WD-40 COMPANY 
SAN DIEGO, April 6, 2017 /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 second fiscal quarter ended February 28, 2017.
Financial Highlights and Summary
-- Total net sales for the second quarter were $96.5 million, an increase
of 2 percent compared to the prior year fiscal quarter. Year-to-date
total net sales were $185.8 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 $102.9 million for the second quarter and $198.1 million
year-to-date.
-- Net income for the second quarter was $12.4 million, a decrease of 10
percent compared to the prior year fiscal quarter. Year-to-date net
income was $24.1 million, a decrease of 6 percent from the prior year
fiscal period.
-- Diluted earnings per share were $0.87 in the second quarter, compared to
$0.94 per share for the prior year fiscal quarter. Year-to-date diluted
earnings per share were $1.69 compared to $1.77 in the prior year fiscal
period.
-- Gross margin was 56.4 percent in the second quarter compared to 55.4
percent in the prior year fiscal quarter. Year-to-date gross margin was
56.8 percent compared to 55.5 percent in the prior year fiscal period.
-- Selling, general and administrative expenses were up 4 percent in the
second quarter to $29.8 million when compared to the prior year fiscal
quarter. Year-to-date selling, general and administrative expenses were
up 4 percent to $58.8 million compared to the prior year fiscal period.
-- Advertising and sales promotion expenses remained relatively constant at
$5.0 million in the second quarter compared to the prior year fiscal
quarter. Year-to-date advertising and sales promotion expenses were down
8 percent to $9.9 million compared to the prior year fiscal period.
"Fluctuating foreign currency exchange rates continue to obscure the true strength of our business and they negatively impacted both our top-line and bottom line results in the second quarter," said Garry Ridge, WD-40 Company's president and chief executive officer. "Even with the impacts of foreign currency headwinds included, we had 4 percent growth in sales of our maintenance products, which continue to be our core strategic focus, and a 5 percent increase in operating income. Our net income was negatively impacted as a result of fluctuations in some non-operating currency related items period over period, as well as an adjustment that we recorded to our income tax expense in the second quarter of this year. As we look to the remainder of fiscal year 2017, we've updated our fiscal year guidance and we remain confident in our strategy and are staying the course."
Net Sales by Segment (in thousands):
Three Months Ended Six Months Ended
------------------ ----------------
February 28, February 29, February 28, February 29,
2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
Americas $45,078 $45,542 (1)% $87,918 $89,954 (2)%
EMEA 36,205 35,626 2% 66,462 67,712 (2)%
Asia-
Pacific 15,236 13,382 14% 31,387 29,406 7%
------ ------ ------ ------
Total $96,519 $94,550 2% $185,767 $187,072 (1)%
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-- Net sales by segment as a percent of total net sales for the second
quarter were as follows: for the Americas, 47 percent; for EMEA, 37
percent; and for Asia-Pacific, 16 percent.
-- Net sales in the Americas were down 1 percent in the second quarter
primarily due to a 10 percent decrease in homecare and cleaning product
sales. Sales of maintenance products increased slightly during the
period primarily due to a 25 percent increase in sales of maintenance
products in Canada driven by successful promotional programs and
improving market and economic conditions, particularly in Western
Canada.
-- Net sales in EMEA increased 2 percent in the second quarter primarily
due to a 10 percent increase in sales in the EMEA distributor markets
compared to the prior year fiscal period primarily due to increased
sales in Russia driven by improving market conditions in the region. On
a constant currency basis EMEA sales for the second quarter would have
increased by $7.0 million or 20 percent compared to the prior fiscal
year period.
-- Net sales in Asia-Pacific increased 14 percent in the second quarter
primarily due to a 21 percent increase in sales in the Asia-Pacific
distributor markets and a 17 percent increase in sales in China. The
sales growth in the distributor markets was primarily attributable to
the timing of customer orders for WD-40 Multi-Use Product and the growth
in China was due to new distribution and increased promotional
activities. Changes in foreign currency exchange rates did not have a
material impact on sales in the Asia-Pacific segment.
