WD-40 Company Reports Fourth Quarter and Fiscal Year 2020 Financial Results

SAN DIEGO, Oct. 20, 2020 /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, 2020.

Financial Highlights and Summary

• Total net sales for the fourth quarter were $111.6 million, an increase of 5 percent compared to the prior year fiscal quarter. For the full fiscal year, total net sales were $408.5 million, a decrease 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 $112.3 million for the fourth quarter and $413.4 million for the full fiscal year.
• Net income for the fourth quarter was $19.7 million, an increase of 129 percent compared to the prior year fiscal quarter. For the full fiscal year, net income was $60.7 million, an increase of 9 percent from the prior fiscal year. Net income in fiscal year 2019 was unfavorably impacted by a reserve for an uncertain tax position of $8.7 million that was recorded during the fourth quarter of fiscal year 2019.
• Diluted earnings per share were $1.42 in the fourth quarter, compared to $0.63 per share for the prior year fiscal quarter. For the full fiscal year, diluted earnings per share were $4.40 compared to $4.02 in the prior fiscal year.
• Gross margin was 56.3 percent in the fourth quarter compared to 54.6 percent in the prior year fiscal quarter. For the full fiscal year, gross margin was 54.6 percent compared to 54.9 percent in the prior fiscal year.
• Selling, general and administrative expenses were up 10 percent in the fourth quarter to $31.6 million when compared to the prior year fiscal quarter. Selling, general and administrative expenses for the full fiscal year were down 2 percent to $122.0 million compared to the prior fiscal year.
• Advertising and sales promotion expenses were up 9 percent in the fourth quarter to $6.4 million when compared to the prior year fiscal quarter. Advertising and sales promotion expenses for the full fiscal year were down 7 percent to $21.6 million compared to the prior fiscal year.

"Fiscal year 2020 brought us many unexpected challenges but it also brought many unexpected opportunities," said Garry Ridge, WD-40 Company's chairman and chief executive officer. "As a global business that sells products in more than 176 countries and territories around the world, each of our markets were impacted differently by the COVID-19 pandemic and therefore our sales results varied greatly between geographies. In geographies where retail operations remained open and where we were able to leverage our strong digital presence, we saw strong sales growth. However, in markets with strict movement restrictions in place or less developed e-commerce adoption, our sales were challenged." 

"An unexpected developing trend we experienced in the fourth quarter was an increase in demand for products linked to renovation trends associated with the COVID-19 pandemic.  It seems that the more time people spend isolated in their homes, the more time and money they spend making home improvements.  We are calling this trend, 'isolation renovation' and in nearly all our direct markets we saw double-digit sales growth of WD-40 Multi-Use Product due to this phenomenon."  

"I also want to take this opportunity to thank our tribe for their commitment during these challenging times. Thank you for working hard to ensure that customer orders were obtained, production lines were functioning, orders were fulfilled, and customers and end-users were getting the products they need.  2020 has been challenging but we have successfully been able to stabilize, secure, and reset our business so that we will thrive in the future," concluded Ridge.

Net Sales by Segment (in thousands):

• Net sales by segment as a percent of total net sales for the fourth quarter were as follows: for the Americas, 51 percent; for EMEA, 38 percent; and for Asia-Pacific, 11 percent.
• Net sales in the Americas were up 15 percent in the fourth quarter due entirely to higher sales of maintenance products in the United States, Canada and Latin America which increased 13 percent, 33 percent, and 38 percent respectively. Higher sales of maintenance products in the United States were primarily due to an increase in sales of WD-40 Multi-Use Product driven by increased demand linked to renovation trends associated with the pandemic, new distribution and successful promotional programs as well as increased sales through the ecommerce channel during the COVID-19 pandemic. Higher sales of maintenance products in Canada were due to strong sales of WD-40 Multi-Use Product, WD-40 BIKE and WD-40 Specialist linked to renovation and transportation trends associated with the pandemic. Although the impacts of the COVID-19 pandemic weakened sales levels throughout many regions of Latin America, during the fourth quarter, these sales declines were more than offset by higher sales of maintenance products in Mexico.
• Net sales in EMEA increased 18 percent in the fourth quarter primarily due to higher sales of maintenance products in the EMEA direct markets, which increased 35 percent compared to the prior year fiscal quarter. This increase was partially offset by lower sales in the EMEA distributor markets. Higher sales of maintenance products in the EMEA direct markets were primarily due to increased sales of WD-40 Multi-Use Product and WD-40 Specialist, which increased 33 percent and 37 percent, respectively. This increase was primarily driven by increased demand linked to renovation trends associated with the pandemic, as well the timing of customer orders which were previously delayed in the third fiscal quarter of fiscal year 2020. EMEA also experienced strong sales of homecare and cleaning products which increased 36 percent compared to the prior year fiscal quarter. Lower sales in the EMEA distributer markets were primarily attributable to continued disruptions around the distribution and sales of our products as a result of the complete lock down of many markets within the region due to the COVID-19 pandemic.
• Net sales in Asia-Pacific decreased 43 percent in the fourth quarter primarily due to a lower sales of maintenance products in the Asia distributor markets and in China, which decreased 76 percent and 35 percent, respectively. This decrease was slightly offset by higher sales of homecare and cleaning products in Australia. Lower sales in the Asia distributor markets were primarily attributable to various disruptions related to the COVID-19 pandemic including extended closures, lockdowns and restrictions required by local governmental authorities. Lower sales in China were primarily attributable to slowness in China's hardware and industrial channels which continue to be impacted by the macroeconomic effects of the global pandemic.

Net Sales by Product Group (in thousands):

• 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 year fiscal quarter. This sales growth was primarily attributable to increased sales of WD-40 Multi-Use Product and WD-40 BIKE within the Americas and EMEA segments, which were partially offset by lower sales of WD-40 Multi-Use Product in the Asia-Pacific segment.
• Net sales of homecare and cleaning products increased by 15 percent in the fourth quarter when compared to the prior year fiscal quarter. We experienced a significant increase in sales of our 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. While each of our homecare and cleaning products have continued to generate positive cash flows, we had experienced decreased or flat sales for many of these products in recent years prior to the COVID-19 pandemic.

Dividend and Share Repurchases
As previously announced, WD-40 Company's board of directors declared on Monday, October 5, 2020 a quarterly dividend of $0.67 per share payable October 30, 2020 to stockholders of record at the close of business on October 16, 2020.

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, and remained in effect through August 31, 2020, the Company was authorized to acquire up to $75.0 million of its outstanding shares. During the period from September 1, 2018 through August 31, 2020, the Company repurchased 268,538 shares at a total cost of $46.4 million under this $75.0 million plan. On April 8, 2020, the Company elected to suspend repurchases under this share buy-back plan which subsequently expired on August 31, 2020. The Company suspended repurchases in order to preserve cash while it continued to monitor the impacts of the COVID-19 pandemic. Therefore, no repurchase transactions were made between April 8, 2020 and August 31, 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 owns 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, which the company expects to file with the SEC on October 21, 2020. 

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 20, 2020, 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

SOURCE WD-40 Company