WD-40 Company Reports First Quarter 2016 Financial Results

SAN DIEGO, Jan. 7, 2016 /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 first fiscal quarter ended November 30, 2015.

Financial Highlights and Summary

• Total net sales for the first quarter were $92.5 million, a decrease of 4 percent compared to the prior year fiscal period.
• Translation of the Company's foreign subsidiary results from their functional currencies to U.S. dollars had an unfavorable impact on sales for the current quarter. On a constant currency basis total net sales would have been $96.2 million for the first quarter.
• Net income for the first quarter was $12.1 million, an increase of 12 percent from the prior year fiscal period.
• Diluted earnings per share were $0.83 compared to $0.73 in the prior year fiscal period.
• Gross margin was 55.6 percent compared to 51.6 percent in the prior year fiscal period.
• Selling, general and administrative expenses were up 2 percent in the first quarter to $27.8 million when compared to the prior year fiscal quarter.
• Advertising and sales promotion expenses were down 4 percent to $5.7 million compared to the prior year fiscal quarter.

"Although foreign currency exchange rate fluctuations negatively impacted our reported sales, we continue to see maintenance product sales growth in local currencies in nearly all our markets," said Garry Ridge, WD-40 Company's president and chief executive officer.  "Our European markets, in particular, continue to be heavily impacted by the weakening of the euro against the pound sterling as well as the strength of the U.S. dollar.  When we remove all foreign currency exchange rate impacts, we grew consolidated sales by about half a percentage point which is a little lighter than we would have liked to see. This was caused by the timing of customer orders and promotional activities as well as unstable market conditions in Russia.   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 maintenance products, which are considered the primary growth focus for the Company, decreased 3 percent in the first fiscal quarter when compared to the prior fiscal quarter period. The decline in the first quarter was driven primarily by the unfavorable impact of foreign currency exchange rates, the timing of orders and promotional activity and unstable market conditions in Russia.
• Net sales of homecare and cleaning products decreased 10 percent for the current quarter 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 but are becoming a smaller part of the business as net sales of 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 first quarter were as follows: for the Americas, 48 percent; for EMEA, 35 percent; and for Asia-Pacific, 17 percent.
• The decline in sales in the Americas in the first quarter was primarily driven by unfavorable impacts of foreign currency exchange rates, specifically those in Canada, and sales declines in Latin America due to the timing of customer orders. These decreases were almost completely offset by increased sales of maintenance products in the U.S. due to promotional activities and the added distribution of our new WD-40 EZ-REACH™ product. On a constant currency basis sales in the Americas for the first quarter would have remained constant at $44.8 million when compared to the prior year fiscal year period.
• The decline in sales in EMEA in the first 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 unstable market conditions in Russia. On a constant currency basis EMEA sales for the first quarter would have decreased by $0.4 million or 1% compared to the prior year fiscal year period.
• The decline in sales in Asia-Pacific in the first quarter was primarily driven by unfavorable impacts of foreign currency exchange rates, as well as the timing of customer orders in the Company's Asian distributor markets. On a constant currency basis Asia-Pacific sales for the first quarter would have increased by $0.2 million or 1% compared to the prior year fiscal year period.

Dividend and Share Repurchase
As previously announced, WD-40 Company's board of directors declared on Tuesday, December 8, 2015 a quarterly dividend of $0.42 per share reflecting an increase of 11 percent over the previous quarter's dividend. The quarterly dividend is payable on January 29, 2016 to stockholders of record at the close of business on January 15, 2016.

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 November 30, 2015, the Company repurchased 278,334 shares at a total cost of $23.8 million under this $75.0 million plan.

Updated Fiscal Year 2016 Guidance
The Company updated its guidance for fiscal year 2016 as follows:

• Net sales growth is projected to be between 4 and 6 percent with net sales expected to be between $393 million and $401 million.
• Gross margin for the full year is expected to be above 54 percent.
• Advertising and promotion expenses are projected to be between 6.0 percent and 7.0 percent of net sales.
• Net income is projected to be between $47.5 million and $48.5 million.
• Diluted earnings per share is expected to be between $3.30 and $3.37 based on an estimated 14.4 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.

"We've updated our fiscal year 2016 guidance to reflect our current view of the business taking into consideration today's foreign currency headwinds and crude oil price tailwinds, 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, with approximately 40 percent of our revenue expected to be generated in currencies other than the U.S. dollar in fiscal year 2016, the continued strengthening of the U.S. dollar has weakened our top-line growth expectations."

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 $378 million in fiscal year 2015 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, 2015, and in the Company's Quarterly Report on Form 10-Q for the period ended November 30, 2015 which the Company expects to file with the SEC on January 7, 2016.

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 January 7, 2016, 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