Net Sales by Product Group (in thousands):
Three Months Ended Six Months Ended
------------------ ----------------
February 28, February 29, February 28, February 29,
2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
Maintenance
products $87,771 $84,641 4% $166,930 $166,882 -
Homecare and
cleaning
products 8,748 9,909 (12)% 18,837 20,190 (7)%
----- ----- ------ ------
Total $96,519 $94,550 2% $185,767 $187,072 (1)%
======= ======= ======== ========
-- Net sales of maintenance products, which are considered the primary
growth focus for the Company, increased 4 percent in the second fiscal
quarter when compared to the prior fiscal year period. This growth was
driven primarily by increased sales of WD-40 Multi-Use Product within
all three of the Company's segments, but primarily in its Asia-Pacific
segment. This sales growth was also attributable to increased sales of
WD-40 Specialist throughout most of the Company's EMEA segment.
-- Net sales of homecare and cleaning products decreased 12 percent in the
second 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.
Dividend and Share Repurchase
As previously announced, WD-40 Company's board of directors declared on Tuesday, March 21, 2017 a quarterly dividend of $0.49 per share payable April 28, 2017 to stockholders of record at the close of business on April 14, 2017.
On June 21, 2016, the Company's Board of Directors approved a share buy-back plan. Under the plan, which became effective on September 1, 2016, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2018. The timing and amount of repurchases are based on terms and conditions as may be acceptable to the Company's Chief Executive Officer and Chief Financial Officer and in compliance with all laws and regulations applicable thereto. During the period from September 1, 2016 through February 28, 2017, the Company has repurchased 174,337 shares at a total cost of $18.7 million under this $75.0 million plan.
Updated Fiscal Year 2017 Guidance
The Company updated its guidance for fiscal year 2017 as follows:
-- Net sales growth is projected to be between 2 and 4 percent with net
sales expected to be between $390 million and $395 million.
-- Gross margin percentage for the full year is expected to be above 56
percent.
-- Advertising and promotion investments are projected to be below 6.0
percent of net sales.
-- Net income is projected to be between $51.3 million and $52.3 million.
-- Diluted earnings per share is expected to be between $3.64 and $3.71
based on an estimated 14.1 million weighted average shares outstanding.
This guidance does not include any future acquisitions or divestitures and assumes that foreign currency exchange rates and crude oil prices will remain close to current levels for the remainder of fiscal year 2017.
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 $381 million in fiscal year 2016 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, 2016, and in the Company's Quarterly Report on Form 10-Q for the period ended February 28, 2017 which the Company expects to file with the SEC on April 6, 2017.
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 April 6, 2017, 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)
February 28, August 31,
2017 2016
---- ----
Assets
Current assets:
Cash and cash equivalents $33,572 $50,891
Short-term investments 67,720 57,633
Trade accounts receivable, less allowance for
doubtful accounts of $268 and $394 at
February 28, 2017 and August 31, 2016,
respectively 66,086 64,680
Inventories 37,980 31,793
Other current assets 6,187 4,475
----- -----
Total current assets 211,545 209,472
Property and equipment, net 22,293 11,545
Goodwill 95,439 95,649
Other intangible assets, net 17,550 19,191
Deferred tax assets, net 621 621
Other assets 2,806 3,190
----- -----
Total assets $350,254 $339,668
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $21,832 $18,690
Accrued liabilities 16,848 15,757
Accrued payroll and related expenses 10,548 20,866
Revolving credit facility, current 14,233 -
Income taxes payable 3,119 3,381
----- -----
Total current liabilities 66,580 58,694
Revolving credit facility 134,000 122,000
Deferred tax liabilities, net 17,442 16,365
Other long-term liabilities 2,668 2,214
----- -----
