q2 fy15 earnings results - s21.q4cdn.com€¦ · q2 fy15 earnings presentation 35% 12% 30% 21% 3%...

Q2 FY15Earnings Results

April 8, 2015

Q2 FY15 EARNINGS PRESENTATION

Forward-Looking Statements

2

Historical financial and operating data in this presentation reflect the consolidated results of WD-40 Company, its subsidiaries and its legal

entities. WD-40 Company markets multi-purpose maintenance products (“MPMP”) under the WD-40®, 3-IN-ONE® and GT85® brand names.

Currently included in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-40 BIKETM product lines. WD-

40 Company markets the following homecare and cleaning (”HCCP”) 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.

Except for the historical information contained herein, this presentation 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 multi-purpose 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, 2014, and in the Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2015 which the Company expects to file

with the SEC on April 9, 2015.

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 8, 2015, 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.


Q2 FY15 Highlights

3

• Net sales for the second quarter were $97.3 million, an increase of 3

percent compared to the prior year fiscal quarter

• Net income for the second quarter was $11.3 million, an increase of 10

percent compared to the prior year fiscal quarter

• Diluted earnings per share were $0.76 in the second quarter, compared to

$0.67 per share for the prior year fiscal quarter

• Gross margin was 52.6 percent in the second quarter compared to 51.6

percent in the prior year fiscal quarter

• All repurchases under the $60 million share buy-back plan completed during

the second quarter

– From August 1, 2013 through February 28, 2015 Company repurchased 848K

shares at a total cost of $60 million

• New repurchase plan is now effective which authorizes the Company to

acquire up to $75 million of its outstanding shares through August 31, 2016

– As of February 28, 2015 no repurchases had been made under this new plan

“We are pleased

with the solid

performance of

our underlying

business this

quarter and are

more confident

than ever that our

strategic initiatives

are well

positioned to carry

us into the future.”

- Garry Ridge


SALESRESULTS

4


Functional currencyMain currency in which

subsidiaries conduct

business; typically the same

as that of the country in

which the subsidiary is

headquartered

Transaction currencyCurrency in which sales,

costs, expenses are

transacted; typically the

same as that of the country in

which the sales transaction

takes place

Reporting currencyAs a U.S. based company

the reporting currency of WD-

40 Company is the

U.S. dollar

Conversion

from transaction

currency to

subsidiaries’

functional

currency

Translation

from

functional

currency to

WD-40

Company’s

reporting

currency

(U.S. dollar)

Foreign Currency Landscape

5




business, typically the same



headquartered


costs, expenses are




takes place



40 Company is the

U.S. dollar

Conversion

from transaction

currency to

subsidiaries’

functional

currency

Translation

from

functional

currency to

WD-40

Company’s

reporting

currency

(U.S. dollar)

Translation Impacts

WD-40 Company has the

following foreign operating

subsidiaries that generate

sales and which have a

functional currency other

than the U.S. dollar:

• United Kingdom (EMEA)

• Canada (Americas)

• Australia (Asia-Pac)

• China (Asia-Pac)

• The results of all of the

Company’s foreign

subsidiaries must be

translated into U.S.

dollars

• Depending on current

foreign currency trends,

translation can have

positive or negative

impacts on reported results

• We frequently report our

results in constant

currency which means we

compare current period

results to the prior periods

results at the prior period’s

exchange rates

In Q2 FY15 the Company

experienced negative

impacts from the translation

of all of the results of its

foreign subsidiaries into the

U.S. dollar

6




business; typically the same



headquartered


costs, expenses are




takes place



40 Company is the

U.S. dollar

Conversion

from transaction

currency to

subsidiaries’

functional

currency

Translation

from

functional

currency to

WD-40

Company’s

reporting

currency

(U.S. dollar)

Conversion Impacts

• The Company’s U.K.

