WD-40 COMPANY 
SAN DIEGO, July 7, 2016 /PRNewswire/ -- WD-40 Company (NASDAQ:WDFC), a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world, today reported financial results for its third fiscal quarter ended May 31, 2016.
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Financial Highlights and Summary
-- Total net sales for the third quarter were $96.4 million, an increase of
4 percent compared to the prior year fiscal quarter. Year-to-date total
net sales were $283.5 million, a decrease of 1 percent compared to the
prior year fiscal period.
-- Translation of the Company's foreign subsidiary results to U.S. dollars
had an unfavorable impact on sales for the current quarter and
year-to-date. On a constant currency basis total net sales would have
been $99.2 million for the third quarter and $293.0 million
year-to-date.
-- Net income for the third quarter was $12.7 million, an increase of 16
percent compared to the prior year fiscal quarter. Year-to-date net
income was $38.4 million, an increase of 16 percent from the prior year
fiscal period.
-- Diluted earnings per share were $0.88 in the third quarter, compared to
$0.75 per share for the prior year fiscal quarter. Year-to-date diluted
earnings per share were $2.65 compared to $2.24 in the prior year fiscal
period.
-- Gross margin was 56.8 percent in the third quarter compared to 53.3
percent in the prior year fiscal quarter. Year-to-date gross margin was
55.9 percent compared to 52.5 percent in the prior year fiscal period.
-- Selling, general and administrative expenses were up 10 percent in the
third quarter to $29.2 million when compared to the prior year fiscal
quarter. Year-to-date selling, general and administrative expenses were
up 5 percent to $85.7 million compared to the prior year fiscal period.
-- Advertising and sales promotion expenses were up 13 percent in the third
quarter to $6.2 million compared to prior year fiscal quarter.
Year-to-date advertising and sales promotion expenses remained constant
at $16.9 million compared to the prior year fiscal period.
"We had a good quarter and are pleased we have seen solid year-over-year sales growth in maintenance products throughout all three of our trading blocs during the third quarter, despite the foreign currency exchange rate fluctuations which continue to impact our reported results," said Garry Ridge, WD-40 Company's president and chief executive officer. "Our gross margin this quarter reflects the lowest oil costs we've seen in well over a decade. Our long-term target for gross margin is 55 percent however, as the cost of crude oil continues to increase from the extremely low levels that flowed through our cost of goods in the third quarter, we expect to see pressure on gross margin in the coming quarters. Overall, we believe the tribe has positioned us for a strong finish to fiscal year 2016 and we are pleased that we will be able to reward them for their hard work across the globe," continued Ridge.
Net Sales by Product Group (in thousands):
Three Months Ended May 31, Nine Months Ended May 31,
-------------------------- -------------------------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Maintenance
products $86,560 $81,512 6% $253,442 $253,005 -
Homecare and
cleaning
products 9,886 10,973 (10)% 30,076 33,164 (9)%
----- ------ ------ ------
Total $96,446 $92,485 4% $283,518 $286,169 (1)%
======= ======= ======== ========
-- Net sales of maintenance products, which are considered the primary
growth focus for the Company, increased 6 percent in the third fiscal
quarter when compared to the prior fiscal year period. This growth was
driven primarily by increased sales of both WD-40 Multi-Use Product and
WD-40 Specialist throughout most of the Company's EMEA segment. This
sales growth was also attributable to strong WD-40 Multi-Use Product
sales in the United States and the Company's Asian distributor markets.
-- Net sales of homecare and cleaning products decreased 10 percent in the
third quarter when compared to the prior fiscal year period. The
homecare and cleaning products, particularly those in the U.S., are
considered harvest brands providing healthy profit returns to the
Company and are becoming a smaller part of the business as net sales of
multi-purpose maintenance products grow per the execution of the
Company's strategic initiatives.
