SAN DIEGO, April 8, 2021 /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,
2021.
Third Fiscal Quarter Financial Highlights
- Total net sales for the second quarter were $111.9 million, an increase of 12 percent
compared to the prior year fiscal quarter. Year-to-date total net
sales were $236.5 million, an
increase of 19 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 $109.2 million for the
second quarter and $231.0 million
year-to-date.
- Net income for the second quarter was $17.2 million, an increase of 20 percent compared
to the prior year fiscal quarter. Year-to-date net income was
$40.8 million, an increase of 54
percent from the prior year fiscal period.
- Diluted earnings per share were $1.24 in the second quarter, compared to
$1.04 per share for the prior year
fiscal quarter. Year-to-date diluted earnings per share were
$2.96 compared to $1.92 in the prior year fiscal period.
- Gross margin was 55.4 percent in the second quarter compared to
53.6 percent in the prior year fiscal quarter. Year-to-date gross
margin was 55.9 percent compared to 53.9 percent in the prior year
fiscal period.
- Selling, general and administrative expenses were up 19 percent
in the second quarter to $35.5
million when compared to the prior year fiscal quarter.
Year-to-date selling, general and administrative expenses were up
14 percent to $71.5 million compared
to the prior year fiscal period.
- Advertising and sales promotion expenses were up 13 percent in
the second quarter to $5.5 million
when compared to the prior year fiscal quarter. Year-to-date
advertising and sales promotion expenses were up 6 percent to
$11.0 million compared to the prior
year fiscal period.
"We continue to experience very high demand for our maintenance
products due to renovation trends associated with the
pandemic, or what we call isolation renovation," said
Garry Ridge, WD-40 Company's
chairman and chief executive officer. "In addition, we are seeing
improved market conditions due to a reduction of COVID-19 lockdown
measures in many markets, particularly in China, as well as increased sales through the
ecommerce channel."
"However, the pandemic has also caused some disruptions and
constraints to our supply chain, primarily in the Americas, which
impacted our ability to meet the increased end user demand we
experienced in the United States
during the second quarter. Despite these supply chain
challenges in the United States,
we continue to experience very strong point-of-sale end user demand
for our maintenance products. We are working to address the supply
chain challenges and there is a recovery plan underway which
we expect will result in improved conditions in the back half of
the year."
"We are off to a very strong start in the first half of fiscal
2021. Keeping up with demand in a COVID environment has been a
challenge, but we've increased our revenue expectations and believe
that net sales are likely to be in a range of between $445 million to $475
million for the full fiscal year. This upward revision
is driven primarily by favorable changes in foreign currency
exchange rates. Additionally, over the long-term, we are
optimistic that many of the new end users who have interacted with
our products during the pandemic will become permanent users of our
maintenance and homecare solutions," Ridge concluded.
Net Sales by Segment (in thousands):
|
Three Months Ended
February 28/29,
|
|
Six Months Ended
February 28/29,
|
|
2021
|
|
2020
|
|
Change
|
|
2021
|
|
2020
|
|
Change
|
Americas
|
$
|
46,157
|
|
$
|
46,842
|
|
|
(1)%
|
|
$
|
100,344
|
|
$
|
93,578
|
|
|
7%
|
EMEA
|
|
49,813
|
|
|
41,753
|
|
|
19%
|
|
|
104,563
|
|
|
80,998
|
|
|
29%
|
Asia-Pacific
|
|
15,935
|
|
|
11,454
|
|
|
39%
|
|
|
31,557
|
|
|
24,029
|
|
|
31%
|
Total
|
$
|
111,905
|
|
$
|
100,049
|
|
|
12%
|
|
$
|
236,464
|
|
$
|
198,605
|
|
|
19%
|
- Net sales by segment as a percent of total net sales for the
second quarter were as follows: for the Americas, 41 percent; for
EMEA, 45 percent; and for Asia-Pacific, 14 percent.
