SAN DIEGO, April 9, 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 second fiscal quarter ended February 28, 2019.
Financial Highlights and Summary
- Total net sales for the second quarter were $101.3 million, relatively constant compared to the prior year fiscal quarter. Year-to-date total net sales were $202.6 million, an increase of 2 percent 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 $104.6 million for the second quarter and $207.1 million year to date.
- Net income for the second quarter was $15.9 million, an increase of 7 percent compared to the prior year fiscal quarter. Year-to-date net income was $29.2 million, an increase of 6 percent from the prior year fiscal period.
- Diluted earnings per share were $1.14 in the second quarter, compared to $1.05 per share for the prior year fiscal quarter. Year-to-date diluted earnings per share were $2.09 compared to $1.95 in the prior year fiscal period.
- Gross margin was 55.4 percent in the second quarter compared to 55.1 percent in the prior year fiscal quarter. Year-to-date gross margin remained constant at 55.3 percent for both the current and prior year fiscal period.
- Selling, general and administrative expenses were up 1 percent in the second quarter to $30.6 million when compared to the prior year fiscal quarter. Year-to-date selling, general and administrative expenses were up 3 percent to $63.3 million compared to the prior year fiscal period.
- Advertising and sales promotion expenses remained relatively constant at $5.2 million for both the current and prior year fiscal quarter. Year-to-date advertising and sales promotion expenses were up 8 percent to $11.1 million compared to the prior year fiscal period.
"I have often found it wise to consider whether an 'event' or a 'trend' is behind any particular operational outcome. This quarter is a great example of why I think about our business in this way," said Garry Ridge, WD-40 Company's president and chief executive officer. "We experienced two 'events' in the United States this quarter that resulted in a 6 percent decline in sales of WD-40 Multi-Use Product in the country compared to last year. This decline in sales was driven by the rotation of products that periodically occurs in the warehouse club channel as well as some delayed promotions with a key U.S. customer.
"Product rotation is a very normal 'event' in the warehouse club channel driven by the fact that they have a limited amount of shelf space for a limited number of brands. Additionally, the delayed promotions we experienced with a key U.S. customer is directly tied to the proactive price increases we put in place last June to offset rising commodity prices. Though necessary, pricing decisions like these, can cause 'events' which are disruptive.
"Even though we had softer revenue in the quarter than we would have liked due to these 'events,' in the U.S., we continue to see long-term global growth that is in-line with our aspirational targets. For example, on a constant currency basis EMEA sales for the second quarter increased by 10 percent compared to the prior year fiscal quarter. This is on the high-end of our targeted compound annual growth rate for this segment. 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," concluded Ridge.
- Net sales by segment as a percent of total net sales for the second quarter were as follows: for the Americas, 43 percent; for EMEA, 41 percent; and for Asia-Pacific, 16 percent.
- Net sales in the Americas decreased 2 percent in the second quarter primarily due to lower sales of maintenance products, which decreased 1 percent compared to the prior year fiscal period. This sales decline was primarily due to lower sales of WD-40 Multi-Use Product in the United States which declined 6 percent compared to the prior year quarter. This was driven by the normal rotation that occurs in the warehouse club channel and some delayed promotions with a key customer. This decline in sales was partially offset by higher sales of WD-40 Specialist in the United States and higher sales of maintenance products in Canada and Latin American driven by the timing of customer orders and expanded distribution.
- Net sales in EMEA increased 3 percent in the second quarter primarily due to higher sales of homecare and cleaning products which increased 56 percent compared to the prior year fiscal period. This sales increase was primarily due to higher sales of 1001 Carpet Fresh due to the favorable impacts of some digital marketing windfalls associated with this brand and increased sales of the WD-40 EZ Reach Flexible Straw product. Changes in foreign currency exchange rates had an unfavorable impact on sales for EMEA from period to period. On a constant currency basis EMEA sales for the second quarter would have increased by $3.8 million or 10 percent compared to the prior year fiscal quarter.
- Net sales in Asia-Pacific decreased 1 percent in the second quarter primarily due to a decline in sales of maintenance products in the Australia and the Asia distributor markets. This lower level of sales was partially offset by a 19 percent increase in sales of maintenance products in China. The sales decline in the Asia distributor markets was primarily due to the timing of customer orders of the WD-40 Specialist product line from period to period. The sales growth in China was primarily attributable to successful promotional programs and increased distribution in the region. The decline in Australia was primarily due changes in foreign currency exchange rates. Foreign currency exchange rates had an unfavorable impact on sales in Asia-Pacific from period to period. On a constant currency basis Asia-Pacific sales for the second quarter would have increased $0.4 million or 3 percent compared to the prior year fiscal period.
- Net sales of maintenance products, which are considered the primary growth focus for the Company, remained relatively constant in the second quarter when compared to the prior year fiscal period. This was primarily attributable to decreased sales of WD-40 Multi-Use Product within the Americas segment. These declines were mostly offset by increased sales of maintenance products within the EMEA segment.
- Net sales of homecare and cleaning products remained relatively constant 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 19, 2019 a quarterly dividend of $0.61 per share payable April 30, 2019 to stockholders of record at the close of business on April 19, 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 February 28, 2019, the Company repurchased 70,684 shares at a total cost of $12.1 million under this $75.0 million plan.
Fiscal Year 2019 Guidance
The Company reaffirmed its guidance for fiscal year 2019 as follows:
- Net sales growth is projected to be between 4 and 7 percent with net sales expected to be between $425 million and $437 million.
- Gross margin percentage for the full year is expected to be near 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 21 and 22 percent.
- Net income is projected to be between $62.2 million and $63.2 million.
- Diluted earnings per share is expected to be between $4.51 and $4.58 based on an estimated 13.8 million weighted average shares outstanding.
This guidance does not include any future acquisitions or divestitures.
"We believe we are going to end the year in-line with our previously issued guidance and are reaffirming guidance today," said Jay Rembolt, WD-40 Company's vice president and chief financial officer. "We expect our net sales may ultimately be at the lower end of the range we've shared with investors. However, gross margin has shown a slight positive trend in recent weeks. All our current indicators show that the back half of the fiscal year should be solid."
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 $408.5 million in fiscal year 2018 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; the impact of the "Tax Cuts and Jobs Act"; 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, 2018, and in the Company's Quarterly Report on Form 10-Q for the period ended February 28, 2019 which the Company expects to file with the SEC on April 9, 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 April 9, 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.
View original content to download multimedia:http://www.prnewswire.com/news-releases/wd-40-company-reports-second-quarter-2019-financial-results-300828321.html
SOURCE WD-40 Company