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®, GT85® and
3-IN-ONE® brand names. Currently included in the WD-40 brand
are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-40
BIKE® product lines.
|
(2)
|
The Company markets
the following homecare and cleaning brands: X-14® mildew
stain remover and automatic toilet bowl cleaners, 2000 Flushes®
automatic toilet bowl cleaners, Carpet Fresh® and no vac®
rug and room deodorizers, Spot Shot® aerosol and liquid carpet
stain removers, 1001® household cleaners and rug and room
deodorizers and Lava® and Solvol® 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