- Net sales in the Americas decreased 1 percent in the second
quarter due primarily to lower sales of maintenance products in
the United States which decreased
11 percent compared to the prior year fiscal quarter. Lower sales
of maintenance products in the United
States were due to supply chain constraints and disruptions
related to the COVID-19 pandemic. Partially offsetting these
declines were higher sales in Canada and Latin
America which increased 15 percent and 27 percent,
respectively. The increase in sales in Canada was driven by increased demand linked
to renovation trends associated with the pandemic, increased sales
through the ecommerce channel and the successful introduction Next
Generation Smart Straw®. The increase in sales in Latin America was primarily due to strong
sales of WD-40 Multi-Use Product in Mexico.
- Net sales in EMEA increased 19 percent in the second quarter
primarily due to higher sales of maintenance products in both the
EMEA direct and distributor markets, which increased 17 percent and
35 percent, respectively. Higher sales of maintenance products in
the EMEA direct markets were primarily due to increased sales of
WD-40 Multi-Use Product driven by increased demand linked to
renovation trends associated with the pandemic and increased sales
through the ecommerce channel. Higher sales of maintenance products
in the EMEA distributor markets were primarily attributable to
improved economic conditions as a result of reductions in COVID-19
related movement restrictions. 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
first quarter would have increased by 15 percent compared to the
prior fiscal year quarter.
- Net sales in Asia-Pacific
increased 39 percent in the second quarter due primarily to higher
sales of WD-40 Multi-Use Product in China which increased 251 percent compared to
the prior year fiscal quarter. Higher sales of WD-40 Multi-Use
Product in China were primarily
due to improved market conditions due to the reduction of COVID-19
lockdown measures compared to the corresponding period of the prior
fiscal year when the pandemic was in its earliest stages. Also
contributing to higher sales in Asia-Pacific were higher sales in Australia which increased 39 percent compared
to the prior year fiscal quarter. This increase was driven by
higher demand for maintenance products linked to renovation trends
and increased demand for cleaning products primarily due to the
impacts of the pandemic. Partially offsetting these increases were
lower sales in the Asia-Pacific
distributor markets which declined 4 percent compared to the prior
year fiscal quarter. The lower sales of maintenance products in the
Asia distributor markets were
attributed to the shift in the timing of customer orders as well as
delays in the shipment of certain orders linked to shipping
container shortages in the region. In addition, many of the
Company's marketing distributors are continuing to adjust to more
normalized inventory levels. Changes in foreign currency exchange
rates had a favorable impact on sales for the Asia-Pacific segment. On a constant currency
basis, Asia-Pacific would have
increased by 32 percent compared to the prior year fiscal
quarter.
Net Sales by Product Group (in thousands):
|
Three Months Ended
February 28/29,
|
|
Six Months Ended
February 28/29,
|
|
2021
|
|
2020
|
|
Change
|
|
2021
|
|
2020
|
|
Change
|
Maintenance
products
|
$
|
102,729
|
|
$
|
91,147
|
|
|
13%
|
|
$
|
217,072
|
|
$
|
180,817
|
|
|
20%
|
Homecare and cleaning
products
|
|
9,176
|
|
|
8,902
|
|
|
3%
|
|
|
19,392
|
|
|
17,788
|
|
|
9%
|
Total
|
$
|
111,905
|
|
$
|
100,049
|
|
|
12%
|
|
$
|
236,464
|
|
$
|
198,605
|
|
|
19%
|
- Net sales of maintenance products, which are considered the
primary growth focus for the Company, increased 13 percent in the
second quarter when compared to the prior year fiscal quarter. This
sales increase was primarily attributable to increased sales of
WD-40 Multi-Use Product in all three segments driven by increased
demand linked to renovation trends associated with the pandemic,
improved market conditions due to a reduction of COVID-19 lockdown
measures, and increased sales through the ecommerce channel.
- Net sales of homecare and cleaning products increased 3 percent
in the second quarter when compared to the prior year fiscal
quarter. The Company started to experience an increase in sales of
its homecare and cleaning products beginning in the third quarter
of fiscal year 2020 due to increased demand for such products as a
result of the COVID-19 pandemic. 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 Information
As previously announced, WD-40
Company's board of directors declared on Tuesday, March 16, 2021 a quarterly dividend of
$0.72 per share reflecting an
increase of greater than 7 percent over the previous quarter's
dividend. The quarterly dividend is payable on April 30, 2021 to stockholders of record at the
close of business on April 16,
2021.
