SAN DIEGO, Oct. 17, 2019 /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 fourth
quarter and fiscal year ended August 31,
2019.
Financial Highlights and Summary
- Total net sales for the fourth quarter were $106.7 million, an increase of 4 percent compared
to the prior year fiscal quarter. For the full fiscal year, total
net sales were $423.4 million, also
an increase of 4 percent compared to the prior fiscal year.
- Translation of the Company's foreign subsidiary results to U.S.
dollars had an unfavorable impact on sales for the current quarter
and full fiscal year. On a constant currency basis, total net sales
would have been $109.2 million for
the fourth quarter and $433.8 million
for the full fiscal year.
- Net income for the fourth quarter was $8.6 million, a decrease of 60 percent compared
to the prior year fiscal quarter. For the full fiscal year, net
income was $55.9 million, a decrease
of 14 percent from the prior fiscal year.
- Diluted earnings per share were $0.63 in the fourth quarter, compared to
$1.54 per share for the prior year
fiscal quarter. For the full fiscal year, diluted earnings per
share were $4.02 compared to
$4.64 in the prior fiscal year.
- Gross margin was 54.6 percent in the fourth quarter compared to
55.2 percent in the prior year fiscal quarter. For the full fiscal
year, gross margin was 54.9 percent compared to 55.1 percent in the
prior fiscal year.
- Selling, general and administrative expenses were down 3
percent in the fourth quarter to $28.7
million when compared to the prior year fiscal quarter.
Selling, general and administrative expenses for the full fiscal
year were up 2 percent to $123.9
million compared to the prior fiscal year.
- Advertising and sales promotion expenses were down 9 percent in
the fourth quarter to $5.9 million
when compared to the prior year fiscal quarter. Advertising and
sales promotion expenses for the full fiscal year were up 4 percent
to $23.3 million compared to the
prior fiscal year.
"In the fourth quarter, net income and diluted earnings per
share were negatively impacted by an $8.7
million reserve for an uncertain tax position that we
recorded, and previously disclosed, during the fourth quarter,"
said Jay Rembolt, WD-40 Company's
chief financial officer. "Because of this adjustment, our net
income is significantly lower on a year-over-year basis in both the
quarter and the full fiscal year. The good news is that this a
one-time charge and the high tax rate we recorded is not expected
to carry into fiscal year 2020. We expect the provision for income
tax to be between 20 and 22 percent in fiscal year 2020," concluded
Rembolt.
WD-40 Company's chief executive officer, Garry Ridge added, "We are pleased that we
achieved sales results in fiscal year 2019 which reflect another
solid year for the Company. Our maintenance products delivered
solid sales increases in the full fiscal year including 4 percent
growth of WD-40 Multi-Use Product and 13 percent growth of WD-40
Specialist. I'd like to thank the tribe for their contributions
during fiscal year 2019. The tribe has never been more aligned and
focused. We are clear about our purpose and we know what we need to
do to achieve our long-term goals."
Net Sales by Segment (in thousands):
|
Three Months Ended
August 31,
|
|
Fiscal Year Ended
August 31,
|
|
2019
|
|
2018
|
|
%
Change
|
|
2019
|
|
2018
|
|
%
Change
|
Americas
|
$
|
49,318
|
|
$
|
48,749
|
|
|
1%
|
|
$
|
193,972
|
|
$
|
192,878
|
|
|
1%
|
EMEA
|
|
36,356
|
|
|
36,647
|
|
|
(1)%
|
|
|
160,615
|
|
|
150,878
|
|
|
6%
|
Asia-Pacific
|
|
21,070
|
|
|
17,244
|
|
|
22%
|
|
|
68,763
|
|
|
64,762
|
|
|
6%
|
Total
|
$
|
106,744
|
|
$
|
102,640
|
|
|
4%
|
|
$
|
423,350
|
|
$
|
408,518
|
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Net sales by segment as a percent of total net sales for the
fourth quarter were as follows: for the Americas, 46 percent; for
EMEA, 34 percent; and for Asia-Pacific, 20 percent.