Net Sales by Segment (in thousands):
Three Months Ended May 31, Nine Months Ended May 31,
-------------------------- -------------------------
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Americas $49,878 $49,744 - $139,832 $139,219 -
EMEA 32,922 30,335 9% 100,634 103,605 (3)%
Asia-
Pacific 13,646 12,406 10% 43,052 43,345 (1)%
------ ------ ------ ------
Total $96,446 $92,485 4% $283,518 $286,169 (1)%
======= ======= ======== ========
-- Net sales by segment as a percent of total net sales for the third
quarter were as follows: for the Americas, 52 percent; for EMEA, 34
percent; and for Asia-Pacific, 14 percent.
-- Net sales in the Americas were flat in the third quarter primarily due
to a 3 percent increase in maintenance products sales which was entirely
offset by a 13 percent decrease in homecare and cleaning product sales.
The increase in maintenance products sales in the segment was driven by
primarily by increased sales in the United States which benefitted from
expanded distribution of WD-40 EZ Reach(TM). This growth was partially
offset by sales declines in Canada associated with promotional programs
and unstable market conditions in the industrial channel in Western
Canada.
-- Net sales in EMEA increased 9 percent in the third quarter primarily due
to a 9 percent increase in sales EMEA's direct markets primarily linked
to higher sales of both WD-40 Multi-Use Product and WD-40 Specialist
throughout most of the segment, particularly in the Germanics region.
Sales in the EMEA distributor markets increased 7 percent compared to
prior year fiscal period primarily due to increased sales in Russia and
Ukraine driven by improving market conditions in the region. On a
constant currency basis EMEA sales for the third quarter would have
increased by $4.8 million or 16% compared to the prior fiscal year
period.
-- Net sales in Asia-Pacific increased 10 percent in the third quarter
primarily due to a 32 percent increase in sales in Asia-Pacific's
distributor markets. The growth in distributor markets was primarily
attributable to the success of promotional programs for WD-40 Multi-Use
Product. This increase was partially offset by unfavorable impacts of
foreign currency exchange rates in both China and Australia. On a
constant currency basis Asia-Pacific sales for the third quarter would
have increased by $1.7 million or 14% compared to the prior fiscal year
period.
Dividend and Share Repurchase
As previously announced, WD-40 Company's board of directors declared on Tuesday, June 21, 2016 a quarterly dividend of $0.42 per share payable July 29, 2016 to stockholders of record at the close of business on July 15, 2016.
On October 14, 2014 the board of directors approved a share repurchase plan. The plan became effective at the beginning of the third quarter of fiscal year 2015. Under the plan, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2016.
On June 21, 2016 the board of directors approved a new share repurchase plan. This new plan will become effective as of September 1, 2016. Under the new plan, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2018. The timing and the amount of any repurchases of common stock under either plan will be determined by management based on its evaluation of market conditions and other factors.
During the period from March 1, 2015 through May 31, 2016, the Company repurchased 438,487 shares at a total cost of $40.4 million under the currently effective $75.0 million plan.
Updated Fiscal Year 2016 Guidance
The Company's updated guidance for fiscal year 2016 is as follows:
-- Net sales are projected to be slightly above fiscal year 2015 with sales
expected to be between $378 million and $383 million.
-- Gross margin for the full year is expected to be above 55 percent.
-- Advertising and promotion investments are projected to be near 6.0
percent of net sales.
-- Net income is projected to be between $49.0 million and $50.0 million.
-- Diluted earnings per share is expected to be between $3.40 and $3.47
based on an estimated 14.4 million weighted average shares outstanding.
The assumptions used in this guidance have been adjusted as it relates to foreign currency exchange rates to accommodate for the current events in Great Britain. Furthermore, this guidance does not include any future acquisitions or divestitures and assumes crude oil prices will remain close to current levels for the remainder of the fiscal year.
Webcast Information
As previously announced, WD-40 Company management will host a live webcast at approximately 5:00 p.m. ET / 2:00 p.m. PT today to discuss these results. Other forward-looking and material information may also be discussed during this call. Please visit http://investor.wd40company.com for more information and to view supporting materials.
About WD-40 Company
WD-40 Company is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world. The Company markets its maintenance products and homecare and cleaning products under the following well-known brands: WD-40(R), 3-IN-ONE(R), GT85(R), X-14(R), 2000 Flushes(R), Carpet Fresh(R), no vac(R), Spot Shot(R), 1001(R), Lava(R) and Solvol(R).
