~ Second quarter consolidated net sales grew
by 16 percent compared to prior year fiscal quarter ~
~ Company reports diluted EPS of $1.41 for the second quarter ~
SAN
DIEGO, April 7, 2022 /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,
2022.
Second Fiscal Quarter Financial Highlights
- Total net sales for the second quarter were $130.0 million, an increase of 16 percent
compared to the prior year fiscal quarter. Year-to-date total net
sales were $264.7 million, an
increase of 12 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 a favorable impact on sales year-to-date. On a constant
currency basis, total net sales would have been $130.9 million for the second quarter and
$262.2 million year-to-date.
- Net income for the second quarter was $19.5 million, an increase of 13 percent compared
to the prior year fiscal quarter. Year-to-date net income was
$38.1 million, a decrease of 7
percent from the prior year fiscal period.
- Diluted earnings per share were $1.41 in the second quarter, compared to
$1.24 per share for the prior year
fiscal quarter. Year-to-date diluted earnings per share were
$2.75 compared to $2.96 for the prior year fiscal period.
- Gross margin was 50.4 percent in the second quarter compared to
55.4 percent in the prior year fiscal quarter. Year-to-date gross
margin was 50.6 percent compared to 55.9 percent in the prior year
fiscal period.
- Selling, general and administrative expenses decreased 2
percent in the second quarter to $34.8
million when compared to the prior year fiscal quarter.
Year-to-date selling, general and administrative expenses increased
3 percent to $73.2 million compared
to the prior year fiscal period.
- Advertising and sales promotion expenses were up 2 percent in
the second quarter to $5.6 million
when compared to the prior year fiscal quarter. Year-to-date
advertising and sales promotion expenses were up 2 percent to
$11.2 million compared to the prior
year fiscal period.
"The resilience of the WD-40® Brand has enabled us to
be off to a solid start in fiscal year 2022 with maintenance
product sales up 14 percent year-to-date," said Garry Ridge, WD-40 Company's chairman and chief
executive officer. "I am also happy to share with you that
our commitment to continuous improvement has resulted in
significant improvements to our supply chain in the United
States. The enhancements we have made have enabled us to
increase the production capacity of our highest volume products and
return to solid growth in our largest market, the United States, which experienced a 26
percent increase in maintenance product sales in the second
quarter."
"Like other companies, we are in a challenging inflationary
environment, which has continued to deteriorate our gross
margin. We are focused and committed to managing our business
so that we can restore gross margin to or above our target of 55
percent over the longer-term. We will restore our gross
margin over the near-term by implementing price increases to offset
the higher input costs we are experiencing. Over the longer-term
our margin accretive Must-Win Battles will further enhance gross
margin."
"As we look to the remainder of the fiscal year, we've reduced
our net income guidance by approximately two percent for the full
fiscal year due to the challenging inflationary environment we are
currently operating in. However, we have been able to maintain our
revenue guidance and believe we will finish fiscal year 2022 with
both topline and bottom-line growth," Ridge concluded.
Net Sales by Segment (in thousands):
|
Three Months Ended
February 28,
|
|
Six Months Ended
February 28,
|
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Americas
|
$
|
54,497
|
|
$
|
46,157
|
|
|
18%
|
|
$
|
110,785
|
|
$
|
100,344
|
|
|
10%
|
EMEA
|
|
54,063
|
|
|
49,813
|
|
|
9%
|
|
|
111,618
|
|
|
104,563
|
|
|
7%
|
Asia-Pacific
|
|
21,426
|
|
|
15,935
|
|
|
34%
|
|
|
42,329
|
|
|
31,557
|
|
|
34%
|
Total
|
$
|
129,986
|
|
$
|
111,905
|
|
|
16%
|
|
$
|
264,732
|
|
$
|
236,464
|
|
|
12%
|
- Net sales by segment as a percent of total net sales for the
second quarter were as follows: for the Americas, 42 percent; for
EMEA, 42 percent; and for Asia-Pacific, 16 percent.
