SAN DIEGO, Oct. 17, 2019 /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, 2019.
Financial Highlights and Summary
- Total net sales for the fourth quarter were $106.7 million, an increase of 4 percent compared to the prior year fiscal quarter. For the full fiscal year, total net sales were $423.4 million, also an increase 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 $109.2 million for the fourth quarter and $433.8 million for the full fiscal year.
- Net income for the fourth quarter was $8.6 million, a decrease of 60 percent compared to the prior year fiscal quarter. For the full fiscal year, net income was $55.9 million, a decrease of 14 percent from the prior fiscal year.
- Diluted earnings per share were $0.63 in the fourth quarter, compared to $1.54 per share for the prior year fiscal quarter. For the full fiscal year, diluted earnings per share were $4.02 compared to $4.64 in the prior fiscal year.
- Gross margin was 54.6 percent in the fourth quarter compared to 55.2 percent in the prior year fiscal quarter. For the full fiscal year, gross margin was 54.9 percent compared to 55.1 percent in the prior fiscal year.
- Selling, general and administrative expenses were down 3 percent in the fourth quarter to $28.7 million when compared to the prior year fiscal quarter. Selling, general and administrative expenses for the full fiscal year were up 2 percent to $123.9 million compared to the prior fiscal year.
- Advertising and sales promotion expenses were down 9 percent in the fourth quarter to $5.9 million when compared to the prior year fiscal quarter. Advertising and sales promotion expenses for the full fiscal year were up 4 percent to $23.3 million compared to the prior fiscal year.
"In the fourth quarter, net income and diluted earnings per share were negatively impacted by an $8.7 million reserve for an uncertain tax position that we recorded, and previously disclosed, during the fourth quarter," said Jay Rembolt, WD-40 Company's chief financial officer. "Because of this adjustment, our net income is significantly lower on a year-over-year basis in both the quarter and the full fiscal year. The good news is that this a one-time charge and the high tax rate we recorded is not expected to carry into fiscal year 2020. We expect the provision for income tax to be between 20 and 22 percent in fiscal year 2020," concluded Rembolt.
WD-40 Company's chief executive officer, Garry Ridge added, "We are pleased that we achieved sales results in fiscal year 2019 which reflect another solid year for the Company. Our maintenance products delivered solid sales increases in the full fiscal year including 4 percent growth of WD-40 Multi-Use Product and 13 percent growth of WD-40 Specialist. I'd like to thank the tribe for their contributions during fiscal year 2019. The tribe has never been more aligned and focused. We are clear about our purpose and we know what we need to do to achieve our long-term goals."
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, 46 percent; for EMEA, 34 percent; and for Asia-Pacific, 20 percent.
- Net sales in the Americas were up 1 percent in the fourth quarter due entirely to higher sales of maintenance products in the United States and Canada, which increased 2 percent and 19 percent, respectively. This increase was partially offset by lower sales of maintenance products Latin America. The higher sales of maintenance products in the United States were primarily due to an increase in sales of WD-40 Specialist. The higher sales of maintenance products in Canada were primarily due to strong sales of WD-40 Multi-Use Product.
- Net sales in EMEA decreased 1 percent in the fourth quarter primarily due to changes in foreign currency exchange rates, which had an unfavorable impact on sales for the EMEA segment from period to period. On a constant currency basis EMEA sales for the fourth quarter would have increased by $1.6 million, or 4 percent, compared to the prior fiscal year period primarily due to higher sales of WD-40 Multi-Use Product within EMEA's distributor markets. EMEA also experienced strong sales of homecare and cleaning products which increased 16 percent compared to the prior year fiscal period.
- Net sales in Asia-Pacific increased 22 percent in the fourth quarter primarily due to a 28 percent increase in sales in the Asia distributor markets and a 22 percent increase in sales in China. The sales growth in the Asia distributor markets was primarily attributable to increased sales driven by successful promotional programs as well as the timing of customer orders in certain countries. The growth in China was due to the timing of promotional activities as well as continued growth within the e-commerce channel. Changes in foreign currency exchange rates had an unfavorable impact on sales for the Asia-Pacific segment from period to period. On a constant currency basis Asia-Pacific sales for the fourth quarter would have increased by $4.3 million, or 25 percent, compared to the prior fiscal year period.
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 fiscal year period. This sales growth was primarily attributable to increased sales of WD-40 Multi-Use Product within the Asia-Pacific segment and increased sales of WD-40 Specialist within the Americas segment.
- Net sales of homecare and cleaning products remained relatively constant in the fourth 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, October 8, 2019 a quarterly dividend of $0.61 per share payable October 31, 2019 to stockholders of record at the close of business on October 18, 2019.
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, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2020. 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, 2018 through August 31, 2019, the Company repurchased 175,955 shares at a total cost of $29.6 million under this $75.0 million plan.
Fiscal Year 2020 Guidance The Company issued the following guidance for fiscal year 2020:
- Net sales growth is projected to be between 3 and 7 percent with net sales expected to be between $436 million and $453 million.
- Gross margin percentage for the full year is expected to be between 54 and 55 percent.
- Advertising and promotion investments are projected to be between 5.5 and 6.0 percent of net sales.
- The provision for income tax is expected to be between 20 and 22 percent.
- Net income is projected to be between $65.0 million and $66.2 million.
- Diluted earnings per share is expected to be between $4.74 and $4.83 based on an estimated 13.7 million weighted average shares outstanding.
This guidance is expressed in good faith and is believed by the Company to have a reasonable basis; however, it is not possible to predict with a reasonable degree of certainty the actual impact of fluctuating foreign currency exchange rates, and these currency fluctuations may have a significant impact on the Company's fiscal year 2020 guidance. This guidance does not include any future acquisitions or divestitures and assumes that crude oil prices will remain close to current levels for the remainder of fiscal year 2020.
Webcast InformationAs 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 CompanyWD-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 $423.4 million in fiscal year 2019 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 StatementsExcept 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; 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, 2019, which the company expects to file with the SEC on October 22, 2019.
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 17, 2019, 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.
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SOURCE WD-40 Company