WD-40 COMPANY SAN DIEGO, Jan. 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 first fiscal quarter ended November 30, 2015.
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Financial Highlights and Summary
-- Total net sales for the first quarter were $92.5 million, a decrease of
4 percent compared to the prior year fiscal period.
-- Translation of the Company's foreign subsidiary results from their
functional currencies to U.S. dollars had an unfavorable impact on sales
for the current quarter. On a constant currency basis total net sales
would have been $96.2 million for the first quarter.
-- Net income for the first quarter was $12.1 million, an increase of 12
percent from the prior year fiscal period.
-- Diluted earnings per share were $0.83 compared to $0.73 in the prior
year fiscal period.
-- Gross margin was 55.6 percent compared to 51.6 percent in the prior year
fiscal period.
-- Selling, general and administrative expenses were up 2 percent in the
first quarter to $27.8 million when compared to the prior year fiscal
quarter.
-- Advertising and sales promotion expenses were down 4 percent to $5.7
million compared to the prior year fiscal quarter.
"Although foreign currency exchange rate fluctuations negatively impacted our reported sales, we continue to see maintenance product sales growth in local currencies in nearly all our markets," said Garry Ridge, WD-40 Company's president and chief executive officer. "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. When we remove all foreign currency exchange rate impacts, we grew consolidated sales by about half a percentage point which is a little lighter than we would have liked to see. This was caused by the timing of customer orders and promotional activities as well as unstable market conditions in Russia. While we expect we will continue to see fluctuations in the performance of certain markets quarter to quarter, our long-term growth plans remain unchanged," continued Ridge.
Net Sales by Product Group (in thousands):
Three Months Ended November 30,
-------------------------------
2015 2014 %
Change
------
Maintenance
products $82,241 $84,904 (3)%
Homecare
and
cleaning
products 10,281 11,449 (10)%
------ ------
Total $92,522 $96,353 (4)%
======= =======
-- Net sales of maintenance products, which are considered the primary
growth focus for the Company, decreased 3 percent in the first fiscal
quarter when compared to the prior fiscal quarter period. The decline in
the first quarter was driven primarily by the unfavorable impact of
foreign currency exchange rates, the timing of orders and promotional
activity and unstable market conditions in Russia.
-- Net sales of homecare and cleaning products decreased 10 percent for the
current quarter 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 but are
becoming a smaller part of the business as net sales of maintenance
products grow per the execution of the Company's strategic initiatives.
Net Sales by Segment (in thousands):
Three Months Ended November 30,
-------------------------------
2015 2014 %
Change
------
Americas $44,412 $44,773 (1)%
EMEA 32,086 34,591 (7)%
Asia-
Pacific 16,024 16,989 (6)%
------ ------
Total $92,522 $96,353 (4)%
======= =======
-- Net sales by segment as a percent of total net sales for the first
quarter were as follows: for the Americas, 48 percent; for EMEA, 35
percent; and for Asia-Pacific, 17 percent.
-- The decline in sales in the Americas in the first quarter was primarily
driven by unfavorable impacts of foreign currency exchange rates,
specifically those in Canada, and sales declines in Latin America due to
the timing of customer orders. These decreases were almost completely
offset by increased sales of maintenance products in the U.S. due to
promotional activities and the added distribution of our new WD-40
EZ-REACH(TM) product. On a constant currency basis sales in the Americas
for the first quarter would have remained constant at $44.8 million when
compared to the prior year fiscal year period.
-- The decline in sales in EMEA in the first quarter was primarily driven
by unfavorable impacts of foreign currency exchange rates, primarily 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 first quarter would have decreased by $0.4 million or 1% compared to
the prior year fiscal year period.
-- The decline in sales in Asia-Pacific in the first 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 first
quarter would have increased by $0.2 million or 1% compared to the prior
year fiscal year period.
Dividend and Share Repurchase
As previously announced, WD-40 Company's board of directors declared on Tuesday, December 8, 2015 a quarterly dividend of $0.42 per share reflecting an increase of 11 percent over the previous quarter's dividend. The quarterly dividend is payable on January 29, 2016 to stockholders of record at the close of business on January 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 November 30, 2015, the Company repurchased 278,334 shares at a total cost of $23.8 million under this $75.0 million plan.
Updated Fiscal Year 2016 Guidance
The Company updated its guidance for fiscal year 2016 as follows:
-- Net sales growth is projected to be between 4 and 6 percent with net
sales expected to be between $393 million and $401 million.
-- Gross margin for the full year is expected to be above 54 percent.
-- Advertising and promotion expenses are projected to be between 6.0
percent and 7.0 percent of net sales.
-- Net income is projected to be between $47.5 million and $48.5 million.
-- Diluted earnings per share is expected to be between $3.30 and $3.37
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.
"We've updated our fiscal year 2016 guidance to reflect our current view of the business taking into consideration today's foreign currency headwinds and crude oil price tailwinds, said Jay Rembolt, WD-40 Company's vice president and chief financial officer. "Although some level of foreign currency exchange volatility had been built into our previous guidance, with approximately 40 percent of our revenue expected to be generated in currencies other than the U.S. dollar in fiscal year 2016, the continued strengthening of the U.S. dollar has weakened our top-line growth expectations."
