SAN DIEGO, April 5, 2018 /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,
2018.
Financial Highlights and Summary
- Total net sales for the second quarter were $101.3 million, an increase of 5 percent compared
to the prior year fiscal quarter. Year-to-date total net sales were
$198.9 million, an increase of 7
percent compared to the prior year fiscal period.
- Translation of the Company's foreign subsidiary results to U.S.
dollars had a favorable impact on sales for the current quarter and
year-to-date. On a constant currency basis total net sales would
have been $97.0 million for the
second quarter and $193.2 million
year-to-date.
- Net income for the second quarter was $14.8 million, an increase of 20 percent compared
to the prior year fiscal quarter. Year-to-date net income was
$27.4 million, an increase of 14
percent from the prior year fiscal period.
- Diluted earnings per share were $1.05 in the second quarter, compared to
$0.87 per share for the prior year
fiscal quarter. Year-to-date diluted earnings per share were
$1.95 compared to $1.69 in the prior year fiscal period.
- Gross margin was 55.1 percent in the second quarter compared to
56.4 percent in the prior year fiscal quarter. Year-to-date gross
margin was 55.3 percent compared to 56.8 percent in the prior year
fiscal period.
- Selling, general and administrative expenses were up 2 percent
in the second quarter to $30.4
million when compared to the prior year fiscal quarter.
Year-to-date selling, general and administrative expenses were up 5
percent to $61.6 million compared to
the prior year fiscal period.
- Advertising and sales promotion expenses were up 3 percent in
the second quarter to $5.2 million
when compared to the prior year fiscal quarter. Year-to-date
advertising and sales promotion expenses were up 5 percent to
$10.3 million compared to the prior
year fiscal period.
"Overall we are off to a solid start in fiscal year 2018 with
year-to-date net sales growth of 7 percent on a reported basis and
4 percent on a constant currency basis," said Garry Ridge, WD-40 Company's president and chief
executive officer. "Unfortunately we are seeing the impact
globally of higher commodity prices which have begun to deteriorate
our gross margins. Therefore we have decided it is time to make
some necessary pricing adjustments to ensure our gross margin will
remain above our target of 55 percent over the long-term.
"Furthermore, I am excited to share with investors that as a
result of the savings we expect to realize from the Tax Cuts and
Jobs Act, we have decided to invest an additional $1.0 million in brand building this fiscal year.
This investment will focus on two main areas around the core
strategies of making our end-users aware and making our products
easy to buy. This investment will enable us to fast track our
global digital presence and increase our sampling programs for
WD-40 Multi Use Product to targeted end-user groups in countries
identified as key growth opportunities.
"As we look to the remainder of fiscal year 2018, we've updated
our fiscal year guidance to reflect updated foreign currency
exchange rates, higher input costs, our revised effective tax rate
as well as the changes we are making to our advertising and
promotion investment this fiscal year," Ridge concluded.
Net Sales by Segment (in thousands):
|
Three Months Ended
February 28,
|
|
Six Months Ended
February 28,
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Americas
|
$
|
44,967
|
|
$
|
45,078
|
|
|
-
|
|
$
|
91,130
|
|
$
|
87,918
|
|
|
4%
|
EMEA
|
|
39,632
|
|
|
36,205
|
|
|
9%
|
|
|
74,660
|
|
|
66,462
|
|
|
12%
|
Asia-Pacific
|
|
16,657
|
|
|
15,236
|
|
|
9%
|
|
|
33,063
|
|
|
31,387
|
|
|
5%
|
Total
|
$
|
101,256
|
|
$
|
96,519
|
|
|
5%
|
|
$
|
198,853
|
|
$
|
185,767
|
|
|
7%
|
- Net sales by segment as a percent of total net sales for the
second quarter were as follows: for the Americas, 44 percent; for
EMEA, 39 percent; and for Asia-Pacific, 17 percent.
