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WD-40 Company Reports First Quarter 2021 Financial Results

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SAN DIEGO, Jan. 7, 2021 /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, 2020.

Financial Highlights and Summary

  • Total net sales for the first quarter were $124.6 million, an increase of 26 percent compared to the prior year fiscal quarter.
  • Translation of the Company's foreign subsidiary results from their functional currencies to U.S. dollars had a favorable impact on sales for the first quarter. On a constant currency basis, total net sales would have been $121.8 million for the first quarter.
  • Net income for the first quarter was $23.6 million, an increase of 94 percent from the prior year fiscal quarter.
  • Diluted earnings per share were $1.72 compared to $0.88 in the prior year fiscal quarter.
  • Gross margin percentage was 56.4 percent compared to 54.3 percent in the prior year fiscal quarter.
  • Selling, general and administrative expenses were up 10 percent in the first quarter to $36.0 million compared to the prior year fiscal quarter.
  • Advertising and sales promotion expenses were down 1 percent to $5.5 million compared to the prior year fiscal quarter.

"We offer a variety of maintenance and cleaning products that have been in very high demand during these highly unusual times," said Garry Ridge, WD-40 Company's chairman and chief executive officer. "Our sales increased 26 percent compared to the first quarter of last year due primarily to increased demand for our products linked to renovation trends associated with the pandemic. We call this phenomenon 'isolation renovation' and we are experiencing it in nearly all of our direct markets around the world."   

"This tremendous result is due to our tribe's hard work and dedication to delivering product to meet these increased consumer demands. I want to thank the tribe for working hard to ensure that customer orders can be fulfilled, production lines at our third-party manufacturers are functioning, and customers and end-users can get the products they need."

"We are off to a very strong start in fiscal year 2021. However, due to the fluidity with which the pandemic continues to evolve, it is very difficult for us to estimate how the pandemic might impact our sales results for the remainder of the fiscal year.  If there is a shift in spending patterns or a global economic downturn in the wake of the pandemic it could adversely impact our financial results," Ridge concluded.

Net Sales by Segment (in thousands):


Three Months Ended November 30,


2020


2019


Change

Americas

$

54,188


$

46,736



16%

EMEA


54,749



39,245



40%

Asia-Pacific


15,622



12,575



24%

Total

$

124,559


$

98,556



26%



 

  • Net sales by segment as a percent of total net sales for the first quarter were as follows: for the Americas, 44 percent; for EMEA, 44 percent; for Asia-Pacific, 12 percent.
  • Net sales in the Americas increased 16 percent in the first quarter due primarily to higher sales of maintenance products in the United States, Latin America and Canada which increased 10 percent, 42 percent, and 34 percent, respectively. Higher sales of maintenance products in the United States and Canada were primarily due to an increase in sales of WD-40 Multi-Use Product driven by increased demand linked to renovation trends associated with the pandemic and increased sales through the ecommerce channel. Higher sales of maintenance products in Latin America were primarily due to strong sales of WD-40 Multi-Use Product in Mexico.
  • Net sales in EMEA increased 40 percent in the first quarter entirely due to higher sales of maintenance products in both the EMEA direct and distributor markets, which increased 47 percent and 34 percent, respectively. Higher sales of maintenance products in the EMEA direct markets were primarily due to increased sales of WD-40 Multi-Use Product driven by increased demand linked to renovation trends associated with the pandemic and increased sales through the ecommerce channel. Higher sales of maintenance products in the EMEA distributor markets were primarily attributable to improved economic conditions as a result of reductions in COVID-19 related movement restrictions. Changes in foreign currency exchange rates had a favorable impact on sales for the EMEA segment from period to period. On a constant currency basis EMEA sales for the first quarter would have increased by 33 percent compared to the prior fiscal year quarter.
  • Net sales in Asia-Pacific increased 24 percent in the first quarter due to higher sales of maintenance products in China, Australia and in the Asia-Pacific distributor markets which increased 53 percent, 18 percent and 11 percent, respectively. Higher sales of maintenance products in China were primarily due to the timing of customer orders and increased sales through the ecommerce channel. In the Asia-Pacific distributor markets higher sales of maintenance products were primarily attributed to reduced COVID-19 lockdown measures in many of the Asian markets. The reduced lockdown measures positively impacted economic conditions which resulted in our marketing distributors adjusting to more normalized inventory levels. Higher sales in the first quarter were also attributable to higher sales of homecare and cleaning products in Australia which increased 44 percent compared to the prior year fiscal quarter due to increased demand for our homecare and cleaning products as a result of the COVID-19 pandemic. Changes in foreign currency exchange rates had a favorable impact on sales for the Asia-Pacific segment. On a constant currency basis, Asia-Pacific would have increased by 21 percent compared to the prior year fiscal quarter.