- Net sales in the Americas increased 18 percent in the second
quarter due primarily to higher sales of maintenance products in
the United States which increased
26 percent compared to the prior year fiscal quarter. The increase
in sales was due primarily to greater product availability as a
result of adjustments the Company made to its United States supply chain to increase the
production capacity of its highest volume products. In addition,
price increases that took effect in the first quarter of this
fiscal year contributed to increased sales in the United States from period to period. Net
sales in Latin America increased
18 percent in the second quarter. This growth was driven by
successful promotional programs, increased product availability,
the favorable impact of price increases, and the timing of customer
orders. Net sales in Canada
declined 2 percent in the second quarter.
- Net sales in EMEA increased 9 percent in the second quarter due
primarily to higher sales of maintenance products in both the EMEA
direct and distributor markets, which increased 7 percent and 13
percent, respectively. The increase in maintenance product sales in
the EMEA direct markets was partially attributable to the favorable
impact of price increases and the timing of customer orders. The
increase in maintenance product sales in the EMEA distributor
markets was primarily attributable to strong sales of maintenance
products in Eastern and Southern
Europe. 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 second
quarter would have increased by 10 percent compared to the prior
year fiscal quarter.
- Net sales in Asia-Pacific
increased 34 percent in the second quarter due primarily to higher
sales of maintenance products in the Asia-Pacific distributor markets and
China, which increased 64 percent
and 42 percent, respectively. In the Asia-Pacific distributor markets higher sales
of maintenance products were primarily due to the timing of
customer orders and successful promotion programs. The increase in
sales is also attributable to certain customers buying product in
advance of future price increases. Higher sales of maintenance
products in China were due
primarily to successful promotional programs as well as the timing
of customer orders related to price increases that went into effect
in the current period. Net sales in Australia decreased 5 percent in the second
quarter due primarily to lower sales of homecare and cleaning
products. Changes in foreign currency exchange rates had an
unfavorable impact on sales for the Asia-Pacific segment. On a constant currency
basis, Asia-Pacific sales would
have increased by 35 percent compared to the prior year fiscal
quarter.
Net Sales by Product Group (in thousands):
|
Three Months Ended
February 28,
|
|
Six Months Ended
February 28,
|
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Maintenance
products
|
$
|
121,901
|
|
$
|
102,728
|
|
|
19%
|
|
$
|
247,931
|
|
$
|
217,072
|
|
|
14%
|
Homecare and cleaning
products
|
|
8,085
|
|
|
9,177
|
|
|
(12)%
|
|
|
16,801
|
|
|
19,392
|
|
|
(13)%
|
Total
|
$
|
129,986
|
|
$
|
111,905
|
|
|
16%
|
|
$
|
264,732
|
|
$
|
236,464
|
|
|
12%
|
- Net sales of maintenance products, which are considered the
primary growth focus for the Company, increased 19 percent in the
second quarter when compared to the prior year fiscal quarter. This
sales increase was primarily attributable to increased sales of
WD-40® Multi-Use Product and WD-40
Specialist® in all three segments driven primarily by
increased product availability as well as the favorable impact of
price increases.
- Net sales of homecare and cleaning products decreased 12
percent in the second quarter when compared to the prior year
fiscal quarter. The homecare and cleaning products, particularly
those in the United States, are
considered harvest brands providing healthy profits to the Company
and are becoming a smaller part of the business as net sales of
maintenance products grow, reflecting the execution of the
Company's strategic initiatives.
Dividend and Share Repurchase Update
As previously announced on March 15,
2022, WD-40 Company's board of directors declared a regular
quarterly dividend of $0.78 per share
payable on April 29, 2022 to
stockholders of record at the close of business on April 15, 2022.