subsidiary (EMEA), records

transactions in currencies

other than its functional

currency, including the

euro and the U.S. dollar

• Therefore these euro and

U.S. dollar transactions

must be converted to the

U.K. subsidiary functional

currency (pound sterling)

• Depending on current

foreign currency trends, this

conversion can have

positive or negative impacts

on pound sterling reported

results

Country/Region

of Sale

Transaction

Currency

% of EMEA

Segment Sales

Q2 FY15 Foreign

Currency

Conversion

Impact

United Kingdom

Direct Markets

Pound sterling ~20% None

European Direct

Markets

Euro ~45% Unfavorable

European Marketing

Distributors

US dollar

Pound sterling

~25%

~10%

Favorable

None

U.K. Subsidiary (EMEA) Transaction Currency Impacts - Sales

7


HCCP (Total) ↑ 3% ↑ 1%

Americas ↔ 0% ↓ -1%

EMEA ↑ 8% ↑ 1%

Asia-Pacific ↑ 11% ↑ 12%

Second Quarter Year-to-Date

MPMP (Total) ↑ 3% ↑ 2%

Americas ↓ -1% ↑ 1%

EMEA ↑ 1% ↓ -2%

Asia-Pacific ↑ 32% ↑ 21%

Second Quarter Year-to-Date

$21.9 $22.2

$167.8 $171.5

YTD FY14 YTD FY15

$10.4 $10.7

$83.8 $86.6

Q2 FY14 Q2 FY15

Net Sales by Product Group

8

Multi-Purpose Maintenance

Products

Homecare and Cleaning

Products

$97.3$94.2

$193.7$189.7

Multi-Purpose Maintenance Product Sales

Homecare and Cleaning Product Sales

Multi-purpose maintenance

product sales89%

Homecare and cleaning

product sales11%

Second Quarter Sales by Product Group ($M) Second Quarter Global Product Group Sales Mix

Year-to-Date Sales by Segment ($M)


Asia-Pacific (Total) ↑ 28% ↑ 20%

Australia ↓ -2% ↓ -1%

China ↑ 57% ↑ 12%

Asian Marketing Distributors ↑ 44% ↑ 39%

Year-to-DateSecond Quarter

EMEA (Total) ↑ 1% ↓ -2%

Direct Markets ↓ -3% ↓ -5%

Marketing Distributors ↑ 9% ↑ 2%


Americas (Total) ↓ -1% ↔ 0%

United States ↓ -1% ↓ -1%

Latin America ↓ -6% ↑ 7%

Canada ↓ -1% ↓ -7%


$25.8 $30.9

$74.6 $73.3

$89.3 $89.5

YTD FY14 YTD FY15

$10.9 $13.9

$38.1 $38.7

$45.2 $44.7

Q2 FY14 Q2 FY15

Net Sales by Segment

9

Americas EMEA Asia-Pacific

Second Quarter Sales by Segment ($M)

$97.3$94.2

$193.7$189.7

Americas

EMEA

Asia-Pacific

Year-to-Date Sales by Segment ($M)


FINANCIAL RESULTS

10


Gross Margin Results

11

Q2 FY15 GM of 52.6% vs. Q2 FY14 GM of 51.6%

• Changes in petroleum-based specialty chemicals

and aerosol cans (+1.3pp)

• Lower promotional discounts (+0.5pp)

• Price increases, primarily in Asia-Pacific (+0.2pp)

• Changes in foreign currency exchange rates in

EMEA (-0.2pp)

• Sales mix and miscellaneous costs (-0.8pp)

YTD FY15 GM of 52.1% vs. YTD FY14 GM of 51.8%

• Changes in petroleum-based specialty chemicals

and aerosol cans (+1.0pp)

• Price increases, primarily in Asia-Pacific (+0.2pp)

• Sales mix and miscellaneous costs (-0.5pp)

• Changes in foreign currency exchange rates in

EMEA (-0.4pp)

Gross margin can be impacted positively and negatively by things not under the Company’s

control like changes in foreign currency exchange rates and changes in input costs

YTD Gross Margin up 0.3 ppQ2 Gross Margin up 1.00 pp


35%

12%

30%

21%

3%

What Makes Up the Cost of a Can?