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 November 30, 2015 which the Company expects to file with the SEC on January 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 January 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)
November 30, August 31,
2015 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $65,071 $53,896
Short-term investments 47,665 48,603
Trade and other accounts receivable, less
allowance for doubtful accounts of $445 and
$491 at November 30, 2015 and August 31, 2015,
respectively
57,782 58,750
Inventories 35,575 32,052
Current deferred tax assets, net 6,957 5,824
Other current assets 4,392 6,127
----- -----
Total current assets 217,442 205,252
Property and equipment, net 10,844 11,376
Goodwill 96,291 96,409
Other intangible assets, net 22,075 22,961
Other assets 3,276 3,259
----- -----
Total assets $349,928 $339,257
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $20,671 $17,128
Accrued liabilities 15,192 15,200
Accrued payroll and related expenses 12,393 13,357
Income taxes payable 2,607 2,287
----- -----
Total current liabilities 50,863 47,972
Revolving credit facility 118,000 108,000
Long-term deferred tax liabilities, net 24,918 23,145
Other long-term liabilities 2,301 2,282
----- -----
Total liabilities 196,082 181,399
------- -------
Commitments and Contingencies
Shareholders' equity:
Common stock authorized 36,000,000 shares,
$0.001 par value; 19,594,908 and 19,546,888
shares issued at November 30, 2015 and August
31, 2015, respectively; and 14,406,219 and
14,450,490 shares outstanding at November 30,
2015 and August 31, 2015, respectively
20 20
Additional paid-in capital 141,815 141,651
Retained earnings 267,245 260,683
Accumulated other comprehensive income (loss) (11,385) (8,722)
Common stock held in treasury, at cost
5,188,689 and 5,096,398 shares at November 30,
2015 and August 31, 2015, respectively
(243,849) (235,774)
-------- --------
Total shareholders' equity 153,846 157,858
------- -------
Total liabilities and shareholders'
equity $349,928 $339,257
======== ========
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share amounts)
Three Months Ended November
30,
----------------------------
2015 2014
---- ----
Net sales $92,522 $96,353
Cost of products sold 41,114 46,652
------ ------
Gross profit 51,408 49,701
------ ------
Operating expenses:
Selling, general and
administrative 27,848 27,424
Advertising and sales promotion 5,660 5,915
Amortization of definite-lived
intangible assets 755 769
--- ---
Total operating expenses 34,263 34,108
------ ------
Income from operations 17,145 15,593
Other income (expense):
Interest income 148 134
Interest expense (372) (294)
Other (expense) income, net (51) 102
--- ---
Income before income taxes 16,870 15,535
Provision for income taxes 4,808 4,749
----- -----
Net income $12,062 $10,786
======= =======
Earnings per common share:
Basic $0.83 $0.73
===== =====
Diluted $0.83 $0.73
===== =====
Shares used in per share
calculations:
Basic 14,404 14,668
====== ======
Diluted 14,461 14,738
====== ======
Dividends declared per
common share $0.38 $0.34
===== =====
WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Three Months Ended November 30,
-------------------------------
2015 2014
---- ----
Operating activities:
Net income $12,062 $10,786
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,661 1,633
Net gains on sales and disposals of property and
equipment (3) (24)
Deferred income taxes 3 (615)
Excess tax benefits from settlements of stock-
based equity awards (1,390) (494)
Stock-based compensation 633 498
Unrealized foreign currency exchange losses, net 360 461
Provision for bad debts 78 164
Changes in assets and liabilities:
Trade and other accounts receivable 430 (720)
Inventories (3,730) 624
Other assets 1,688 2,841
Accounts payable and accrued liabilities 3,617 (3,563)
Accrued payroll and related expenses (3,187) (4,931)
Income taxes payable 2,403 2,698
Other long-term liabilities 20 40
--- ---
Net cash provided by operating activities 14,645 9,398
------ -----
Investing activities:
Purchases of property and equipment (448) (1,582)
Proceeds from sales of property and equipment - 79
Acquisition of business - (3,705)
Purchases of short-term investments (2,933) (82)
Maturities of short-term investments 2,846 -
----- ---
Net cash used in investing activities (535) (5,290)
---- ------
Financing activities:
Treasury stock purchases (8,075) (9,863)
Dividends paid (5,500) (5,003)
Proceeds from issuance of common stock 421 685
Excess tax benefits from settlements of stock-
based equity awards 1,390 494
Proceeds from revolving credit facility 10,000 -
------ ---
Net cash used in financing activities (1,764) (13,687)
------ -------
Effect of exchange rate changes on cash and cash
equivalents (1,171) (1,782)
------ ------
Net increase (decrease) in cash and cash
equivalents 11,175 (11,361)
Cash and cash equivalents at beginning of period 53,896 57,803
------ ------
Cash and cash equivalents at end of
period $65,071 $46,442
======= =======
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SOURCE WD-40 Company
