WD-40 Company Reports Third Quarter 2015 Financial Results

SAN DIEGO, July 8, 2015 /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 third fiscal quarter ended May 31, 2015.

Financial Highlights and Summary

• Total net sales for the third quarter were $92.5 million, a decrease of 3 percent compared to the prior year fiscal quarter. Year-to-date total net sales were $286.2 million, a slight increase compared to the prior year fiscal period.   
• Translation of the Company's foreign subsidiary results to U.S. dollars had an unfavorable impact on sales for the current quarter and year to date.  On a constant currency basis total net sales would have been $96.5 million for the third quarter and $292.9 million year to date.
• Net income for the third quarter was $11.0 million, an increase of 5 percent compared to the prior year fiscal quarter. Year-to-date net income was $33.1 million, an increase of 3 percent from the prior year fiscal period.
• Diluted earnings per share were $0.75 in the third quarter, compared to $0.69 per share for the prior year fiscal quarter. Year-to-date diluted earnings per share were $2.24 compared to $2.10 in the prior year fiscal period.
• Gross margin was 53.3 percent in the third quarter compared to 51.4 percent in the prior year fiscal quarter.  Year-to-date gross margin was 52.5 percent compared to 51.6 percent in the prior year fiscal period.
• Selling, general and administrative expenses were down 1 percent in the third quarter to $26.6 million when compared to the prior year fiscal quarter.  Year-to-date selling, general and administrative expenses were up 1 percent to $81.4 million compared to the prior year fiscal period. 
• Advertising and sales promotion expenses were down 15 percent in the third quarter to $5.5 million compared to prior year fiscal quarter.  Year-to-date advertising and sales promotion expenses were down 6 percent to $16.9 million compared to the prior year fiscal period. 

"Foreign currency exchange headwinds and political and economic instability in Eastern Europe continue to adversely impact and distort the true strength of our business," said Garry Ridge, WD-40 Company's president and chief executive officer. "Our net sales results in the third quarter were negatively impacted by foreign currency issues, particularly in our EMEA segment, as well as significantly reduced sales in our distributor markets in Ukraine and Russia. We experienced strong sales growth in the Americas segment during the third quarter due to increased distribution and promotional activities.  Our Asia-Pacific segment is on track for a great year despite an isolated product quality issue linked to a defective aerosol can component contained in our WD-40 Multi-Use Product sold within our Asian distributor markets.  This product quality issue caused sales levels to be lower during the third quarter."

"Although foreign currency exchange rate fluctuations across Europe as well as the political and economic instability in Eastern Europe negatively impacted our reported sales in EMEA, nearly all of our EMEA direct markets are seeing organic sales growth in their local currencies.  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 of multi-purpose maintenance products, which are considered the primary growth focus for the Company, decreased 4 percent in the third fiscal quarter but remained relatively constant year to date when compared to the prior fiscal year periods.  The decline in the third quarter was driven primarily by the unfavorable impact of foreign currency exchange rates in EMEA and an isolated product quality issue that was linked to a specific product sold within our Asian distributor markets.
• Net sales of homecare and cleaning products increased 1 percent for both the current quarter and year to date when compared to the prior fiscal year periods. 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. 

• Net sales by segment as a percent of total net sales for the third quarter were as follows: for the Americas, 54 percent; for EMEA, 33 percent; and for Asia-Pacific, 13 percent.
• The increase in sales in the Americas in the third quarter was primarily driven by strong growth of both WD-40 Multi-Use Product and WD-40 Specialist sales throughout the segment including double digit growth of both categories in the United States. 
• The decrease in sales in EMEA in the third 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 political and economic instability in Ukraine and Russia.  On a constant currency basis EMEA sales for the third quarter would have decreased by $3.3 million or 9% compared to the prior year fiscal year period.
• The decrease in sales in Asia-Pacific in the third quarter was primarily due to a 28 percent decrease in sales of multi-purpose maintenance products in the Company's Asian distributor markets. This decrease was due to an isolated product quality issue linked to a defective aerosol can component that was contained in WD-40 Multi-Use Product sold to marketing distributors in various countries in Asia during the third quarter. The Company recorded allowances to reverse these sales in the amount of approximately $0.9 million.  Although these markets were negatively impacted by this product quality issue in the third quarter, the issue was isolated and has been addressed. 

Dividend and Share Repurchase
As previously announced, WD-40 Company's board of directors declared on Tuesday, June 23, 2015 a quarterly dividend of $0.38 per share payable July 31, 2015 to stockholders of record at the close of business on July 17, 2015.

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 May 31, 2015, the Company repurchased $11.3 million in shares under this plan.

Updated Fiscal Year 2015 Guidance

• The Company's updated guidance for fiscal year 2015 is as follows:
• Net sales growth is projected to be flat to 2 percent with net sales expected to be between $383 million and $390 million.
• Gross margin for the full fiscal year is expected to be better than 52 percent. 
• Projected advertising and promotion expenses to be 6.0 percent to 7.0 percent of net sales. 
• Net income is projected to be between $44.5 million and $45.4 million.
• Expect diluted earnings per share to be between $3.03 and $3.09 based on an estimated 14.7 million weighted average shares outstanding.

This guidance does not include any future acquisitions or divestitures and is based on recent foreign currency exchange rates. 

"We've adjusted our full year guidance and it reflects the continued impact of foreign currency exchange movements as well as the macroeconomic and political challenges in Eastern Europe," 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, it is difficult to project for how long and to what depth our fiscal year results will be impacted."

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 multi-purpose maintenance products and its 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 $383 million in fiscal year 2014 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 multi-purpose 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, 2014, and in the Company's Quarterly Report on Form 10-Q for the period ended May 31, 2015 which the Company expects to file with the SEC on July 9, 2015.

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 July 8, 2015, 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.

SOURCE WD-40 Company

Related Links

http://www.wd40company.com

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