- Net sales in the Americas were relatively flat in the second
quarter primarily due to lower sales of homecare and cleaning
products in the U.S., which declined 7 percent from period to
period. This lower level of sales was mostly offset by a higher
level of sales of maintenance products which increased 1 percent
compared to the prior year fiscal period. The maintenance product
sales increase was primarily driven by higher sales of WD-40
Specialist and 3-IN-ONE in the United
States and Latin
America.
- Net sales in EMEA increased 9 percent in the second quarter
primarily due higher sales of maintenance products in the EMEA
direct markets, which increased 18 percent from period to period.
This higher level of sales was partially offset by a lower level of
sales in the segment's distributor markets which decreased 8
percent compared to the prior year fiscal period. Changes in
foreign currency exchange rates had a favorable impact on sales for
the EMEA segment from period to period. On a constant currency
basis EMEA sales for the second quarter would have decreased by
$0.2 million or 1 percent compared to
the prior year fiscal period.
- Net sales in Asia-Pacific
increased 9 percent in the second quarter primarily due to a 19
percent increase in sales in China
and a 13 percent increase in sales in Australia. The sales growth in China was primarily attributable to a special
promotional program which was conducted during the second quarter
of fiscal year 2018 as well as the timing of customer orders in the
region. The growth in Australia
was primarily due to successful promotional activities and expanded
distribution of the WD-40 Specialist product line. Changes in
foreign currency exchange rates had a favorable impact on sales in
the Asia-Pacific segment from
period to period. On a constant currency basis Asia-Pacific sales for the second quarter
would have increased $1.0 million or
6 percent compared to the prior year fiscal period.
Net Sales by Product Group (in thousands):
|
Three Months Ended
February 28,
|
|
Six Months Ended
February 28,
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Maintenance
products
|
$
|
92,319
|
|
$
|
87,771
|
|
|
5%
|
|
$
|
180,349
|
|
$
|
166,930
|
|
|
8%
|
Homecare and cleaning
products
|
|
8,937
|
|
|
8,748
|
|
|
2%
|
|
|
18,504
|
|
|
18,837
|
|
|
(2)%
|
Total
|
$
|
101,256
|
|
$
|
96,519
|
|
|
5%
|
|
$
|
198,853
|
|
$
|
185,767
|
|
|
7%
|
- Net sales of maintenance products, which are considered the
primary growth focus for the Company, increased 5 percent in the
second quarter when compared to the prior year fiscal period. This
sales growth was primarily attributable to increased sales of WD-40
Multi-Use Product within the EMEA and Asia-Pacific segments. This growth was also
attributable to increased sales of WD-40 Specialist within all
three of the Company's segments.
- Net sales of homecare and cleaning products increased 2 percent
in the second quarter when compared to the prior year fiscal
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 20, 2018 a
quarterly dividend of $0.54 per share
payable April 30, 2018 to
stockholders of record at the close of business on April 20, 2018.
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, 2018, the Company has
repurchased 386,973 shares at a total cost
of $42.5 million under this $75.0
million plan.
Updated Fiscal Year 2018 Guidance
The Company revised its revenue guidance for fiscal year 2018 as
follows:
- Net sales growth is projected to be between 7 and 9 percent
with net sales expected to be between $407 million and
$415 million.
- Gross margin percentage for the full year is expected to
be near 55 percent.
- Advertising and promotion investments are projected to be near
6 percent of net sales.
- Net income is projected to be between $56.6 million and $57.5 million.
- Diluted earnings per share is expected to be between
$4.07 and $4.14 based on an estimated 13.9
million weighted average shares outstanding.
This guidance includes the anticipated impacts of the Tax Cuts
and Jobs Act. The Company expects its annual effective income
tax rate for fiscal year 2018 to be between 22 and 23
percent. This guidance does not include any future
acquisitions or divestitures and assumes that foreign currency
exchange rates and commodity prices will remain close to current
levels for the remainder of fiscal year 2018.
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 2017 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 certain 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; the impact of the "Tax Cuts and Jobs
Act"; 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, 2017, and in the Company's Quarterly Report on Form 10-Q
for the period ended February 28, 2018 which the Company
expects to file with the SEC on April 6, 2018.
