WD-40 COMPANY 
SAN DIEGO, July 10, 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 third fiscal quarter ended May 31, 2017.
Financial Highlights and Summary
-- Total net sales for the third quarter were $98.2 million, an increase of
2 percent compared to the prior year fiscal quarter. Year-to-date total
net sales were $283.9 million, an increase of $0.4 million 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 third quarter and $301.0 million
year-to-date.
-- Net income for the third quarter was $14.4 million, an increase of 14
percent compared to the prior year fiscal quarter. Year-to-date net
income was $38.6 million, an increase of $0.2 million from the prior
year fiscal period.
-- Diluted earnings per share were $1.02 in the third quarter, compared to
$0.88 per share for the prior year fiscal quarter. Year-to-date diluted
earnings per share were $2.71 compared to $2.65 in the prior year fiscal
period.
-- Gross margin was 55.3 percent in the third quarter compared to 56.8
percent in the prior year fiscal quarter. Year-to-date gross margin was
56.3 percent compared to 55.9 percent in the prior year fiscal period.
-- Selling, general and administrative expenses were down 6 percent in the
third quarter to $27.6 million when compared to the prior year fiscal
quarter. Year-to-date selling, general and administrative expenses were
up 1 percent to $86.4 million compared to the prior year fiscal period.
-- Advertising and sales promotion expenses were down 13 percent in the
third quarter to $5.4 million when compared to the prior year fiscal
quarter. Year-to-date advertising and sales promotion expenses were down
10 percent to $15.3 million compared to the prior year fiscal period.
"We had a solid quarter and are pleased that we achieved both sales and earnings results which reflect new record highs for the Company," said Garry Ridge, WD-40 Company's president and chief executive officer. "Fluctuating foreign currency exchange rates continue to obscure our sales results but if you remove their impact our consolidated sales would have increased by about 4 percent over the prior year fiscal third quarter. Overall, while we continue to see fluctuations in certain markets quarter to quarter, our long-term growth plans remain stable," continued Ridge.
Net Sales by Segment (in thousands):
Three Months Ended May 31, Nine Months Ended May 31,
-------------------------- -------------------------
2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
Americas $49,046 $49,878 (2)% $136,964 $139,832 (2)%
EMEA 34,386 32,922 4% 100,848 100,634 -
Asia-
Pacific 14,746 13,646 8% 46,133 43,052 7%
------ ------ ------ ------
Total $98,178 $96,446 2% $283,945 $283,518 -
======= ======= ======== ========
-- Net sales by segment as a percent of total net sales for the third
quarter were as follows: for the Americas, 50 percent; for EMEA, 35
percent; and for Asia-Pacific, 15 percent.
-- Net sales in the Americas were down 2 percent in the third quarter
primarily due to lower sales of maintenance products in the U.S., which
declined 3% from period to period. This lower level of sales was
primarily attributable to shifting buying patterns in some trade
channels as well as efforts of certain of our customers to more closely
manage their inventory levels. The sales decrease in the U.S. was
partially offset by higher sales of maintenance products in Canada and
Latin America.
-- Net sales in EMEA increased 4 percent in the third quarter primarily due
to a 16 percent increase in sales in the EMEA distributor markets
compared to the prior year fiscal period primarily due to higher sales
of WD-40 Multi-Use Product in Eastern Europe, particularly in Russia.
Changes in foreign currency exchange rates had an unfavorable impact on
sales for the EMEA segment from period to period. On a constant currency
basis EMEA sales for the third quarter would have increased by $6.0
million or 18 percent compared to the prior fiscal year period.
-- Net sales in Asia-Pacific increased 8 percent in the third quarter
primarily due to a 12 percent increase in sales in the Asia-Pacific
distributor markets and a 6 percent increase in sales in China. The
sales growth in the Asia distributor markets was primarily attributable
to the timing of customer orders and a higher level of promotional
activities for WD-40 Multi-Use Product. The growth in China was due to
new distribution and continued growth in sales to the Company's largest
customers throughout China. 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 May 31, Nine Months Ended May 31,
-------------------------- -------------------------
2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
Maintenance
products $88,926 $86,560 3% $255,856 $253,442 1%
Homecare and
cleaning
products 9,252 9,886 (6)% 28,089 30,076 (7)%
----- ----- ------ ------
Total $98,178 $96,446 2% $283,945 $283,518 -
======= ======= ======== ========
-- Net sales of maintenance products, which are considered the primary
growth focus for the Company, increased 3 percent in the third fiscal
quarter when compared to the prior fiscal year period. This growth was
driven primarily by increased sales of WD-40 Specialist within all three
of the Company's segments. This sales growth was also attributable to
increased sales of WD-40 Multi-Use Product within the EMEA and
Asia-Pacific segments.
-- Net sales of homecare and cleaning products decreased 6 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.
Dividend and Share Repurchase
As previously announced, WD-40 Company's board of directors declared on Tuesday, June 20, 2017 a quarterly dividend of $0.49 per share payable July 31, 2017 to stockholders of record at the close of business on July 21, 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 May 31, 2017, the Company has repurchased 244,973 shares at a total cost of $26.2 million under this $75.0 million plan.
Updated Fiscal Year 2017 Guidance
The Company updated its revenue guidance for fiscal year 2017 as follows:
-- Net sales are projected to be flat to up 2 percent with net sales
expected to be between $382 million and $388 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®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and Solvol®.
