WD-40 COMPANY 
SAN DIEGO, April 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 second fiscal quarter ended February 29, 2016.
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Financial Highlights and Summary
-- Total net sales for the second quarter were $94.6 million, a decrease of
3 percent compared to the prior year fiscal quarter. Year-to-date total
net sales were $187.1 million, a decrease of 3 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 $97.5 million for the second quarter and $193.8 million
year-to-date.
-- Net income for the second quarter was $13.7 million, an increase of 21
percent compared to the prior year fiscal quarter. Year-to-date net
income was $25.7 million, an increase of 16 percent from the prior year
fiscal period.
-- Diluted earnings per share were $0.94 in the second quarter, compared to
$0.76 per share for the prior year fiscal quarter. Year-to-date diluted
earnings per share were $1.77 compared to $1.49 in the prior year fiscal
period.
-- Gross margin was 55.4 percent in the second quarter compared to 52.6
percent in the prior year fiscal quarter. Year-to-date gross margin was
55.5 percent compared to 52.1 percent in the prior year fiscal period.
-- Selling, general and administrative expenses were up 5 percent in the
second quarter to $28.7 million when compared to the prior year fiscal
quarter. Year-to-date selling, general and administrative expenses were
up 3 percent to $56.5 million compared to the prior year fiscal period.
-- Advertising and sales promotion expenses were down 9 percent in the
second quarter to $5.0 million compared to prior year fiscal quarter.
Year-to-date advertising and sales promotion expenses were down 6
percent to $10.7 million compared to the prior year fiscal period.
"Our second quarter results are a true reflection of the diversity of our business across geographies, trade channels and economies," said Garry Ridge, WD-40 Company's president and chief executive officer. "Foreign currency exchange rate fluctuations continue to negatively impact our reported sales. When we compare sales to last fiscal year's second quarter our European markets, in particular, continue to be heavily impacted by the weakening of the euro against the pound sterling as well as the strength of the U.S. dollar. On a more positive note, WD-40 Specialist(R) grew 20 percent globally during the second quarter and I continue to expect it will provide the Company with many long-term growth opportunities."
"Looking forward to the second half of our fiscal year, I believe we are in a good position to finish the year strong. As long as we continue to execute our strategic initiatives and stay focused, our hard working tribe will deliver a solid finish to fiscal year 2016, continued Ridge."
Net Sales by Product Group (in thousands):
Three Months Ended Six Months Ended
------------------ ----------------
February 29, February 28, % February 29, February 28, %
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ----
Maintenance
products $84,641 $86,589 (2)% $166,882 $171,493 (3)%
Homecare and
cleaning
products 9,909 10,742 (8)% 20,190 22,191 (9)%
----- ------ ------ ------
Total $94,550 $97,331 (3)% $187,072 $193,684 (3)%
======= ======= ======== ========
-- Net sales of maintenance products, which are considered the primary
growth focus for the Company, decreased 2 percent in the second fiscal
quarter when compared to the prior fiscal year period. The decline in
the second quarter was driven primarily by the unfavorable impact of
foreign currency exchange rates, particularly in EMEA, as well as
unstable market conditions in Russia and the timing of customer orders
in the Company's Asian distributor markets.
-- Net sales of homecare and cleaning products decreased 8 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.
Net Sales by Segment (in thousands):
Three Months Ended Six Months Ended
------------------ ----------------
February 29, February 28, % February 29, February 28, %
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Americas $45,542 $44,702 2% $89,954 $89,475 1%
EMEA 35,626 38,679 (8)% 67,712 73,270 (8)%
Asia-Pacific 13,382 13,950 (4)% 29,406 30,939 (5)%
------ ------ ------ ------
Total $94,550 $97,331 (3)% $187,072 $193,684 (3)%
======= ======= ======== ========
-- Net sales by segment as a percent of total net sales for the second
quarter were as follows: for the Americas, 48 percent; for EMEA, 38
percent; and for Asia-Pacific, 14 percent.
-- The increase in sales in the Americas in the second quarter was
primarily driven by a higher level of promotional activities which
resulted in strong growth of WD-40 Multi-Use Product in Latin America
and the WD-40 Specialist product line in the United States. This growth
was partially offset by sales declines in Canada which were attributable
to the unfavorable impact of foreign currency exchange rate changes and
unstable market conditions in the industrial channel in Western Canada.
-- The decrease in sales in EMEA in the second quarter was primarily driven
by unfavorable impacts of foreign currency exchange rates, mainly in the
Company's euro-based direct markets, as well as decreased sales in the
Company's distributor markets in Eastern Europe due to unstable market
conditions in Russia. On a constant currency basis EMEA sales for the
second quarter would have decreased by $1.2 million or 3 percent
compared to the prior fiscal year period.
-- The decrease in sales in Asia-Pacific in the second quarter was
primarily driven by unfavorable impacts of foreign currency exchange
rates, as well as the timing of customer orders in the Company's Asian
distributor markets. On a constant currency basis Asia-Pacific sales for
the second quarter would have increased by $0.2 million or 1% compared
to the prior fiscal year period.
Dividend and Share Repurchase
As previously announced, WD-40 Company's board of directors declared on Tuesday, March 22, 2016 a quarterly dividend of $0.42 per share payable April 29, 2016 to stockholders of record at the close of business on April 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. The timing and the amount of any repurchases of common stock will be determined by management based on its evaluation of market conditions and other factors. During the period from March 1, 2015 through February 29, 2016, the Company repurchased 347,582 shares at a total cost of $30.8 million under this $75.0 million plan.
Revised Fiscal Year 2016 Guidance
The Company's updated guidance for fiscal year 2016 is as follows:
-- Net sales growth is projected to be between 2 and 4 percent with net
sales expected to be between $385 million and $394 million.