Total liabilities 220,690 199,273
------- -------
Commitments and Contingencies
Shareholders' equity:
Common stock authorized 36,000,000 shares,
$0.001 par value; 19,676,623 and 19,621,820
shares issued at February 28, 2017 and August
31, 2016, respectively; and 14,088,804 and
14,208,338 shares outstanding at February 28,
2017 and August 31, 2016, respectively
20 20
Additional paid-in capital 148,498 145,936
Retained earnings 300,797 289,642
Accumulated other comprehensive income (loss) (33,128) (27,298)
Common stock held in treasury, at cost
5,587,819 and 5,413,482 shares at February
28, 2017 and August 31, 2016, respectively
(286,623) (267,905)
-------- --------
Total shareholders' equity 129,564 140,395
------- -------
Total liabilities and shareholders'
equity $350,254 $339,668
======== ========
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
February 28, February 29, February 28, February 29,
2017 2016 2017 2016
---- ---- ---- ----
Net sales $96,519 $94,550 $185,767 $187,072
Cost of products sold 42,057 42,188 80,265 83,302
------ ------ ------ ------
Gross profit 54,462 52,362 105,502 103,770
------ ------ ------- -------
Operating expenses:
Selling, general and administrative 29,842 28,692 58,833 56,540
Advertising and sales promotion 5,041 5,017 9,853 10,677
Amortization of definite-lived
intangible assets 717 747 1,438 1,502
--- --- ----- -----
Total operating expenses 35,600 34,456 70,124 68,719
------ ------ ------ ------
Income from operations 18,862 17,906 35,378 35,051
Other income (expense):
Interest income 133 183 280 331
Interest expense (598) (417) (1,129) (789)
Other income 9 1,320 273 1,269
--- ----- --- -----
Income before income taxes 18,406 18,992 34,802 35,862
Provision for income taxes 6,046 5,323 10,684 10,131
----- ----- ------ ------
Net income $12,360 $13,669 $24,118 $25,731
======= ======= ======= =======
Earnings per common share:
Basic $0.87 $0.95 $1.69 $1.78
===== ===== ===== =====
Diluted $0.87 $0.94 $1.69 $1.77
===== ===== ===== =====
Shares used in per share calculations:
Basic 14,111 14,386 14,146 14,395
====== ====== ====== ======
Diluted 14,143 14,429 14,182 14,445
====== ====== ====== ======
Dividends declared per
common share $0.49 $0.42 $0.91 $0.80
===== ===== ===== =====
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Six Months Ended
----------------
February 28, February 29,
2017 2016
---- ----
Operating activities:
Net income $24,118 $25,731
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,298 3,311
Net gains on sales and disposals of property
and equipment (101) (15)
Deferred income taxes 155 (407)
Excess tax benefits from settlements of stock-
based equity awards (936) (1,544)
Stock-based compensation 2,959 1,889
Unrealized foreign currency exchange losses
(gains), net 1,153 (1,116)
Provision for bad debts (102) 97
Changes in assets and liabilities:
Trade and other accounts receivable (4,088) (14,828)
Inventories (6,582) (4,858)
Other assets (1,459) (660)
Accounts payable and accrued liabilities 4,793 3,199
Accrued payroll and related expenses (11,727) (3,948)
Income taxes payable 2,302 3,346
Other long-term liabilities (36) 84
--- ---
Net cash provided by operating activities 13,747 10,281
------ ------
Investing activities:
Purchases of property and equipment (12,896) (2,155)
Proceeds from sales of property and equipment 271 92
Purchases of short-term investments (17,212) (11,829)
Maturities of short-term investments 4,517 4,278
----- -----
Net cash used in investing activities (25,320) (9,614)
------- ------
Financing activities:
Treasury stock purchases (18,718) (15,122)
Dividends paid (12,963) (11,591)
Proceeds from issuance of common stock 359 708
Excess tax benefits from settlements of stock-
based equity awards 936 1,544
Net proceeds from revolving credit facility 26,233 14,541
------ ------
Net cash used in financing activities (4,153) (9,920)
------ ------
Effect of exchange rate changes on cash and
cash equivalents (1,593) (2,333)
------ ------
Net decrease in cash and cash equivalents (17,319) (11,586)
Cash and cash equivalents at beginning of
period 50,891 53,896
------ ------
Cash and cash equivalents at end of
period $33,572 $42,310
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SOURCE WD-40 Company