- Net sales in the Americas were up 1 percent in the fourth
quarter due entirely to higher sales of maintenance products in
the United States and Canada, which increased 2 percent and 19
percent, respectively. This increase was partially offset by lower
sales of maintenance products Latin
America. The higher sales of maintenance products in
the United States were primarily
due to an increase in sales of WD-40 Specialist. The higher sales
of maintenance products in Canada
were primarily due to strong sales of WD-40 Multi-Use Product.
- Net sales in EMEA decreased 1 percent in the fourth quarter
primarily due to changes in foreign currency exchange rates, which
had an unfavorable impact on sales for the EMEA segment from period
to period. On a constant currency basis EMEA sales for the fourth
quarter would have increased by $1.6
million, or 4 percent, compared to the prior fiscal year
period primarily due to higher sales of WD-40 Multi-Use Product
within EMEA's distributor markets. EMEA also experienced strong
sales of homecare and cleaning products which increased 16 percent
compared to the prior year fiscal period.
- Net sales in Asia-Pacific
increased 22 percent in the fourth quarter primarily due to a 28
percent increase in sales in the Asia distributor markets and a 22 percent
increase in sales in China. The
sales growth in the Asia
distributor markets was primarily attributable to increased sales
driven by successful promotional programs as well as the timing of
customer orders in certain countries. The growth in China was due to the timing of promotional
activities as well as continued growth within the e-commerce
channel. Changes in foreign currency exchange rates had an
unfavorable impact on sales for the Asia-Pacific segment from period to period. On
a constant currency basis Asia-Pacific sales for the fourth quarter
would have increased by $4.3 million,
or 25 percent, compared to the prior fiscal year period.
Net Sales by Product Group (in thousands):
|
Three Months Ended
August 31,
|
|
Fiscal Year Ended
August 31,
|
|
2019
|
|
2018
|
|
%
Change
|
|
2019
|
|
2018
|
|
%
Change
|
Maintenance
products
|
$
|
97,273
|
|
$
|
93,203
|
|
|
4%
|
|
$
|
386,644
|
|
$
|
372,391
|
|
|
4%
|
Homecare and cleaning
products
|
|
9,471
|
|
|
9,437
|
|
|
-
|
|
|
36,706
|
|
|
36,127
|
|
|
2%
|
Total
|
$
|
106,744
|
|
$
|
102,640
|
|
|
4%
|
|
$
|
423,350
|
|
$
|
408,518
|
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Net sales of maintenance products, which are considered the
primary growth focus for the Company, increased 4 percent in the
fourth quarter when compared to the prior fiscal year period. This
sales growth was primarily attributable to increased sales of WD-40
Multi-Use Product within the Asia-Pacific segment and increased sales of
WD-40 Specialist within the Americas segment.
- Net sales of homecare and cleaning products remained relatively
constant in the fourth 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, October 8, 2019 a quarterly
dividend of $0.61 per share payable
October 31, 2019 to stockholders of
record at the close of business on October
18, 2019.
On June 19, 2018, the Company's
Board of Directors approved a share buy-back plan. Under the plan,
which became effective on September 1,
2018, the Company is authorized to acquire up to
$75.0 million of its outstanding
shares through August 31, 2020. 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, 2018 through August 31, 2019, the Company repurchased 175,955
shares at a total cost of $29.6
million under this $75.0
million plan.
Fiscal Year 2020 Guidance
The Company issued the
following guidance for fiscal year 2020:
- Net sales growth is projected to be between 3 and 7 percent
with net sales expected to be between $436
million and $453 million.
- Gross margin percentage for the full year is expected to be
between 54 and 55 percent.
- Advertising and promotion investments are projected to be
between 5.5 and 6.0 percent of net sales.
- The provision for income tax is expected to be between 20 and
22 percent.
- Net income is projected to be between $65.0 million and $66.2
million.
- Diluted earnings per share is expected to be between
$4.74 and $4.83 based on an estimated 13.7 million weighted
average shares outstanding.
This guidance is expressed in good faith and is believed by the
Company to have a reasonable basis; however, it is not possible to
predict with a reasonable degree of certainty the actual impact of
fluctuating foreign currency exchange rates, and these currency
fluctuations may have a significant impact on the Company's fiscal
year 2020 guidance. This guidance does not include any future
acquisitions or divestitures and assumes that crude oil prices will
remain close to current levels for the remainder of fiscal year
2020.