On October 12, 2021, the Company's
board of directors approved a share repurchase plan that became
effective on November 1, 2021. Under
the plan the Company is authorized to acquire up to $75.0 million of its outstanding shares through
August 31, 2023. The timing and
amount of repurchases will be based on terms and conditions
acceptable to the Company and in compliance with applicable laws
and regulations. During the period from November 1, 2021 through February 28, 2022, the Company repurchased 78,637
shares of its common stock at a total cost of $18.2 million, leaving $56.8 million available for the repurchase of
common stock under this plan.
Updated Fiscal Year 2022 Guidance
The Company issued the following updated guidance for fiscal
year 2022:
- Net sales growth is projected to be between 7 and 12 percent
with net sales expected to be between $522 million and
$547 million.
- Gross margin percentage for the full year is expected to
be between 50 and 51 percent.
- Advertising and promotion investments are projected to be
between 5 and 6 percent of net sales.
- The provision for income tax is expected to be between 20 and
21 percent.
- Net income is projected to be between $70.7 million and $72.5 million.
- Diluted earnings per share is expected to be between
$5.14 and $5.27 based on an estimated 13.7
million weighted average shares outstanding.
This guidance is based on management's current view of
anticipated results and does not include any future acquisitions or
divestitures or the impact of fluctuating foreign currency
exchange rates. It assumes crude oil costs will be between
$100 and $120 per barrel. Unanticipated inflationary
headwinds and other unforeseen events may further impact the
Company's financial results.
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 supplemental 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 owns a wide range of well-known
brands that include maintenance products and homecare and cleaning
products: WD-40® Multi-Use Product, WD-40
Specialist®, 3-IN-ONE®, GT85®,
2000 Flushes®, no vac®, 1001®,
Spot Shot®, Lava®, Solvol®, X-14®,
and Carpet Fresh®.
Headquartered in San Diego,
WD-40 Company recorded net sales of $488.1
million in fiscal year 2021 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 are generally identified with words such as "believe,"
"expect," "intend," "plan," "could," "may," "aim," "anticipate,"
"target," "estimate" and similar expressions.
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; the
length and severity of the current COVID-19 pandemic and its impact
on the global economy and the Company's financial results; changes
in the political conditions or relations between the United States and other nations; the
impacts from inflationary trends and supply chain constraints; and
forecasted foreign currency exchange rates and commodity
prices.
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, 2021
which the Company filed with the SEC on October 22, 2021 and in the Company's Quarterly
Report on Form 10-Q for the period ended February 28, 2022 which the Company expects to
file with the Securities and Exchange Commission on April 7, 2022.
All forward-looking statements included in this presentation
should be considered in the context of these risks. All
forward-looking statements reflect the Company's expectations as of
April 7, 2022, and the Company
undertakes 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 these forward-looking statements.
Table Notes and General Definitions
- The Company markets maintenance products under the
WD-40®, GT85® and 3-IN-ONE®
brand names. Currently included in the WD-40 brand are
WD-40® Multi-Use Product and WD-40
Specialist® and WD-40 BIKE® product
lines.
- The Company markets the following homecare and cleaning
brands: X-14® automatic toilet bowl cleaners,
2000 Flushes® automatic toilet bowl cleaners, Carpet
Fresh® and no vac® rug and room
deodorizers, Spot Shot® aerosol and liquid carpet stain
removers, 1001® household cleaners and rug and room
deodorizers and Lava® and Solvol® heavy-duty
hand cleaners.
- The Americas segment consists of the U.S., Canada, Mexico and Latin
America.
- The EMEA segment consists of countries in Europe, the Middle
East, Africa and
India.
- The Asia-Pacific segment
consists of Australia,
China and other countries in the
Asia region.
- Constant currency represents the translation of the current
quarter and year-to-date results from the functional currencies of
the Company's subsidiaries to U.S. dollars using the exchange rate
in effect for the corresponding periods of the prior fiscal
year.
