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05.04.2018 22:05
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WD-40 Company Reports Second Quarter 2018 Financial Results
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PR Newswire
SAN DIEGO, April 5, 2018
SAN DIEGO, April 5, 2018 /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, 2018.
Financial Highlights and Summary
- Total net sales for the second quarter were $101.3 million, an increase of 5 percent compared to the prior year fiscal quarter. Year-to-date total net sales were $198.9 million, an increase of 7 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 $97.0 million for the second quarter and $193.2 million year-to-date.
- Net income for the second quarter was $14.8 million, an increase of 20 percent compared to the prior year fiscal quarter. Year-to-date net income was $27.4 million, an increase of 14 percent from the prior year fiscal period.
- Diluted earnings per share were $1.05 in the second quarter, compared to $0.87 per share for the prior year fiscal quarter. Year-to-date diluted earnings per share were $1.95 compared to $1.69 in the prior year fiscal period.
- Gross margin was 55.1 percent in the second quarter compared to 56.4 percent in the prior year fiscal quarter. Year-to-date gross margin was 55.3 percent compared to 56.8 percent in the prior year fiscal period.
- Selling, general and administrative expenses were up 2 percent in the second quarter to $30.4 million when compared to the prior year fiscal quarter. Year-to-date selling, general and administrative expenses were up 5 percent to $61.6 million compared to the prior year fiscal period.
- Advertising and sales promotion expenses were up 3 percent in the second quarter to $5.2 million when compared to the prior year fiscal quarter. Year-to-date advertising and sales promotion expenses were up 5 percent to $10.3 million compared to the prior year fiscal period.
"Overall we are off to a solid start in fiscal year 2018 with year-to-date net sales growth of 7 percent on a reported basis and 4 percent on a constant currency basis," said Garry Ridge, WD-40 Company's president and chief executive officer. "Unfortunately we are seeing the impact globally of higher commodity prices which have begun to deteriorate our gross margins. Therefore we have decided it is time to make some necessary pricing adjustments to ensure our gross margin will remain above our target of 55 percent over the long-term.
"Furthermore, I am excited to share with investors that as a result of the savings we expect to realize from the Tax Cuts and Jobs Act, we have decided to invest an additional $1.0 million in brand building this fiscal year. This investment will focus on two main areas around the core strategies of making our end-users aware and making our products easy to buy. This investment will enable us to fast track our global digital presence and increase our sampling programs for WD-40 Multi Use Product to targeted end-user groups in countries identified as key growth opportunities.
"As we look to the remainder of fiscal year 2018, we've updated our fiscal year guidance to reflect updated foreign currency exchange rates, higher input costs, our revised effective tax rate as well as the changes we are making to our advertising and promotion investment this fiscal year," Ridge concluded.
Net Sales by Segment (in thousands):
| | Three Months Ended February 28, | | Six Months Ended February 28, | ||||||||||||||
| | 2018 | | 2017 | | Change | | 2018 | | 2017 | | Change | ||||||
| Americas | $ | 44,967 | | $ | 45,078 | | | - | | $ | 91,130 | | $ | 87,918 | | | 4% |
| EMEA | | 39,632 | | | 36,205 | | | 9% | | | 74,660 | | | 66,462 | | | 12% |
| Asia-Pacific | | 16,657 | | | 15,236 | | | 9% | | | 33,063 | | | 31,387 | | | 5% |
| Total | $ | 101,256 | | $ | 96,519 | | | 5% | | $ | 198,853 | | $ | 185,767 | | | 7% |
- Net sales by segment as a percent of total net sales for the second quarter were as follows: for the Americas, 44 percent; for EMEA, 39 percent; and for Asia-Pacific, 17 percent.
- Net sales in the Americas were relatively flat in the second quarter primarily due to lower sales of homecare and cleaning products in the U.S., which declined 7 percent from period to period. This lower level of sales was mostly offset by a higher level of sales of maintenance products which increased 1 percent compared to the prior year fiscal period. The maintenance product sales increase was primarily driven by higher sales of WD-40 Specialist and 3-IN-ONE in the United States and Latin America.
- Net sales in EMEA increased 9 percent in the second quarter primarily due higher sales of maintenance products in the EMEA direct markets, which increased 18 percent from period to period. This higher level of sales was partially offset by a lower level of sales in the segment's distributor markets which decreased 8 percent compared to the prior year fiscal period. 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 second quarter would have decreased by $0.2 million or 1 percent compared to the prior year fiscal period.
- Net sales in Asia-Pacific increased 9 percent in the second quarter primarily due to a 19 percent increase in sales in China and a 13 percent increase in sales in Australia. The sales growth in China was primarily attributable to a special promotional program which was conducted during the second quarter of fiscal year 2018 as well as the timing of customer orders in the region. The growth in Australia was primarily due to successful promotional activities and expanded distribution of the WD-40 Specialist product line. Changes in foreign currency exchange rates had a favorable impact on sales in the Asia-Pacific segment from period to period. On a constant currency basis Asia-Pacific sales for the second quarter would have increased $1.0 million or 6 percent compared to the prior year fiscal period.
Net Sales by Product Group (in thousands):
| | Three Months Ended February 28, | | Six Months Ended February 28, | ||||||||||||||
| | 2018 | | 2017 | | Change | | 2018 | | 2017 | | Change | ||||||
| Maintenance products | $ | 92,319 | | $ | 87,771 | | | 5% | | $ | 180,349 | | $ | 166,930 | | | 8% |
| Homecare and cleaning products | | 8,937 | | | 8,748 | | | 2% | | | 18,504 | | | 18,837 | | | (2)% |
| Total | $ | 101,256 | | $ | 96,519 | | | 5% | | $ | 198,853 | | $ | 185,767 | | | 7% |
- Net sales of maintenance products, which are considered the primary growth focus for the Company, increased 5 percent in the second quarter when compared to the prior year fiscal period. This sales growth was primarily attributable to increased sales of WD-40 Multi-Use Product within the EMEA and Asia-Pacific segments. This growth was also attributable to increased sales of WD-40 Specialist within all three of the Company's segments.
- Net sales of homecare and cleaning products increased 2 percent in the second quarter when compared to the prior year fiscal 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, March 20, 2018 a quarterly dividend of $0.54 per share payable April 30, 2018 to stockholders of record at the close of business on April 20, 2018.
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 February 28, 2018, the Company has repurchased 386,973 shares at a total cost of $42.5 million under this $75.0 million plan.
Updated Fiscal Year 2018 Guidance
The Company revised its revenue guidance for fiscal year 2018 as follows:
- Net sales growth is projected to be between 7 and 9 percent with net sales expected to be between $407 million and $415 million.
- Gross margin percentage for the full year is expected to be near 55 percent.
- Advertising and promotion investments are projected to be near 6 percent of net sales.
- Net income is projected to be between $56.6 million and $57.5 million.
- Diluted earnings per share is expected to be between $4.07 and $4.14 based on an estimated 13.9 million weighted average shares outstanding.
This guidance includes the anticipated impacts of the Tax Cuts and Jobs Act. The Company expects its annual effective income tax rate for fiscal year 2018 to be between 22 and 23 percent. This guidance does not include any future acquisitions or divestitures and assumes that foreign currency exchange rates and commodity prices will remain close to current levels for the remainder of fiscal year 2018.
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 2017 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.
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