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 $423.4
million in fiscal year 2019 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; anticipated input
costs for manufacturing and the costs associated with distribution
of our products; 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; expected tax
rates and the impact of tax legislation and regulatory action; 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," "target," "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, 2019, which the company expects to file with the SEC on
October 22, 2019.
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 October 17, 2019, 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
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited and in
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
August
31,
|
|
August
31,
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
27,233
|
|
$
|
48,866
|
Short-term
investments
|
|
-
|
|
|
219
|
Trade accounts
receivable, less allowance for doubtful
|
|
|
|
|
|
accounts of $300 and
$340 at August 31, 2019
|
|
|
|
|
|
and 2018,
respectively
|
|
72,864
|
|
|
69,025
|
Inventories
|
|
40,682
|
|
|
36,536
|
Other current
assets
|
|
7,216
|
|
|
13,337
|
Total current
assets
|
|
147,995
|
|
|
167,983
|
Property and equipment,
net
|
|
45,076
|
|
|
36,357
|
Goodwill
|
|
95,347
|
|
|
95,621
|
Other intangible
assets, net
|
|
10,652
|
|
|
13,513
|
Deferred tax assets,
net
|
|
403
|
|
|
511
|
Other assets
|
|
3,189
|
|
|
3,074
|
Total
assets
|
$
|
302,662
|
|
$
|
317,059
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
18,727
|
|
$
|
19,115
|
Accrued
liabilities
|
|
18,513
|
|
|
26,240
|
Accrued payroll and
related expenses
|
|
15,301
|
|
|
14,823
|
Short-term
borrowings
|
|
21,205
|
|
|
23,600
|
Income taxes
payable
|
|
844
|
|
|
2,125
|
Total current
liabilities
|
|
74,590
|
|
|
85,903
|
Long-term
borrowings
|
|
60,221
|
|
|
62,800
|
Deferred tax
liabilities, net
|
|
11,688
|
|
|
11,050
|
Other long-term
liabilities
|
|
10,688
|
|
|
1,817
|
Total
liabilities
|
|
157,187
|
|
|
161,570
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
Common stock ―
authorized 36,000,000 shares, $0.001 par value;
|
|
|
|
|
|
19,773,977 and
19,729,774 shares issued at August 31, 2019 and 2018,
|
|
|
|
|
|
respectively; and
13,718,661 and 13,850,413 shares outstanding at
|
|
|
|
|
|
August 31, 2019 and
2018, respectively
|
|
20
|
|
|
20
|
Additional paid-in
capital
|
|
155,132
|
|
|
153,469
|
Retained
earnings
|
|
374,060
|
|
|
351,266
|
Accumulated other
comprehensive income (loss)
|
|
(32,482)
|
|
|
(27,636)
|
Common stock held in
treasury, at cost ― 6,055,316 and 5,879,361
|
|
|
|
|
|
shares at August 31,
2019 and 2018, respectively
|
|
(351,255)
|
|
|
(321,630)
|
Total shareholders'
equity
|
|
145,475
|
|
|
155,489
|
Total liabilities and
shareholders' equity
|
$
|
302,662
|
|
$
|
317,059
|
|
|
|
|
|
|
WD-40
COMPANY
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited and in
thousands, except per share amounts)
|
|
|
Three Months Ended
August 31,
|
|
Fiscal Year Ended
August 31,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
106,744
|
|
$
|
102,640
|
|
$
|
423,350
|
|
$
|
408,518
|
Cost of products
sold
|
|
48,476
|
|
|
45,990
|
|
|
191,010
|
|
|
183,255
|
Gross
profit
|
|
58,268
|
|
|
56,650
|
|
|
232,340
|
|
|
225,263
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
28,668
|
|
|
29,658
|
|
|
123,946
|
|
|
121,394
|
Advertising and sales
promotion
|
|
5,886
|
|
|
6,486
|
|
|
23,306
|
|
|
22,314
|
Amortization of