WD-40 COMPANY
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
(Unaudited and in thousands, except share and per
share amounts)
|
|
|
|
|
|
|
|
February 28,
|
|
August 31,
|
|
2022
|
|
2021
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
43,322
|
|
$
|
85,961
|
Trade and other
accounts receivable, less allowance for doubtful
|
|
|
|
|
|
accounts
of $366 and $463 at February 28, 2022
|
|
|
|
|
|
and August
31, 2021, respectively
|
|
103,582
|
|
|
89,558
|
Inventories
|
|
75,537
|
|
|
55,752
|
Other current
assets
|
|
12,158
|
|
|
9,948
|
Total current assets
|
|
234,599
|
|
|
241,219
|
Property and
equipment, net
|
|
69,334
|
|
|
70,145
|
Goodwill
|
|
95,754
|
|
|
95,869
|
Other intangible
assets, net
|
|
6,478
|
|
|
7,244
|
Operating lease
right-of-use assets
|
|
8,115
|
|
|
8,824
|
Deferred tax
assets, net
|
|
853
|
|
|
858
|
Other
assets
|
|
8,013
|
|
|
6,044
|
Total assets
|
$
|
423,146
|
|
$
|
430,203
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
39,655
|
|
$
|
33,499
|
Accrued
liabilities
|
|
28,130
|
|
|
25,658
|
Accrued payroll
and related expenses
|
|
13,133
|
|
|
25,662
|
Short-term
borrowings
|
|
2,038
|
|
|
800
|
Income taxes
payable
|
|
433
|
|
|
317
|
Total current liabilities
|
|
83,389
|
|
|
85,936
|
Long-term
borrowings
|
|
112,809
|
|
|
114,940
|
Deferred tax
liabilities, net
|
|
10,717
|
|
|
10,401
|
Long-term
operating lease liabilities
|
|
6,356
|
|
|
7,062
|
Other long-term
liabilities
|
|
11,025
|
|
|
11,482
|
Total liabilities
|
|
224,296
|
|
|
229,821
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
Common stock ―
authorized 36,000,000 shares, $0.001 par value;
|
|
|
|
|
|
19,887,516
and 19,856,865 shares issued at February 28, 2022 and
|
|
|
|
|
|
August 31,
2021, respectively; and 13,660,980 and 13,708,966 shares
|
|
|
|
|
|
outstanding at February 28, 2022 and August 31, 2021,
respectively
|
|
20
|
|
|
20
|
Additional
paid-in capital
|
|
164,192
|
|
|
163,737
|
Retained
earnings
|
|
448,179
|
|
|
430,735
|
Accumulated
other comprehensive loss
|
|
(27,296)
|
|
|
(26,030)
|
Common stock
held in treasury, at cost ― 6,226,536 and 6,147,899
|
|
|
|
|
|
shares at
February 28, 2022 and August 31, 2021, respectively
|
|
(386,245)
|
|
|
(368,080)
|
Total shareholders' equity
|
|
198,850
|
|
|
200,382
|
Total liabilities and shareholders' equity
|
$
|
423,146
|
|
$
|
430,203
|
WD-40
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited and in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
February 28,
|
|
Six Months Ended
February 28,
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
129,986
|
|
$
|
111,905
|
|
$
|
264,732
|
|
$
|
236,464
|
Cost of products
sold
|
|
64,468
|
|
|
49,898
|
|
|
130,744
|
|
|
104,211
|
Gross profit
|
|
65,518
|
|
|
62,007
|
|
|
133,988
|
|
|
132,253
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and administrative
|
|
34,819
|
|
|
35,478
|
|
|
73,242
|
|
|
71,455
|
Advertising and
sales promotion
|
|
5,596
|
|
|
5,512
|
|
|
11,220
|
|
|
11,031
|
Amortization of
definite-lived intangible assets
|
|
360
|
|
|
362
|
|
|
723
|
|
|
720
|
Total operating expenses
|
|
40,775
|
|
|
41,352
|
|
|