Headquartered in San Diego, WD-40 Company recorded net sales of $378 million in fiscal year 2015 and its products are currently available in more than 176 countries and territories worldwide. WD-40 Company is traded on the NASDAQ Global Select market under the ticker symbol "WDFC." For additional information about WD-40 Company please visit http://www.wd40company.com.
Forward-Looking Statements
Except for the historical information contained herein, this press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect the Company's current expectations with respect to currently available operating, financial and economic information. These forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements.
Our forward-looking statements include, but are not limited to, discussions about future financial and operating results, including: growth expectations for maintenance products; expected levels of promotional and advertising spending; plans for and success of product innovation, the impact of new product introductions on the growth of sales; anticipated results from product line extension sales; and forecasted foreign currency exchange rates and commodity prices. Our forward-looking statements are generally identified with words such as "believe," "expect," "intend," "plan," "could," "may," "aim," "anticipate," "estimate" and similar expressions.
The Company's expectations, beliefs and forecasts are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that the Company's expectations, beliefs or forecasts will be achieved or accomplished.
Actual events or results may differ materially from those projected in forward-looking statements due to various factors, including, but not limited to, those identified in Part I Item 1A, "Risk Factors," in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2015, and in the Company's Quarterly Report on Form 10-Q for the period ended May 31, 2016 which the Company expects to file with the SEC on July 7, 2016.
All forward-looking statements included in this press release should be considered in the context of these risks. All forward-looking statements speak only as of July 7, 2016, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors and prospective investors are cautioned not to place undue reliance on our forward-looking statements.
Table Notes and General Definitions
(1) The Company markets maintenance
products under the WD-40(R),
GT85(R) and 3-IN-ONE(R) brand
names. Currently included in the WD-
40 brand are the WD-40 Multi-Use
Product and the WD-40 Specialist(R)
and WD-40 BIKE(R) product lines.
(2) The Company markets the following
homecare and cleaning brands: X-
14(R) mildew stain remover and
automatic toilet bowl cleaners, 2000
Flushes(R) automatic toilet bowl
cleaners, Carpet Fresh(R) and no
vac(R) rug and room deodorizers,
Spot Shot(R) aerosol and liquid
carpet stain removers, 1001(R)
household cleaners and rug and room
deodorizers and Lava(R) and
Solvol(R) heavy-duty hand cleaners.
(3) The Americas segment consists of the
U.S., Canada and Latin America.
(4) The EMEA segment consists of
countries in Europe, the Middle
East, Africa and India.
(5) The Asia-Pacific segment consists of
Australia, China and other countries
in the Asia region.
(6) Constant currency represents the
translation of the current quarter
and year-to-date results from the
functional currencies of the
Company's subsidiaries to U.S.
dollars using the exchange rate in
effect for the corresponding periods
of the prior fiscal year.
WD-40 COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share amounts)
May 31, August 31,
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $47,373 $53,896
Short-term investments 62,682 48,603
Trade and other accounts receivable, less
allowance for doubtful accounts of $362 and
$491 at May 31, 2016 and August 31, 2015,
respectively 64,057 58,750
Inventories 33,180 32,052
Current deferred tax assets, net 6,951 5,824
Other current assets 4,221 6,127
----- -----
Total current assets 218,464 205,252
Property and equipment, net 12,054 11,376
Goodwill 96,152 96,409
Other intangible assets, net 20,430 22,961
Other assets 2,799 3,259
----- -----
Total assets $349,899 $339,257
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $20,431 $17,128
Accrued liabilities 14,847 15,200
Accrued payroll and related expenses 16,014 13,357
Income taxes payable 3,224 2,287
----- -----
Total current liabilities 54,516 47,972
