WDFC
$199.45
W D 40
($.57)
(.28%)
Earnings Details
3rd Quarter May 2020
Thursday, July 9, 2020 4:05:00 PM
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Summary

W D 40 (WDFC) Recent Earnings

W D 40 (WDFC) reported 3rd Quarter May 2020 earnings of $1.06 per share on revenue of $98.2 million. The consensus earnings estimate was $1.08 per share. Revenue fell 13.8% compared to the same quarter a year ago.

WD-40 Co manufactures lubricants & cleaners. It offers multi-purpose maintenance products under the WD-40 brand for household, marine, automotive, construction, repair, sporting goods, gardening, and industrial applications.

Results
Reported Earnings
$1.06
Earnings Whisper
-
Consensus Estimate
$1.08
Reported Revenue
$98.2 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

WD-40 Company Reports Third Quarter 2020 Financial Results

SAN DIEGO, July 9, 2020 /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 third fiscal quarter ended May 31, 2020.

Third Fiscal Quarter Financial Highlights

  • Total net sales for the third quarter were $98.2 million, a decrease of 14 percent compared to the prior year fiscal quarter. Year-to-date total net sales were $296.9 million, a decrease of 6 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 $100.5 million for the third quarter and $301.1 million year to date.
  • Net income for the third quarter was $14.5 million, a decrease of 20 percent compared to the prior year fiscal quarter. Year-to-date net income was $41.0 million, a decrease of 13 percent from the prior year fiscal period.
  • Diluted earnings per share were $1.06 in the third quarter, compared to $1.30 per share for the prior year fiscal quarter. Year-to-date diluted earnings per share were $2.98 compared to $3.39 in the prior year fiscal period.
  • Gross margin was 54.0 percent in the third quarter compared to 54.5 percent in the prior year fiscal quarter. Year-to-date gross margin was 54.0 percent compared to 55.0 percent in the prior year fiscal period.
  • Selling, general and administrative expenses were down 13 percent in the third quarter to $27.9 million when compared to the prior year fiscal quarter. Year-to-date selling, general and administrative expenses were down 5 percent to $90.4 million compared to the prior year fiscal period. 
  • Advertising and sales promotion expenses were down 24 percent in the third quarter to $4.8 million when compared to the prior year fiscal quarter. Year-to-date advertising and sales promotion expenses were down 13 percent to $15.2 million compared to the prior year fiscal period. 

"Our total sales in the third quarter declined by 14 percent due to disruptions related to the COVID-19 pandemic," said Garry Ridge, WD-40 Company's chairman and chief executive officer. "As a global business that operates in 176 countries around the world, each of our locations has been impacted by COVID-19 in different ways but our tribe members everywhere adapted quickly to the unprecedented situation which enabled us to hold our own this quarter even while confronted with extremely challenging circumstances."   

"I have often said that physical awareness and mental awareness of our product – or said simply, making our end-users aware of our products and making them easy to buy – is core to our continued success. COVID-19 has reinforced this lesson for me. In geographies and trade channels where our products remained easy to buy, like in e-commerce and in certain countries that were not subject to movement restrictions, we performed very well in the third quarter. However, in markets with strict movement restrictions in place or less developed e-commerce adoption, our sales were more severely impacted."

"Though the global health crisis is not over yet, I do believe that we have maneuvered through the immediate crisis very well. We have always had a very clear strategy with very clear targets enabled by an enviable culture. What this crisis has required us to do is pause, reset, and become even more laser-focused on how we will achieve our growth aspirations," concluded Ridge.

Net Sales by Segment (in thousands):






