85,185
|
|
|
83,206
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
24,743
|
|
|
20,655
|
|
|
48,803
|
|
|
49,047
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
21
|
|
|
19
|
|
|
46
|
|
|
38
|
Interest
expense
|
|
(613)
|
|
|
(610)
|
|
|
(1,233)
|
|
|
(1,180)
|
Other income
(expense), net
|
|
252
|
|
|
151
|
|
|
(77)
|
|
|
330
|
Income before income
taxes
|
|
24,403
|
|
|
20,215
|
|
|
47,539
|
|
|
48,235
|
Provision for income
taxes
|
|
4,895
|
|
|
3,024
|
|
|
9,476
|
|
|
7,421
|
Net
income
|
$
|
19,508
|
|
$
|
17,191
|
|
$
|
38,063
|
|
$
|
40,814
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.41
|
|
$
|
1.25
|
|
$
|
2.76
|
|
$
|
2.97
|
Diluted
|
$
|
1.41
|
|
$
|
1.24
|
|
$
|
2.75
|
|
$
|
2.96
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
13,679
|
|
|
13,700
|
|
|
13,773
|
|
|
13,687
|
Diluted
|
|
13,704
|
|
|
13,729
|
|
|
13,804
|
|
|
13,718
|
WD-40
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited and in
thousands)
|
|
|
|
|
|
|
|
Six Months Ended
February 28,
|
|
2022
|
|
2021
|
Operating
activities:
|
|
|
|
|
|
Net
income
|
$
|
38,063
|
|
$
|
40,814
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
4,082
|
|
|
3,458
|
Net gains on sales and disposals of property and
equipment
|
|
(123)
|
|
|
(104)
|
Deferred income taxes
|
|
367
|
|
|
152
|
Stock-based compensation
|
|
4,776
|
|
|
4,542
|
Unrealized foreign currency exchange (gains) losses
|
|
(110)
|
|
|
139
|
Provision for bad debts
|
|
(55)
|
|
|
175
|
Changes in assets and liabilities:
|
|
|
|
|
|
Trade and other accounts receivable
|
|
(15,178)
|
|
|
(10,111)
|
Inventories
|
|
(20,369)
|
|
|
(2,104)
|
Other assets
|
|
(4,328)
|
|
|
(4,386)
|
Operating lease assets and liabilities, net
|
|
1
|
|
|
9
|
Accounts payable and accrued liabilities
|
|
9,624
|
|
|
7,398
|
Accrued payroll and related expenses
|
|
(12,356)
|
|
|
1,584
|
Other long-term liabilities and income taxes
payable
|
|
(311)
|
|
|
944
|
Net cash provided by operating
activities
|
|
4,083
|
|
|
42,510
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Purchases of
property and equipment
|
|
(3,860)
|
|
|
(7,605)
|
Proceeds from
sales of property and equipment
|
|
289
|
|
|
239
|
Net cash used in investing
activities
|
|
(3,571)
|
|
|
(7,366)
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Treasury stock
purchases
|
|
(18,165)
|
|
|
-
|
Dividends
paid
|
|
(20,619)
|
|
|
(18,416)
|
Proceeds from
issuance of long-term senior notes
|
|
-
|
|
|
52,000
|
Repayments of
long-term senior notes
|
|
(400)
|
|
|
(400)
|
Net proceeds
(repayments) of revolving credit facility
|
|
1,238
|
|
|
(50,000)
|
Shares withheld
to cover taxes upon conversions of equity awards
|
|
(4,321)
|
|
|
(3,495)
|
Net cash used in financing
activities
|
|
(42,267)
|
|
|
(20,311)
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
(884)
|
|
|
1,086
|
Net (decrease) increase
in cash and cash equivalents
|
|
(42,639)
|
|
|
15,919
|
Cash and cash
equivalents at beginning of period
|
|
85,961
|
|
|
56,462
|
Cash and cash
equivalents at end of period
|
$
|
43,322
|
|
$
|
72,381
|
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SOURCE WD-40 Company