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 including management's current view of
the business in light of the COVID-19 pandemic. 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 a wide range of 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 $408.5
million in fiscal year 2020 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; the length and severity of the current COVID-19 pandemic
and its impact on the global economy and the Company's financial
results; 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, 2020,
and in the Company's Quarterly Report on Form 10-Q for the period
ended February 28, 2021 which the
Company expects to file with the SEC on April 8, 2021.
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 8, 2021, 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® 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, Mexico 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,
|
|
2021
|
|
2020
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
72,381
|
|
$
|
56,462
|
Trade accounts
receivable, less allowance for doubtful accounts of $550 and $362 at February 28, 2021
and August 31, 2020,
respectively
|
|
93,577
|
|
|
80,672
|
Inventories
|
|
44,539
|
|
|
41,264
|
Other current
assets
|
|
11,339
|
|
|
6,756
|
Total current
assets
|
|
221,836
|
|
|
185,154
|
Property and equipment,
net
|
|
67,077
|
|
|
60,759
|
Goodwill
|
|
95,987
|
|
|
95,731
|
Other intangible
assets, net
|
|
8,020
|
|
|
8,633
|
Operating lease
right-of-use assets
|
|
8,741
|
|
|
8,168
|
Deferred tax assets,
net
|
|
498
|
|
|
464
|
Other assets
|
|
3,828
|
|
|
3,728
|
Total
assets
|
$
|
405,987
|
|
$
|
362,637
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
27,729
|
|
$
|
21,676
|
Accrued
liabilities
|
|
24,451
|
|
|
21,660
|
Accrued payroll and
related expenses
|
|
16,667
|
|
|
14,767
|
Short-term
borrowings
|
|
800
|
|
|
800
|
Income taxes
payable
|
|
2,236
|
|
|
1,213
|
Total current
liabilities
|
|
71,883
|
|
|
60,116
|
Long-term
borrowings
|
|
116,731
|
|
|
113,098
|
Deferred tax
liabilities, net
|
|
11,535
|
|
|
11,291
|
Long-term operating
lease liabilities
|
|
6,945
|
|
|
6,520
|
Other long-term
liabilities
|
|
11,313
|
|
|
11,299
|
Total
liabilities
|
|
218,407
|
|
|
202,324
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
Common stock ―
authorized 36,000,000 shares, $0.001 par value; 19,855,666 and 19,812,685 shares issued at February
28, 2021 and August 31, 2020,
respectively; and 13,707,767 and 13,664,786 shares
outstanding at February 28, 2021 and
August 31, 2020, respectively
|
|
20
|
|
|
20
|
Additional paid-in
capital
|
|
158,897
|
|
|
157,850
|
Retained
earnings
|
|
421,129
|
|
|
398,731
|
Accumulated other
comprehensive loss
|
|
(24,386)
|
|
|
(28,208)
|
Common stock held in
treasury, at cost ― 6,147,899 and 6,147,899 shares at February 28, 2021 and August 31, 2020,
respectively
|
|
(368,080)
|
|
|
(368,080)
|
Total shareholders'
equity
|
|
187,580
|
|
|
160,313
|
Total liabilities and
shareholders' equity
|
$
|
405,987
|
|
$
|
362,637
|
WD-40
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited and in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
February 28/29,
|
|
Six Months Ended
February 28/29,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
111,905
|
|
$
|
100,049
|
|
$
|
236,464
|
|
$
|
198,605
|
Cost of products
sold
|
|
49,898
|
|
|
46,447
|
|
|
104,211
|
|
|
91,460
|
Gross
profit
|
|
62,007
|
|
|
53,602
|
|
|
132,253
|
|
|
107,145
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
