WD-40 Company Reports Third Quarter 2017 Financial Results

SAN DIEGO, July 10, 2017 /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, 2017.

Financial Highlights and Summary

• Total net sales for the third quarter were $98.2 million, an increase of 2 percent compared to the prior year fiscal quarter. Year-to-date total net sales were $283.9 million, an increase of $0.4 million 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 $102.9 million for the third quarter and $301.0 million year-to-date.
• Net income for the third quarter was $14.4 million, an increase of 14 percent compared to the prior year fiscal quarter. Year-to-date net income was $38.6 million, an increase of $0.2 million from the prior year fiscal period.
• Diluted earnings per share were $1.02 in the third quarter, compared to $0.88 per share for the prior year fiscal quarter. Year-to-date diluted earnings per share were $2.71 compared to $2.65 in the prior year fiscal period.
• Gross margin was 55.3 percent in the third quarter compared to 56.8 percent in the prior year fiscal quarter. Year-to-date gross margin was 56.3 percent compared to 55.9 percent in the prior year fiscal period.
• Selling, general and administrative expenses were down 6 percent in the third quarter to $27.6 million when compared to the prior year fiscal quarter. Year-to-date selling, general and administrative expenses were up 1 percent to $86.4 million compared to the prior year fiscal period.
• Advertising and sales promotion expenses were down 13 percent in the third quarter to $5.4 million when compared to the prior year fiscal quarter. Year-to-date advertising and sales promotion expenses were down 10 percent to $15.3 million compared to the prior year fiscal period.

"We had a solid quarter and are pleased that we achieved both sales and earnings results which reflect new record highs for the Company," said Garry Ridge, WD-40 Company's president and chief executive officer.  "Fluctuating foreign currency exchange rates continue to obscure our sales results but if you remove their impact our consolidated sales would have increased by about 4 percent over the prior year fiscal third quarter. Overall, while we continue to see fluctuations in certain markets quarter to quarter, our long-term growth plans remain stable," continued Ridge.

Net Sales by Segment (in thousands):

• Net sales by segment as a percent of total net sales for the third quarter were as follows: for the Americas, 50 percent; for EMEA, 35 percent; and for Asia-Pacific, 15 percent.
• Net sales in the Americas were down 2 percent in the third quarter primarily due to lower sales of maintenance products in the U.S., which declined 3% from period to period. This lower level of sales was primarily attributable to shifting buying patterns in some trade channels as well as efforts of certain of our customers to more closely manage their inventory levels. The sales decrease in the U.S. was partially offset by higher sales of maintenance products in Canada and Latin America.
• Net sales in EMEA increased 4 percent in the third quarter primarily due to a 16 percent increase in sales in the EMEA distributor markets compared to the prior year fiscal period primarily due to higher sales of WD-40 Multi-Use Product in Eastern Europe, particularly in Russia. Changes in foreign currency exchange rates had an unfavorable impact on sales for the EMEA segment from period to period. On a constant currency basis EMEA sales for the third quarter would have increased by $6.0 million or 18 percent compared to the prior fiscal year period.
• Net sales in Asia-Pacific increased 8 percent in the third quarter primarily due to a 12 percent increase in sales in the Asia-Pacific distributor markets and a 6 percent increase in sales in China. The sales growth in the Asia distributor markets was primarily attributable to the timing of customer orders and a higher level of promotional activities for WD-40 Multi-Use Product. The growth in China was due to new distribution and continued growth in sales to the Company's largest customers throughout China. Changes in foreign currency exchange rates did not have a material impact on sales in the Asia-Pacific segment.

Net Sales by Product Group (in thousands):

• Net sales of maintenance products, which are considered the primary growth focus for the Company, increased 3 percent in the third fiscal quarter when compared to the prior fiscal year period. This growth was driven primarily by increased sales of WD-40 Specialist within all three of the Company's segments. This sales growth was also attributable to increased sales of WD-40 Multi-Use Product within the EMEA and Asia-Pacific segments.
• Net sales of homecare and cleaning products decreased 6 percent in the third 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, June 20, 2017 a quarterly dividend of $0.49 per share payable July 31, 2017 to stockholders of record at the close of business on July 21, 2017.

On June 21, 2016, the Company's Board of Directors approved a share buy-back plan. Under the plan, which became effective on September 1, 2016, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2018. 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, 2016 through May 31, 2017, the Company has repurchased 244,973 shares at a total cost of $26.2 million under this $75.0 million plan.

Updated Fiscal Year 2017 Guidance
The Company updated its revenue guidance for fiscal year 2017 as follows:

• Net sales are projected to be flat to up 2 percent with net sales expected to be between $382 million and $388 million.
• Gross margin percentage for the full year is expected to be above 56 percent. 
• Advertising and promotion investments are projected to be below 6.0 percent of net sales. 
• Net income is projected to be between $51.3 million and $52.3 million.
• Diluted earnings per share is expected to be between $3.64 and $3.71 based on an estimated 14.1 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 for the remainder of fiscal year 2017.

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 $381 million in fiscal year 2016 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, 2016, and in the Company's Quarterly Report on Form 10-Q for the period ended May 31, 2017 which the Company expects to file with the SEC on July 10, 2017.

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 10, 2017, 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

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