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 5, 2018, 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)
|
|
|
|
|
|
|
|
February
28,
|
|
August
31,
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
36,500
|
|
$
|
37,082
|
Short-term
investments
|
|
86,914
|
|
|
80,166
|
Trade accounts
receivable, less allowance for doubtful accounts of $262 and $240 at February 28, 2018
and August 31, 2017,
respectively
|
|
73,332
|
|
|
64,259
|
Inventories
|
|
39,973
|
|
|
35,340
|
Other current
assets
|
|
5,689
|
|
|
8,007
|
Total current
assets
|
|
242,408
|
|
|
224,854
|
Property and equipment,
net
|
|
36,849
|
|
|
29,439
|
Goodwill
|
|
95,947
|
|
|
95,597
|
Other intangible
assets, net
|
|
15,221
|
|
|
16,244
|
Deferred tax assets,
net
|
|
501
|
|
|
495
|
Other assets
|
|
3,074
|
|
|
3,088
|
Total
assets
|
$
|
394,000
|
|
$
|
369,717
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
21,213
|
|
$
|
20,898
|
Accrued
liabilities
|
|
19,267
|
|
|
18,997
|
Accrued payroll and
related expenses
|
|
10,270
|
|
|
14,222
|
Short-term
borrowings
|
|
14,020
|
|
|
20,000
|
Income taxes
payable
|
|
1,738
|
|
|
1,306
|
Total current
liabilities
|
|
66,508
|
|
|
75,423
|
Long-term
borrowings
|
|
153,200
|
|
|
134,000
|
Deferred tax
liabilities, net
|
|
11,761
|
|
|
18,949
|
Other long-term
liabilities and income taxes payable
|
|
8,189
|
|
|
1,958
|
Total
liabilities
|
|
239,658
|
|
|
230,330
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
Common stock ―
authorized 36,000,000 shares, $0.001 par value; 19,729,392 and 19,688,238 shares issued at February
28, 2018 and August 31, 2017,
respectively; and 13,928,937 and 13,984,183 shares
outstanding at February 28, 2018 and
August 31, 2017, respectively
|
|
20
|
|
|
20
|
Additional paid-in
capital
|
|
152,536
|
|
|
150,692
|
Retained
earnings
|
|
328,598
|
|
|
315,764
|
Accumulated other
comprehensive income (loss)
|
|
(16,421)
|
|
|
(28,075)
|
Common stock held in
treasury, at cost ― 5,800,455 and 5,704,055 shares at February 28, 2018 and August 31, 2017,
respectively
|
|
(310,391)
|
|
|
(299,014)
|
Total shareholders'
equity
|
|
154,342
|
|
|
139,387
|
Total liabilities and
shareholders' equity
|
$
|
394,000
|
|
$
|
369,717
|
WD-40
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited and in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
February 28,
|
|
Six Months Ended
February 28,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
101,256
|
|
$
|
96,519
|
|
$
|
198,853
|
|
$
|
185,767
|
Cost of products
sold
|
|
45,498
|
|
|
42,057
|
|
|
88,898
|
|
|
80,265
|
Gross
profit
|
|
55,758
|
|
|
54,462
|
|
|
109,955
|
|
|
105,502
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
30,437
|
|
|
29,842
|
|
|
61,654
|
|
|
58,833
|
Advertising and sales
promotion
|
|
5,212
|
|
|
5,041
|
|
|
10,327
|
|
|
9,853
|
Amortization of
definite-lived intangible assets
|
|
741
|
|
|
717
|
|
|
1,470
|
|
|
1,438
|
Total operating
expenses
|
|
36,390
|
|
|
35,600
|
|
|
73,451
|
|
|
70,124
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
19,368
|
|
|
18,862
|
|
|
36,504
|
|
|
35,378
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
131
|
|
|
133
|
|
|