35,478
|
|
|
29,906
|
|
|
71,455
|
|
|
62,505
|
Advertising and sales
promotion
|
|
5,512
|
|
|
4,857
|
|
|
11,031
|
|
|
10,447
|
Amortization of
definite-lived intangible assets
|
|
362
|
|
|
654
|
|
|
720
|
|
|
1,304
|
Total operating
expenses
|
|
41,352
|
|
|
35,417
|
|
|
83,206
|
|
|
74,256
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
20,655
|
|
|
18,185
|
|
|
49,047
|
|
|
32,889
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
19
|
|
|
28
|
|
|
38
|
|
|
53
|
Interest
expense
|
|
(610)
|
|
|
(593)
|
|
|
(1,180)
|
|
|
(1,035)
|
Other income (expense),
net
|
|
151
|
|
|
(229)
|
|
|
330
|
|
|
(224)
|
Income before income
taxes
|
|
20,215
|
|
|
17,391
|
|
|
48,235
|
|
|
31,683
|
Provision for income
taxes
|
|
3,024
|
|
|
3,064
|
|
|
7,421
|
|
|
5,162
|
Net income
|
$
|
17,191
|
|
$
|
14,327
|
|
$
|
40,814
|
|
$
|
26,521
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.25
|
|
$
|
1.04
|
|
$
|
2.97
|
|
$
|
1.92
|
Diluted
|
$
|
1.24
|
|
$
|
1.04
|
|
$
|
2.96
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
13,700
|
|
|
13,712
|
|
|
13,687
|
|
|
13,713
|
Diluted
|
|
13,729
|
|
|
13,737
|
|
|
13,718
|
|
|
13,741
|
WD-40
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited and in
thousands)
|
|
|
|
|
|
|
|
Six Months Ended
February 28/29,
|
|
2021
|
|
2020
|
Operating
activities:
|
|
|
|
|
|
Net income
|
$
|
40,814
|
|
$
|
26,521
|
Adjustments to
reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,458
|
|
|
4,024
|
Net gains on sales and
disposals of property and equipment
|
|
(104)
|
|
|
(66)
|
Deferred income
taxes
|
|
152
|
|
|
(79)
|
Stock-based
compensation
|
|
4,542
|
|
|
3,889
|
Unrealized foreign
currency exchange losses
|
|
139
|
|
|
(249)
|
Provision for bad
debts
|
|
175
|
|
|
61
|
Changes in assets and
liabilities:
|
|
|
|
|
|
Trade accounts
receivable
|
|
(10,111)
|
|
|
(1,313)
|
Inventories
|
|
(2,104)
|
|
|
(1,648)
|
Other
assets
|
|
(4,386)
|
|
|
(1,781)
|
Operating lease assets
and liabilities, net
|
|
9
|
|
|
211
|
Accounts payable and
accrued liabilities
|
|
7,398
|
|
|
1,969
|
Accrued payroll and
related expenses
|
|
1,584
|
|
|
(7,345)
|
Other long-term
liabilities and income taxes payable
|
|
944
|
|
|
(812)
|
Net cash provided by
operating activities
|
|
42,510
|
|
|
23,382
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(7,605)
|
|
|
(10,695)
|
Proceeds from sales of
property and equipment
|
|
239
|
|
|
212
|
Net cash used in
investing activities
|
|
(7,366)
|
|
|
(10,483)
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Treasury stock
purchases
|
|
-
|
|
|
(9,658)
|
Dividends
paid
|
|
(18,416)
|
|
|
(17,642)
|
Proceeds from issuance
of long-term senior notes
|
|
52,000
|
|
|
-
|
Repayments of
long-term senior notes
|
|
(400)
|
|
|
(400)
|
Net (repayments)
proceeds of revolving credit facility
|
|
(50,000)
|
|
|
20,524
|
Shares withheld to
cover taxes upon conversions of equity awards
|
|
(3,495)
|
|
|
(2,640)
|
Net cash used
in financing activities
|
|
(20,311)
|
|
|
(9,816)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
1,086
|
|
|
187
|
Net increase in cash
and cash equivalents
|
|
15,919
|
|
|
3,270
|
Cash and cash
equivalents at beginning of period
|
|
56,462
|
|
|
27,233
|
Cash and cash
equivalents at end of period
|
$
|
72,381
|
|
$
|
30,503
|
|
|
|
|
|
|
Supplemental
disclosure of noncash investing activities:
|
|
|
|
|
|
Accrued capital
expenditures
|
$
|
1,638
|
|
$
|
5,724
|
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SOURCE WD-40 Company