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 May 31, 2017 which the Company expects to file with the SEC on July 10, 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 July 10, 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)
May 31, August 31,
2017 2016
---- ----
Assets
Current assets:
Cash and cash equivalents $32,205 $50,891
Short-term investments 79,391 57,633
Trade accounts receivable, less allowance for
doubtful accounts of $229 and $394 at May 31,
2017 and August 31, 2016, respectively
65,177 64,680
Inventories 36,549 31,793
Other current assets 2,959 4,475
----- -----
Total current assets 216,281 209,472
Property and equipment, net 25,510 11,545
Goodwill 95,557 95,649
Other intangible assets, net 16,936 19,191
Deferred tax assets, net 609 621
Other assets 2,886 3,190
----- -----
Total assets $357,779 $339,668
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $18,557 $18,690
Accrued liabilities 17,364 15,757
Accrued payroll and related expenses 12,762 20,866
Revolving credit facility, current 20,000 -
Income taxes payable 1,509 3,381
----- -----
Total current liabilities 70,192 58,694
Revolving credit facility 134,000 122,000
Deferred tax liabilities, net 17,286 16,365
Other long-term liabilities 1,962 2,214
----- -----
Total liabilities 223,440 199,273
------- -------
Commitments and Contingencies
Shareholders' equity:
Common stock ? authorized 36,000,000 shares,
$0.001 par value; 19,681,883 and 19,621,820
shares issued at May 31, 2017 and August 31,
2016, respectively; and 14,023,428 and
14,208,338 shares outstanding at May 31, 2017
and August 31, 2016, respectively
20 20
Additional paid-in capital 149,767 145,936
Retained earnings 308,308 289,642
Accumulated other comprehensive income (loss) (29,624) (27,298)
Common stock held in treasury, at cost ?
5,658,455 and 5,413,482 shares at May 31, 2017
and August 31, 2016, respectively
(294,132) (267,905)
-------- --------
Total shareholders' equity 134,339 140,395
------- -------
Total liabilities and shareholders'
equity $357,779 $339,668
======== ========
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,
-------------------------- -------------------------
2017 2016 2017 2016
---- ---- ---- ----
Net sales $98,178 $96,446 $283,945 $283,518
Cost of products sold 43,891 41,635 124,156 124,937
------ ------ ------- -------
Gross profit 54,287 54,811 159,789 158,581
------ ------ ------- -------
Operating expenses:
Selling, general and administrative 27,558 29,215 86,391 85,755
Advertising and sales promotion 5,398 6,188 15,251 16,865
Amortization of definite-lived
intangible assets 718 740 2,156 2,242
--- --- ----- -----
Total operating expenses 33,674 36,143 103,798 104,862
------ ------ ------- -------
Income from operations 20,613 18,668 55,991 53,719
Other income (expense):
Interest income 112 186 392 517
Interest expense (693) (433) (1,822) (1,222)
Other income (expense), net 254 (799) 527 470
--- ---- --- ---
Income before income taxes 20,286 17,622 55,088 53,484
Provision for income taxes 5,842 4,957 16,526 15,088
----- ----- ------ ------
Net income $14,444 $12,665 $38,562 $38,396
======= ======= ======= =======
Earnings per common share:
Basic $1.02 $0.88 $2.71 $2.66
===== ===== ===== =====
Diluted $1.02 $0.88 $2.71 $2.65
===== ===== ===== =====
Shares used in per share calculations:
Basic 14,056 14,306 14,115 14,365
====== ====== ====== ======
Diluted 14,088 14,349 14,151 14,413
====== ====== ====== ======
Dividends declared per
common share $0.49 $0.42 $1.40 $1.22
===== ===== ===== =====
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Nine Months Ended May 31,
-------------------------
2017 2016
---- ----
Operating activities:
Net income $38,562 $38,396
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,005 4,893
Net gains on sales and disposals of property and
equipment (109) (30)
Deferred income taxes (101) (601)
Excess tax benefits from settlements of stock-
based equity awards (1,432) (1,618)
Stock-based compensation 3,543 2,518
Unrealized foreign currency exchange losses 872 214
Provision for bad debts (141) 15
Changes in assets and liabilities:
Trade and other accounts receivable (1,915) (7,229)
Inventories (4,926) (1,533)
Other assets 1,660 2,258
Accounts payable and accrued liabilities (125) 2,963
Accrued payroll and related expenses (9,629) 507
Income taxes payable 702 3,294
Other long-term liabilities (246) 112
---- ---
Net cash provided by operating activities 31,720 44,159
------ ------
Investing activities:
Purchases of property and equipment (15,410) (3,311)
Proceeds from sales of property and equipment 403 195
Purchases of short-term investments (26,815) (22,920)
Maturities of short-term investments 4,517 6,516
----- -----
Net cash used in investing activities (37,305) (19,520)
------- -------
Financing activities:
Treasury stock purchases (26,227) (24,691)
Dividends paid (19,896) (17,647)
Proceeds from issuance of common stock 548 821
Excess tax benefits from settlements of stock-
based equity awards 1,432 1,618
Net proceeds from revolving credit facility 32,000 10,000
------ ------
Net cash used in financing activities (12,143) (29,899)
------- -------
Effect of exchange rate changes on cash and cash
equivalents (958) (1,263)
---- ------
Net decrease in cash and cash equivalents (18,686) (6,523)
Cash and cash equivalents at beginning of period 50,891 53,896
------ ------
Cash and cash equivalents at end of
period $32,205 $47,373
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SOURCE WD-40 Company