264
|
|
|
280
|
Interest
expense
|
|
(1,002)
|
|
|
(598)
|
|
|
(1,843)
|
|
|
(1,129)
|
Other (expense) income,
net
|
|
(281)
|
|
|
9
|
|
|
(153)
|
|
|
273
|
Income before income
taxes
|
|
18,216
|
|
|
18,406
|
|
|
34,772
|
|
|
34,802
|
Provision for income
taxes
|
|
3,398
|
|
|
6,046
|
|
|
7,324
|
|
|
10,684
|
Net income
|
$
|
14,818
|
|
$
|
12,360
|
|
$
|
27,448
|
|
$
|
24,118
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.05
|
|
$
|
0.87
|
|
$
|
1.95
|
|
$
|
1.69
|
Diluted
|
$
|
1.05
|
|
$
|
0.87
|
|
$
|
1.95
|
|
$
|
1.69
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
13,967
|
|
|
14,111
|
|
|
13,972
|
|
|
14,146
|
Diluted
|
|
13,995
|
|
|
14,143
|
|
|
14,003
|
|
|
14,182
|
Dividends declared
per common share
|
$
|
0.54
|
|
$
|
0.49
|
|
$
|
1.03
|
|
$
|
0.91
|
WD-40
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited and in
thousands)
|
|
|
|
|
|
|
|
Six Months Ended
February 28,
|
|
2018
|
|
2017
|
Operating
activities:
|
|
|
|
|
|
Net income
|
$
|
27,448
|
|
$
|
24,118
|
Adjustments to
reconcile net income to net cash provided by
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,886
|
|
|
3,298
|
Net gains on sales and
disposals of property and equipment
|
|
(96)
|
|
|
(101)
|
Deferred income
taxes
|
|
(7,184)
|
|
|
155
|
Stock-based
compensation
|
|
3,238
|
|
|
2,959
|
Unrealized foreign
currency exchange losses
|
|
284
|
|
|
1,153
|
Provision for bad
debts
|
|
28
|
|
|
(102)
|
Changes in assets and
liabilities:
|
|
|
|
|
|
Trade accounts
receivable
|
|
(7,147)
|
|
|
(4,088)
|
Inventories
|
|
(3,752)
|
|
|
(6,582)
|
Other
assets
|
|
2,539
|
|
|
(1,459)
|
Accounts payable and
accrued liabilities
|
|
(260)
|
|
|
4,793
|
Accrued payroll and
related expenses
|
|
(4,329)
|
|
|
(10,035)
|
Other long-term
liabilities and income taxes payable
|
|
6,499
|
|
|
2,266
|
Net cash provided by
operating activities
|
|
21,154
|
|
|
16,375
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(9,247)
|
|
|
(12,896)
|
Proceeds from sales of
property and equipment
|
|
246
|
|
|
271
|
Purchase of intangible
assets
|
|
(175)
|
|
|
-
|
Purchases of
short-term investments
|
|
(84,181)
|
|
|
(17,212)
|
Maturities of
short-term investments
|
|
83,967
|
|
|
4,517
|
Net cash used in
investing activities
|
|
(9,390)
|
|
|
(25,320)
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Treasury stock
purchases
|
|
(11,377)
|
|
|
(18,718)
|
Dividends
paid
|
|
(14,486)
|
|
|
(12,963)
|
Proceeds from issuance
of common stock
|
|
215
|
|
|
359
|
Proceeds from issuance
of long-term senior notes
|
|
20,000
|
|
|
-
|
Net (repayments)
proceeds from revolving credit facility
|
|
(6,780)
|
|
|
26,233
|
Shares withheld to
cover taxes upon conversions of equity awards
|
|
(1,797)
|
|
|
(1,692)
|
Net cash used
in financing activities
|
|
(14,225)
|
|
|
(6,781)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
1,879
|
|
|
(1,593)
|
Net decrease in cash
and cash equivalents
|
|
(582)
|
|
|
(17,319)
|
Cash and cash
equivalents at beginning of period
|
|
37,082
|
|
|
50,891
|
Cash and cash
equivalents at end of period
|
$
|
36,500
|
|
$
|
33,572
|
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SOURCE WD-40 Company