Three Months Ended May 31,


Nine Months Ended May 31,


2020


2019


Change


2020


2019


Change

Americas

$

50,094


$

52,966



(5)%


$

143,672


$

144,654



(1)%

EMEA


32,521



44,548



(27)%



113,519



124,259



(9)%

Asia-Pacific


15,632



16,475



(5)%



39,661



47,693



(17)%

Total

$

98,247


$

113,989



(14)%


$

296,852


$

316,606



(6)%



















  • Net sales by segment as a percent of total net sales for the third quarter were as follows: for the Americas, 51 percent; for EMEA, 33 percent; and for Asia-Pacific, 16 percent.
  • Net sales in the Americas decreased 5 percent in the third quarter primarily due to lower sales of WD-40 Multi-Use Product in Latin America which decreased 46 percent compared to the prior year fiscal quarter. This decline was driven by disruptions around the distribution and sales of our products due to the complete lock down of most countries in the region due to the COVID-19 pandemic. In addition, sales in Latin America were negatively impacted due to decreased sales in Mexico from period to period as a result of a change the Company made to the distribution model for this region. Also contributing to lower sales in the Americas were decreased sales in Canada which declined 10 percent compared to the prior year fiscal quarter due to the negative impacts of COVID-19. Partially offsetting these declines were higher sales in the United States, which increased 1 percent compared to the prior year fiscal quarter due to increased demand for cleaning products as a result of the COVID-19 pandemic.
  • Net sales in EMEA decreased 27 percent in the third quarter primarily due to lower sales of WD-40 Multi-Use Product throughout the Company's European direct and distributor markets, which declined 28 and 25 percent, respectively. These decreases were due to disruptions related to the COVID-19 pandemic. Also contributing to lower sales in EMEA were decreased sales of homecare and cleaning products which declined 45 percent compared to the prior year fiscal quarter. This sales decrease was primarily due to sales of 1001 Carpet Fresh which were significantly higher in the prior year fiscal quarter due to positive impacts of digital marketing associated with the brand. Changes in foreign currency exchange rates had an unfavorable impact on sales for EMEA when compared to the prior year quarter. On a constant currency basis, EMEA sales for the third quarter would have decreased to $33.8 million or 24 percent compared to the prior year fiscal quarter.
  • Net sales in Asia-Pacific decreased 5 percent in the third quarter primarily due to lower sales of WD-40 Multi-Use Product in the Asia distributor market, which decreased 33 percent compared to the prior fiscal quarter. The decrease in sales in the Asia distributor market was mainly due to disruptions related to the COVID-19 pandemic. Partially offsetting these declines were higher sales in both Australia and China, which increased 16 and 26 percent respectively compared to the prior year fiscal quarter. The increase in sales in Australia was mainly driven by increased demand for Solvol® and no vac® as a result of the COVID-19 pandemic.  The increase in sales in China was mainly driven by the company's ability to resume normal operations and ship many large orders in the third quarter that had previously been delayed due to the impacts of the COVID-19 pandemic and Chinese New Year. Changes in foreign currency exchange rates had an unfavorable impact on sales for Asia-Pacific when compared to the prior year quarter. On a constant currency basis, Asia-Pacific sales for the third quarter would have decreased to $16.4 million or 1 percent compared to the prior year fiscal quarter.

Net Sales by Product Group (in thousands):






































Three Months Ended May 31,


Nine Months Ended May 31,


2020


2019


Change


2020


2019


Change

Maintenance products

$

87,859


$

104,533



(16)%


$

268,676


$

289,371



(7)%

Homecare and cleaning products


10,388



9,456



10%



28,176



27,235



3%

Total

$

98,247


$

113,989



(14)%


$

296,852


$

316,606



(6)%



















  • Net sales of maintenance products, which are considered the primary growth focus for the Company, decreased 16 percent in the third quarter when compared to the prior year fiscal quarter. This sales decline was primarily attributable to decreased sales of WD-40 Multi-Use Product in all three segments due to disruptions related to the COVID-19 pandemic. 
  • Net sales of homecare and cleaning products increased 10 percent in the third quarter when compared to the prior year fiscal quarter. This higher level of sales was due to the increased demand for such products that has resulted from the COVID-19 pandemic. The homecare and cleaning products, particularly those in the United States, 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, June 16, 2020 a regular quarterly dividend of $0.67 per share payable July 31, 2020 to stockholders of record at the close of business on July 17, 2020.

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 May 31, 2020, the Company repurchased 268,538 shares at a total cost of $46.4 million under this $75.0 million plan. On April 8, 2020, the Company elected to temporarily suspend repurchases under its current share buy-back plan. The Company has elected this suspension in order to preserve cash while it monitors the impacts of the COVID-19 pandemic as it continues to unfold. Therefore, no repurchases of the Company's stock were transacted between April 8, 2020 and May 31, 2020.

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 including management's current view of the business in light of the COVID-19 pandemic.  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 $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 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; 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; 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, and in the Company's Quarterly Report on Form 10-Q for the period ended May 31, 2020 which the Company expects to file with the SEC on July 9, 2020.

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 July 9, 2020, 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.

Table Notes and General Definitions

(1)

The Company markets maintenance products under the WD-40®, GT85® and 3-IN-ONE® brand names. Currently included in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-40 BIKE® product lines.

(2)

The Company markets the following homecare and cleaning brands:  X-14® mildew stain remover and 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.

(3)

The Americas segment consists of the U.S., Canada and Latin America.

(4)

The EMEA segment consists of countries in Europe, the Middle East, Africa and India.

(5)

The Asia-Pacific segment consists of Australia, China and other countries in the Asia region.