Revolving credit facility 118,000 108,000
Long-term deferred tax liabilities, net 24,333 23,145
Other long-term liabilities 2,383 2,282
----- -----
Total liabilities 199,232 181,399
------- -------
Commitments and Contingencies
Shareholders' equity:
Common stock authorized 36,000,000 shares,
$0.001 par value; 19,606,058 and 19,546,888
shares issued at May 31, 2016 and August 31,
2015, respectively; and 14,257,216 and
14,450,490 shares outstanding at May 31, 2016
and August 31, 2015, respectively 20 20
Additional paid-in capital 144,330 141,651
Retained earnings 281,432 260,683
Accumulated other comprehensive income (loss) (14,650) (8,722)
Common stock held in treasury, at cost
5,348,842 and 5,096,398 shares at May 31,
2016 and August 31, 2015, respectively (260,465) (235,774)
Total shareholders' equity 150,667 157,858
------- -------
Total liabilities and shareholders'
equity $349,899 $339,257
======== ========
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share amounts)
Three Months Ended May 31, Nine Months Ended May 31,
-------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Net sales $96,446 $92,485 $283,518 $286,169
Cost of products sold 41,635 43,213 124,937 135,963
------ ------ ------- -------
Gross profit 54,811 49,272 158,581 150,206
------ ------ ------- -------
Operating expenses:
Selling, general and administrative 29,215 26,640 85,755 81,424
Advertising and sales promotion 6,188 5,506 16,865 16,906
Amortization of definite-lived
intangible assets 740 754 2,242 2,280
--- --- ----- -----
Total operating expenses 36,143 32,900 104,862 100,610
------ ------ ------- -------
Income from operations 18,668 16,372 53,719 49,596
Other income (expense):
Interest income 186 113 517 425
Interest expense (433) (343) (1,222) (912)
Other (expense) income, net (799) (444) 470 (1,785)
---- ---- --- ------
Income before income taxes 17,622 15,698 53,484 47,324
Provision for income taxes 4,957 4,733 15,088 14,240
----- ----- ------ ------
Net income $12,665 $10,965 $38,396 $33,084
======= ======= ======= =======
Earnings per common share:
Basic $0.88 $0.75 $2.66 $2.25
===== ===== ===== =====
Diluted $0.88 $0.75 $2.65 $2.24
===== ===== ===== =====
Shares used in per share calculations:
Basic 14,306 14,546 14,365 14,616
====== ====== ====== ======
Diluted 14,349 14,615 14,413 14,685
====== ====== ====== ======
Dividends declared per
common share $0.42 $0.38 $1.22 $1.10
===== ===== ===== =====
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Nine Months Ended May 31,
-------------------------
2016 2015
---- ----
Operating activities:
Net income $38,396 $33,084
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,893 4,824
Net gains on sales and disposals of property
and equipment (30) (82)
Deferred income taxes (601) (1,229)
Excess tax benefits from settlements of stock-
based equity awards (1,618) (906)
Stock-based compensation 2,518 2,205
Unrealized foreign currency exchange losses,
net 214 2,393
Provision for bad debts 15 214
Changes in assets and liabilities:
Trade and other accounts receivable (7,229) (3,787)
Inventories (1,533) 1,078
Other assets 2,258 3,817
Accounts payable and accrued liabilities 2,963 (1,596)
Accrued payroll and related expenses 507 (5,003)
Income taxes payable 3,294 130
Other long-term liabilities 112 184
--- ---
Net cash provided by operating activities 44,159 35,326
------ ------
Investing activities:
Purchases of property and equipment (3,311) (4,068)
Proceeds from sales of property and equipment 195 420
Acquisition of business - (3,705)
Purchases of short-term investments (22,920) (8,167)
Maturities of short-term investments 6,516 1,636
----- -----
Net cash used in investing activities (19,520) (13,884)
------- -------
Financing activities:
Treasury stock purchases (24,691) (25,886)
Dividends paid (17,647) (16,177)
Proceeds from issuance of common stock 821 1,483
Excess tax benefits from settlements of stock-
based equity awards 1,618 906
Net proceeds from revolving credit facility 10,000 10,000
------ ------
Net cash used in financing activities (29,899) (29,674)
------- -------
Effect of exchange rate changes on cash and
cash equivalents (1,263) (2,654)
------ ------
Net decrease in cash and cash equivalents (6,523) (10,886)
Cash and cash equivalents at beginning of
period 53,896 57,803
------ ------
Cash and cash equivalents at end of
period $47,373 $46,917
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SOURCE WD-40 Company