Net Sales by Product Group (in thousands):


Three Months Ended November 30,


2020


2019


Change

Maintenance products

$

114,343


$

89,670



28%

Homecare and cleaning products


10,216



8,886



15%

Total

$

124,559


$

98,556



26%



 

  • Net sales of maintenance products, which are considered the primary growth focus for the Company, increased 28 percent in the first quarter when compared to the prior year fiscal quarter. This increase is primarily due to increased sales of WD-40 Multi-Use Product driven by increased demand linked to renovation trends associated with the pandemic and increased sales through the ecommerce channel.
  • Net sales of homecare and cleaning products increased 15 percent in the first quarter compared to the prior year fiscal quarter. We experienced a significant increase in sales of our homecare and cleaning products beginning in the third quarter of fiscal year 2020 due to increased demand for such products as a result of the COVID-19 pandemic. While each of our homecare and cleaning products have continued to generate positive cash flows, we had experienced decreased or flat sales for many of these products in recent years prior to the COVID-19 pandemic.

Dividend and Share Repurchase Update
As previously announced, WD-40 Company's board of directors declared on Monday, December 7, 2020 a quarterly dividend of $0.67 per share. The quarterly dividend is payable on January 29, 2021 to stockholders of record at the close of business on January 15, 2021.

On April 8, 2020, the Company elected to suspend repurchases under its previously approved share buy-back plan, which subsequently expired on August 31, 2020. The Company made this election in order to preserve cash while it continues to monitor the long-term impacts of the COVID-19 pandemic. Management does not expect to seek Board approval for a new share buy-back plan until it starts to see a reduced level of uncertainty regarding the pandemic's impact on the economy and the Company's business. Therefore, no repurchase transactions were made during the first quarter of fiscal year 2021.

Fiscal Year 2021 Guidance
Current market conditions suggest that for fiscal year 2021 total net sales are expected to be between $435 million and $470 million. Due to the uncertainty that the pandemic continues to present, the Company is not issuing comprehensive financial guidance for fiscal year 2021.

This net sales guidance is expressed in good faith and is believed by the Company to have a reasonable basis; however, it is not possible to predict with any reasonable degree of certainty the actual impact that the pandemic may have on the Company's fiscal year 2021 net sales 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 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 a wide range of 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 2020 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, 2020, and in the Company's Quarterly Report on Form 10-Q for the period ended November 30, 2020 which the Company expects to file with the SEC on January 7, 2021.

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, 2021, 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® 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, Mexico 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)








November 30,


August 31,


2020


2020

Assets






Current assets:






Cash and cash equivalents

$

65,844


$

56,462

Trade accounts receivable, less allowance for doubtful






accounts of $490 and $362 at November 30, 2020






and August 31, 2020, respectively


91,061



80,672

Inventories


41,772



41,264

Other current assets


8,098



6,756

Total current assets


206,775



185,154

Property and equipment, net


62,607



60,759

Goodwill


95,721



95,731

Other intangible assets, net


8,268



8,633

Operating lease right-of-use assets


8,815



8,168

Deferred tax assets, net


472



464

Other assets


3,740



3,728

Total assets

$

386,398


$

362,637







Liabilities and Shareholders' Equity






Current liabilities:






Accounts payable

$

24,749


$

21,676

Accrued liabilities


22,989



21,660

Accrued payroll and related expenses


15,426



14,767

Short-term borrowings


800



800

Income taxes payable


2,890



1,213

Total current liabilities


66,854



60,116

Long-term borrowings


114,712



113,098

Deferred tax liabilities, net


11,557



11,291

Long-term operating lease liabilities


7,141



6,520

Other long-term liabilities


11,634



11,299

Total liabilities


211,898



202,324







Commitments and Contingencies












Shareholders' equity:






Common stock ― authorized 36,000,000 shares, $0.001 par value; 19,836,102 and 19,812,685 shares issued at November 30, 2020 and August 31, 2020, respectively; and 13,688,203 and 13,664,786 shares outstanding at November 30, 2020 and August 31, 2020, respectively


 

20



 

20

Additional paid-in capital


157,025



157,850

Retained earnings


413,155



398,731

Accumulated other comprehensive loss


(27,620)



(28,208)

Common stock held in treasury, at cost ― 6,147,899 and 6,147,899 shares at November 30, 2020 and August 31, 2020, respectively


 

(368,080)



 

(368,080)

Total shareholders' equity


174,500



160,313

Total liabilities and shareholders' equity

$

386,398


$

362,637



 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)








Three Months Ended November 30,



2020



2019







Net sales

$

124,559


$

98,556

Cost of products sold


54,313



45,013

Gross profit


70,246



53,543







Operating expenses:






Selling, general and administrative


35,977



32,599

Advertising and sales promotion


5,519



5,590

Amortization of definite-lived intangible assets


358



650

Total operating expenses


41,854



38,839







Income from operations


28,392



14,704







Other (expense) income:






Interest income


19



25

Interest expense


(570)



(442)

Other (expense) income, net


179



5

Income before income taxes


28,020



14,292

Provision for income taxes


4,397



2,098

Net income

$

23,623


$

12,194







Earnings per common share:






Basic

$

1.72


$

0.88

Diluted

$

1.72


$

0.88







Shares used in per share calculations:






Basic


13,675



13,714

Diluted


13,706



13,746



 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)








Three Months Ended November 30,


2020


2019

Operating activities:






Net income

$

23,623


$

12,194

Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization


1,700



1,957

Net gains on sales and disposals of property and equipment


(55)



(64)

Deferred income taxes


236



57

Stock-based compensation


2,665



2,214

Unrealized foreign currency exchange losses


52



394

Provision for bad debts


124



6

Changes in assets and liabilities:






Trade accounts receivable


(9,936)



3,630

Inventories


(345)



(2,358)

Other assets


(1,304)



462

Operating lease assets and liabilities, net


6



195

Accounts payable and accrued liabilities


4,590



(332)

Accrued payroll and related expenses


624



(2,234)

Other long-term liabilities and income taxes payable


1,941



(915)

Net cash provided by operating activities


23,921



15,206







Investing activities:






Purchases of property and equipment


(3,812)



(5,965)

Proceeds from sales of property and equipment


142



195

Net cash used in investing activities


(3,670)



(5,770)







Financing activities:






Treasury stock purchases


-



(4,957)

Dividends paid


(9,199)



(8,406)

Proceeds from issuance of long-term senior notes


52,000



-

Repayments of long-term senior notes


(400)



(400)

Net (repayments) proceeds of revolving credit facility


(50,000)



7,883

Shares withheld to cover taxes upon conversions of equity awards


(3,490)



(2,640)

  Net cash used in financing activities


(11,089)



(8,520)

Effect of exchange rate changes on cash and cash equivalents


220



531

Net increase in cash and cash equivalents


9,382



1,447

Cash and cash equivalents at beginning of period


56,462



27,233

Cash and cash equivalents at end of period

$

65,844


$

28,680







Supplemental disclosure of noncash investing activities:






Accrued capital expenditures

$

1,274


$

1,206



 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/wd-40-company-reports-first-quarter-2021-financial-results-301203036.html

SOURCE WD-40 Company

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