-- Gross margin for the full year is expected to be around 55 percent.
-- Advertising and promotion investments are projected to be between 6.0
percent and 6.5 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.
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 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 February 29, 2016 which the Company expects to file with the SEC on April 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 April 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)
February 29, August 31,
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $42,310 $53,896
Short-term investments 51,235 48,603
Trade and other accounts receivable, less allowance for
doubtful
accounts of $446 and $491 at February 29, 2016
and August 31, 2015, respectively 70,821 58,750
Inventories 36,072 32,052
Current deferred tax assets, net 6,947 5,824
Other current assets 7,012 6,127
----- -----
Total current assets 214,397 205,252
Property and equipment, net 11,221 11,376
Goodwill 95,903 96,409
Other intangible assets, net 20,914 22,961
Other assets 2,812 3,259
----- -----
Total assets $345,247 $339,257
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $17,469 $17,128
Accrued liabilities 17,192 15,200
Accrued payroll and related expenses 11,410 13,357
Revolving credit facility, current 4,541 -
Income taxes payable 3,213 2,287
----- -----
Total current liabilities 53,825 47,972
Revolving credit facility 118,000 108,000
Long-term deferred tax liabilities, net 24,419 23,145
Other long-term liabilities 2,350 2,282
----- -----
Total liabilities 198,594 181,399
------- -------
Commitments and Contingencies
Shareholders' equity:
Common stock authorized 36,000,000 shares, $0.001 par
value;
19,602,908 and 19,546,888 shares issued at February 29, 2016
and
August 31, 2015, respectively; and 14,344,971 and 14,450,490
shares
outstanding at February 29, 2016 and August 31, 2015,
respectively 20 20
Additional paid-in capital 143,512 141,651
Retained earnings 274,823 260,683
Accumulated other comprehensive income (loss) (20,806) (8,722)
Common stock held in treasury, at cost 5,257,937 and
5,096,398
shares at February 29, 2016 and August 31, 2015, respectively (250,896) (235,774)
-------- --------
Total shareholders' equity 146,653 157,858
------- -------
Total liabilities and shareholders'
equity $345,247 $339,257
======== ========
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
February 29, February 28, February 29, February 28,
2016 2015 2016 2015
---- ---- ---- ----
Net sales $94,550 $97,331 $187,072 $193,684
Cost of products sold 42,188 46,098 83,302 92,750
------ ------ ------ ------
Gross profit 52,362 51,233 103,770 100,934
------ ------ ------- -------
Operating expenses:
Selling, general and administrative 28,692 27,360 56,540 54,784
Advertising and sales promotion 5,017 5,485 10,677 11,400
Amortization of definite-lived intangible assets 747 757 1,502 1,526
--- --- ----- -----
Total operating expenses 34,456 33,602 68,719 67,710
------ ------ ------ ------
Income from operations 17,906 17,631 35,051 33,224
Other income (expense):
Interest income 183 178 331 312
Interest expense (417) (275) (789) (569)
Other income (expense), net 1,320 (1,443) 1,269 (1,341)
----- ------ ----- ------
Income before income taxes 18,992 16,091 35,862 31,626
Provision for income taxes 5,323 4,758 10,131 9,507
----- ----- ------ -----
Net income $13,669 $11,333 $25,731 $22,119
======= ======= ======= =======
Earnings per common share:
Basic $0.95 $0.77 $1.78 $1.50
===== ===== ===== =====
Diluted $0.94 $0.76 $1.77 $1.49
===== ===== ===== =====
Shares used in per share calculations:
Basic 14,386 14,636 14,395 14,652
====== ====== ====== ======
Diluted 14,429 14,703 14,445 14,720
====== ====== ====== ======
Dividends declared per
common share $0.42 $0.38 $0.80 $0.72
===== ===== ===== =====
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Six Months Ended
----------------
February 29, February 28,
2016 2015
---- ----
Operating activities:
Net income $25,731 $22,119
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,311 3,247
Net gains on sales and disposals of property and equipment (15) (31)
Deferred income taxes (407) (1,046)
Excess tax benefits from settlements of stock-based equity awards (1,544) (587)
Stock-based compensation 1,889 1,636
Unrealized foreign currency exchange (gains) losses, net (1,116) 1,745
Provision for bad debts 97 209
Changes in assets and liabilities:
Trade and other accounts receivable (14,828) (12,602)
Inventories (4,858) (408)
Other assets (660) 2,332
Accounts payable and accrued liabilities 3,199 4,501
Accrued payroll and related expenses (3,948) (8,037)
Income taxes payable 3,346 318
Other long-term liabilities 84 100
--- ---
Net cash provided by operating activities 10,281 13,496
------ ------
Investing activities:
Purchases of property and equipment (2,155) (2,833)
Proceeds from sales of property and equipment 92 250
Acquisition of business - (3,705)
Purchases of short-term investments (11,829) (1,831)
Maturities of short-term investments 4,278 1,673
----- -----
Net cash used in investing activities (9,614) (6,446)
------ ------
Financing activities:
Treasury stock purchases (15,122) (14,551)
Dividends paid (11,591) (10,606)
Proceeds from issuance of common stock 708 856
Excess tax benefits from settlements of stock-based equity awards 1,544 587
Net proceeds from revolving credit facility 14,541 5,000
------ -----
Net cash used in financing activities (9,920) (18,714)
------ -------
Effect of exchange rate changes on cash and cash equivalents (2,333) (2,438)
------ ------
Net decrease in cash and cash equivalents (11,586) (14,102)
Cash and cash equivalents at beginning of period 53,896 57,803
------ ------
Cash and cash equivalents at end of
period $42,310 $43,701
======= =======
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SOURCE WD-40 Company