definite-lived intangible assets
|
|
650
|
|
|
735
|
|
|
2,706
|
|
|
2,951
|
Total operating
expenses
|
|
35,204
|
|
|
36,879
|
|
|
149,958
|
|
|
146,659
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
23,064
|
|
|
19,771
|
|
|
82,382
|
|
|
78,604
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
32
|
|
|
83
|
|
|
155
|
|
|
454
|
Interest
expense
|
|
(579)
|
|
|
(1,171)
|
|
|
(2,541)
|
|
|
(4,219)
|
Other income (expense),
net
|
|
(54)
|
|
|
426
|
|
|
774
|
|
|
339
|
Income before income
taxes
|
|
22,463
|
|
|
19,109
|
|
|
80,770
|
|
|
75,178
|
Provision for income
taxes
|
|
13,879
|
|
|
(2,528)
|
|
|
24,862
|
|
|
9,963
|
Net income
|
$
|
8,584
|
|
$
|
21,637
|
|
$
|
55,908
|
|
$
|
65,215
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.63
|
|
$
|
1.55
|
|
$
|
4.03
|
|
$
|
4.65
|
Diluted
|
$
|
0.63
|
|
$
|
1.54
|
|
$
|
4.02
|
|
$
|
4.64
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
13,731
|
|
|
13,869
|
|
|
13,799
|
|
|
13,929
|
Diluted
|
|
13,763
|
|
|
13,904
|
|
|
13,830
|
|
|
13,962
|
|
|
|
|
|
|
|
|
|
|
|
|
WD-40
COMPANY
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited and in
thousands)
|
|
|
|
|
|
|
|
Fiscal Year Ended
August 31,
|
|
2019
|
|
2018
|
Operating
activities:
|
|
|
|
|
|
Net income
|
$
|
55,908
|
|
$
|
65,215
|
Adjustments to
reconcile net income to net cash provided by
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
7,593
|
|
|
7,800
|
Net gains on sales and
disposals of property and equipment
|
|
(99)
|
|
|
(164)
|
Deferred income
taxes
|
|
(4)
|
|
|
(7,186)
|
Stock-based
compensation
|
|
4,446
|
|
|
4,195
|
Unrealized foreign
currency exchange losses (gains), net
|
|
651
|
|
|
(302)
|
Provision for bad
debts
|
|
67
|
|
|
121
|
Changes in assets and
liabilities:
|
|
|
|
|
|
Trade accounts
receivable
|
|
(7,318)
|
|
|
(5,635)
|
Inventories
|
|
(4,800)
|
|
|
(1,299)
|
Other
assets
|
|
5,802
|
|
|
(5,353)
|
Accounts payable and
accrued liabilities
|
|
(7,948)
|
|
|
6,107
|
Accrued payroll and
related expenses
|
|
879
|
|
|
590
|
Other long-term
liabilities and income taxes payable
|
|
7,674
|
|
|
733
|
Net cash provided by
operating activities
|
|
62,851
|
|
|
64,822
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(13,282)
|
|
|
(12,356)
|
Proceeds from sales of
property and equipment
|
|
383
|
|
|
458
|
Purchases of
intangible assets
|
|
-
|
|
|
(175)
|
Purchases of
short-term investments
|
|
-
|
|
|
(83,704)
|
Maturities of
short-term investments
|
|
219
|
|
|
166,984
|
Net cash provided by
(used in) investing activities
|
|
(12,680)
|
|
|
71,207
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Treasury stock
purchases
|
|
(29,625)
|
|
|
(22,616)
|
Dividends
paid
|
|
(32,889)
|
|
|
(29,585)
|
Proceeds from issuance
of common stock
|
|
-
|
|
|
215
|
Proceeds from issuance
of long-term senior notes
|
|
-
|
|
|
20,000
|
Repayments of
long-term senior notes
|
|
(800)
|
|
|
(400)
|
Net (repayments)
proceeds from revolving credit facility
|
|
(2,912)
|
|
|
(87,200)
|
Shares withheld to
cover taxes upon conversion of equity awards
|
|
(2,783)
|
|
|
(1,823)
|
Net cash used in
financing activities
|
|
(69,009)
|
|
|
(121,409)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(2,795)
|
|
|
(2,836)
|
Net increase
(decrease) in cash and cash equivalents
|
|
(21,633)
|
|
|
11,784
|
Cash and cash
equivalents at beginning of period
|
|
48,866
|
|
|
37,082
|
Cash and cash
equivalents at end of period
|
$
|
27,233
|
|
$
|
48,866
|
|
|
|
|
|
|
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SOURCE WD-40 Company