(6)

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)








May 31,


August 31,


2020


2019

Assets






Current assets:






Cash and cash equivalents

$

88,555


$

27,233

Trade accounts receivable, less allowance for doubtful






accounts of $399 and $300 at May 31, 2020






and August 31, 2019, respectively


76,390



72,864

Inventories


42,970



40,682

Other current assets


5,350



7,216

Total current assets


213,265



147,995

Property and equipment, net


56,712



45,076

Goodwill


95,376



95,347

Other intangible assets, net


8,821



10,652

Operating lease right-of-use assets


7,769



-

Deferred tax assets, net


422



403

Other assets


3,586



3,189

Total assets

$

385,951


$

302,662







Liabilities and Shareholders' Equity






Current liabilities:






Accounts payable

$

17,386


$

18,727

Accrued liabilities


18,017



18,513

Accrued payroll and related expenses


9,653



15,301

Short-term borrowings


70,800



21,205

Income taxes payable


1,893



844

Total current liabilities


117,749



74,590

Long-term borrowings


94,566



60,221

Deferred tax liabilities, net


11,457



11,688

Long-term operating lease liabilities


6,346



-

Other long-term liabilities


10,850



10,688

Total liabilities


240,968



157,187







Commitments and Contingencies












Shareholders' equity:






Common stock ? authorized 36,000,000 shares, $0.001 par value;






19,812,685 and 19,773,977 shares issued at May 31, 2020 and






August 31, 2019, respectively; and 13,664,786 and 13,718,661 shares






outstanding at May 31, 2020 and August 31, 2019, respectively


20



20

Additional paid-in capital


157,101



155,132

Retained earnings


388,265



374,060

Accumulated other comprehensive loss


(32,323)



(32,482)

Common stock held in treasury, at cost ? 6,147,899 and 6,055,316






shares at May 31, 2020 and August 31, 2019, respectively


(368,080)



(351,255)

Total shareholders' equity


144,983



145,475

Total liabilities and shareholders' equity

$

385,951


$

302,662







 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)














Three Months Ended May 31,


Nine Months Ended May 31,



2020



2019



2020



2019













Net sales

$

98,247


$

113,989


$

296,852


$

316,606

Cost of products sold


45,197



51,906



136,657



142,534

Gross profit


53,050



62,083



160,195



174,072













Operating expenses:












Selling, general and administrative


27,922



31,956



90,427



95,278

Advertising and sales promotion


4,764



6,270



15,211



17,420

Amortization of definite-lived intangible assets


552



655



1,856



2,056

Total operating expenses


33,238



38,881



107,494



114,754













Income from operations


19,812



23,202



52,701



59,318













Other income (expense):












Interest income


20



27



73



123

Interest expense


(778)



(567)



(1,813)



(1,962)

Other income (expense), net


27



(45)



(197)



828

Income before income taxes


19,081



22,617



50,764



58,307

Provision for income taxes


4,557



4,478



9,719



10,983

Net income

$

14,524


$

18,139


$

41,045


$

47,324













Earnings per common share:












Basic

$

1.06


$

1.30


$

2.98


$

3.40

Diluted

$

1.06


$

1.30


$

2.98


$

3.39













Shares used in per share calculations:












Basic


13,674



13,790



13,700



13,821

Diluted


13,700



13,820



13,727



13,853













 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)








Nine Months Ended May 31,


2020


2019

Operating activities:






Net income

$

41,045


$

47,324

Adjustments to reconcile net income to net cash provided by






operating activities:






Depreciation and amortization


5,980



5,710

Net gains on sales and disposals of property and equipment


(115)



(72)

Deferred income taxes


(221)



310

Stock-based compensation


4,609



3,947

Unrealized foreign currency exchange losses (gains)


30



(658)

Provision for bad debts


98



95

Changes in assets and liabilities:






Trade accounts receivable


(3,006)



(8,286)

Inventories


(2,433)



(6,841)

Other assets


1,443



7,099

Operating lease assets and liabilities, net


224



-

Accounts payable and accrued liabilities


(2,367)



(8,458)

Accrued payroll and related expenses


(5,758)



(2,297)

Other long-term liabilities and income taxes payable


1,227



(1,602)

Net cash provided by operating activities


40,756



36,271







Investing activities:






Purchases of property and equipment


(17,411)



(8,701)

Proceeds from sales of property and equipment


321



261

Net cash used in investing activities


(17,090)



(8,220)







Financing activities:






Treasury stock purchases


(16,825)



(22,384)

Dividends paid


(26,840)



(24,468)

Repayments of long-term senior notes


(800)



(800)

Net proceeds of revolving credit facility


84,595



11,261

Shares withheld to cover taxes upon conversions of equity awards


(2,640)



(2,433)

  Net cash provided by (used in) financing activities


37,490



(38,824)

Effect of exchange rate changes on cash and cash equivalents


166



(2,352)

Net increase (decrease) in cash and cash equivalents


61,322



(13,125)

Cash and cash equivalents at beginning of period


27,233



48,866

Cash and cash equivalents at end of period

$

88,555


$

35,741







Supplemental disclosure of noncash investing activities:






Accrued capital expenditures

$

454


$

1,256







 

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SOURCE WD-40 Company