12

Approximate Cost Breakdown of a Typical Can of

WD-40 MUP Manufactured in the United States

Data as of February 2015. Represents average input costs over 6-month period of a typical 12 ounce can of WD-40 Multi-Use Product manufactured in the United States.

We estimate only

a small portion of

the input costs

associated with

petroleum-

based specialty

chemicals

directly correlate

to the price of a

barrel of crude oil

Petroleum-Based

Specialty Chemicals

Manufacturing Fees

Can

Plastic

Corrugate


50/30/20 Results

13

* See appendix for descriptions and reconciliations of these non-GAAP measures.

Note: Percentages may not aggregate to EBITDA percentage due to rounding

50/30/20 Business Model Target Q2 FY15 Q2 FY14 Q2 FY13

Gross Margin 50% 53% 52% 51%

Cost of Doing Business 30% 34% 34% 33%

EBITDA 20% 18% 18% 19%


Selected Financial ResultsSecond quarter

14

Q2 FY15 Q2 FY14 % Change(1)

Selling, general and administrative $27.4 $26.7 3%

Advertising and sales promotion $5.5 $6.0 -9%

Amortization $0.8 $0.7 16%

Total operating expenses $33.6 $33.3 1%

Other expenses(2) $1.5 $0.3 419%

Provision for income taxes $4.8 $4.6 3%

Net Income $11.3 $10.3 10%

EPS (Diluted) $0.76 $0.67 13%

($ in millions; except % change and EPS)

1) Percentage change is based on whole numbers and not the rounded amounts as presented above. There will be minor calculation differences in percentages

due to rounding.

2) Other expenses include interest income, interest expense and other expense. Other expense increased primarily due to higher foreign currency exchange

losses as a result of significant fluctuations in the foreign currency exchange rates for the euro against the pound sterling.


Selected Financial ResultsYear to date

15

YTD FY15 YTD FY14 % Change(1)

Selling, general and administrative $54.8 $53.4 3%

Advertising and sales promotion $11.4 $11.6 -2%

Amortization $1.5 $1.2 22%

Total operating expenses $67.7 $66.2 2%

Other expenses(2) $1.6 $0.6 169%

Provision for income taxes $9.5 $9.6 -1%

Net Income $22.1 $21.8 1%

EPS (Diluted) $1.49 $1.41 6%



due to rounding.

2) Other expenses include interest income, interest expense and other expense. Other expense increased primarily due to higher foreign currency exchange

losses as a result of significant fluctuations in the foreign currency exchange rates for the euro against the pound sterling.


Q2 FY15 Q4 FY14 % Change(1)

Cash and cash equivalents $43.7 $57.8 -24%

Short-term investments $42.1 $45.1 -5%

Other assets $252.0 $244.8 3%

Total assets $337.7 $347.7 -3%

Revolving credit facility $103.0 $98.0 5%

Other liabilities $74.2 $80.3 -8%

Total liabilities $177.2 $178.3 -1%

Total Shareholders' equity $160.6 $169.4 -5%

Total liabilities and shareholder's equity $337.7 $347.7 -3%

Condensed Balance Sheet

16

($ in millions; except % change)


due to rounding.


GUIDANCE

17


Updated Fiscal Year 2015 Guidance*

18

Diluted EPS

Net Income

A&P Investment

Gross Margin

Net Sales

Sales Growth Between 1% and 4%

Between $387 and $400 million

Better than 52%

In the range of 6.0% to 7.0% of net sales

Between $45.1 and $46.0 million

Between $3.07 and $3.13 based on 14.7

million shares outstanding

* As of 4/8/15. This guidance does not include any future acquisitions or divestitures and is based on recent foreign currency exchange rates.

Changes to guidance indicated in BLUE.


APPENDIX

19

Q2 FY15 EARNINGS PRESENTATION 20

Foreign Currency Translation Impact or“Constant Currency” - Q2 FY15

Q2 FY15 Q2 FY14 % Change

Net Sales $97.3 $94.2 3%

Gross Profit (%) 52.6% 51.6% 100 bps

Operating Income $17.6 $15.3 16%

Net Income $11.3 $10.3 10%

EPS (Diluted) $0.76 $0.67 13%

Q2 FY15 CC* Q2 FY14 % Change

Net Sales $100.6 $94.2 7%


Net Income $11.8 $10.3 15%

EPS (Diluted) $0.80 $0.67 19%

Financial ResultsAs reported

Financial ResultsConstant currency basis

*Q2 FY15 results translated at Q2 FY14 foreign currency exchange rates



YTD FY15 CC* YTD FY14 % Change

Net Sales $196.4 $189.7 4%


Net Income $22.6 $21.8 4%

EPS (Diluted) $1.52 $1.41 8%

YTD FY15 YTD FY14 % Change

Net Sales $193.7 $189.7 2%

Gross Profit (%) 52.1% 51.8% 30 bps


Net Income $22.1 $21.8 1%

EPS (Diluted) $1.49 $1.41 6%

Foreign Currency Translation Impact or“Constant Currency” – YTD

21

Financial Results(As reported)

Financial Results(Constant currency basis)

*YTD FY15 results translated at YTD FY14 foreign currency exchange rates



Non-GAAP Reconciliation

22

(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our

management believes provide our stockholders with additional insights into WD-40 Company’s results of operations and how it runs its business. Our

management uses these non-GAAP financial measures in order to establish financial goals and to gain an understanding of the comparative performance

of the Company from year to year or quarter to quarter. The non-GAAP measures referenced in this presentation, which include EBITDA (earnings before

interest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolation

or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company’s

performance or operations. Reconciliations of these non-GAAP financial measures to the WD-40 Company financials as prepared under GAAP are as

follows:

Cost of doing business:

Total operating expenses - GAAP $ 33,602 $ 33,306

Amortization of definite-lived intangible assets (757) (654)

Depreciation (in operating departments) (202) (529)

Cost of doing business $ 32,643 $ 32,123

Net sales $ 97,331 $ 94,184

Cost of doing business as a percentage of net sales 34% 34%

EBITDA:

Net income - GAAP $ 11,333 $ 10,317

Provision for income taxes 4,758 4,638

Interest income (178) (158)

Interest expense 275 226

Amortization of definite-lived intangible assets 757 654

Depreciation 857 817

EBITDA $ 17,802 $ 16,494

Net sales $ 97,331 $ 94,184

EBITDA as a percentage of net sales 18% 18%

Three Months Ended

2/28/2015 2/28/2014 Cost of doing business:

Total operating expenses - GAAP $ 67,710 $ 66,212

Amortization of definite-lived intangible assets (1,526) (1,246)

Depreciation (in operating departments) (405) (1,014)

Cost of doing business $ 65,779 $ 63,952

Net sales $ 193,684 $ 189,725

Cost of doing business as a percentage of net sales 34% 34%

EBITDA:

Net income - GAAP $ 22,119 $ 21,799

Provision for income taxes 9,507 9,625

Interest income (312) (289)

Interest expense 569 441

Amortization of definite-lived intangible assets 1,526 1,246

Depreciation 1,721 1,603

EBITDA $ 35,130 $ 34,425

Net sales $ 193,684 $ 189,725

EBITDA as a percentage of net sales 18% 18%

Six Months Ended

2/28/2015 2/28/2014

q2 fy15 earnings results - s21.q4cdn.com€¦ · q2 fy15 earnings presentation 35% 12% 30% 21% 3%...

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