WD-40 Company Reports Second Quarter 2021 Financial Results

SAN DIEGO, April 8, 2021 /PRNewswire/ — WD-40 Company (NASDAQ:WDFC), a global marketing organization dedicated to creating positive lasting memories by…

SAN DIEGO, April 8, 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 second fiscal quarter ended February 28, 2021.

Third Fiscal Quarter Financial Highlights

  • Total net sales for the second quarter were $111.9 million, an increase of 12 percent compared to the prior year fiscal quarter. Year-to-date total net sales were $236.5 million, an increase of 19 percent compared to the prior year fiscal period.
  • Translation of the Company’s foreign subsidiary results to U.S. dollars had a favorable impact on sales for the current quarter and year-to-date. On a constant currency basis, total net sales would have been $109.2 million for the second quarter and $231.0 million year-to-date.
  • Net income for the second quarter was $17.2 million, an increase of 20 percent compared to the prior year fiscal quarter. Year-to-date net income was $40.8 million, an increase of 54 percent from the prior year fiscal period.
  • Diluted earnings per share were $1.24 in the second quarter, compared to $1.04 per share for the prior year fiscal quarter. Year-to-date diluted earnings per share were $2.96 compared to $1.92 in the prior year fiscal period.
  • Gross margin was 55.4 percent in the second quarter compared to 53.6 percent in the prior year fiscal quarter. Year-to-date gross margin was 55.9 percent compared to 53.9 percent in the prior year fiscal period.
  • Selling, general and administrative expenses were up 19 percent in the second quarter to $35.5 million when compared to the prior year fiscal quarter. Year-to-date selling, general and administrative expenses were up 14 percent to $71.5 million compared to the prior year fiscal period.
  • Advertising and sales promotion expenses were up 13 percent in the second quarter to $5.5 million when compared to the prior year fiscal quarter. Year-to-date advertising and sales promotion expenses were up 6 percent to $11.0 million compared to the prior year fiscal period.

«We continue to experience very high demand for our maintenance products due to renovation trends associated with the pandemic, or what we call isolation renovation,» said Garry Ridge, WD-40 Company’s chairman and chief executive officer. «In addition, we are seeing improved market conditions due to a reduction of COVID-19 lockdown measures in many markets, particularly in China, as well as increased sales through the ecommerce channel.» 

«However, the pandemic has also caused some disruptions and constraints to our supply chain, primarily in the Americas, which impacted our ability to meet the increased end user demand we experienced in the United States during the second quarter.  Despite these supply chain challenges in the United States, we continue to experience very strong point-of-sale end user demand for our maintenance products. We are working to address the supply chain challenges and there is a recovery plan underway which we expect will result in improved conditions in the back half of the year.» 

«We are off to a very strong start in the first half of fiscal 2021. Keeping up with demand in a COVID environment has been a challenge, but we’ve increased our revenue expectations and believe that net sales are likely to be in a range of between $445 million to $475 million for the full fiscal year.  This upward revision is driven primarily by favorable changes in foreign currency exchange rates.  Additionally, over the long-term, we are optimistic that many of the new end users who have interacted with our products during the pandemic will become permanent users of our maintenance and homecare solutions,» Ridge concluded. 

Net Sales by Segment (in thousands):


Three Months Ended February 28/29,


Six Months Ended February 28/29,


2021


2020


Change


2021


2020


Change

Americas

$

46,157


$

46,842



(1)%


$

100,344


$

93,578



7%

EMEA


49,813



41,753



19%



104,563



80,998



29%

Asia-Pacific


15,935



11,454



39%



31,557



24,029



31%

Total

$

111,905


$

100,049



12%


$

236,464


$

198,605



19%

 

  • Net sales by segment as a percent of total net sales for the second quarter were as follows: for the Americas, 41 percent; for EMEA, 45 percent; and for Asia-Pacific, 14 percent.
  • Net sales in the Americas decreased 1 percent in the second quarter due primarily to lower sales of maintenance products in the United States which decreased 11 percent compared to the prior year fiscal quarter. Lower sales of maintenance products in the United States were due to supply chain constraints and disruptions related to the COVID-19 pandemic. Partially offsetting these declines were higher sales in Canada and Latin America which increased 15 percent and 27 percent, respectively. The increase in sales in Canada was driven by increased demand linked to renovation trends associated with the pandemic, increased sales through the ecommerce channel and the successful introduction Next Generation Smart Straw®. The increase in sales in Latin America was primarily due to strong sales of WD-40 Multi-Use Product in Mexico.
  • Net sales in EMEA increased 19 percent in the second quarter primarily due to higher sales of maintenance products in both the EMEA direct and distributor markets, which increased 17 percent and 35 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 15 percent compared to the prior fiscal year quarter.
  • Net sales in Asia-Pacific increased 39 percent in the second quarter due primarily to higher sales of WD-40 Multi-Use Product in China which increased 251 percent compared to the prior year fiscal quarter. Higher sales of WD-40 Multi-Use Product in China were primarily due to improved market conditions due to the reduction of COVID-19 lockdown measures compared to the corresponding period of the prior fiscal year when the pandemic was in its earliest stages. Also contributing to higher sales in Asia-Pacific were higher sales in Australia which increased 39 percent compared to the prior year fiscal quarter. This increase was driven by higher demand for maintenance products linked to renovation trends and increased demand for cleaning products primarily due to the impacts of the pandemic. Partially offsetting these increases were lower sales in the Asia-Pacific distributor markets which declined 4 percent compared to the prior year fiscal quarter. The lower sales of maintenance products in the Asia distributor markets were attributed to the shift in the timing of customer orders as well as delays in the shipment of certain orders linked to shipping container shortages in the region. In addition, many of the Company’s marketing distributors are continuing to adjust to more normalized inventory levels. 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 32 percent compared to the prior year fiscal quarter.

Net Sales by Product Group (in thousands):


Three Months Ended February 28/29,


Six Months Ended February 28/29,


2021


2020


Change


2021


2020


Change

Maintenance products

$

102,729


$

91,147



13%


$

217,072


$

180,817



20%

Homecare and cleaning products


9,176



8,902



3%



19,392



17,788



9%

Total

$

111,905


$

100,049



12%


$

236,464


$

198,605



19%

 

  • Net sales of maintenance products, which are considered the primary growth focus for the Company, increased 13 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 in all three segments driven by increased demand linked to renovation trends associated with the pandemic, improved market conditions due to a reduction of COVID-19 lockdown measures, and increased sales through the ecommerce channel.
  • Net sales of homecare and cleaning products increased 3 percent in the second quarter when compared to the prior year fiscal quarter. The Company started to experience an increase in sales of its 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. The homecare and cleaning products, particularly those in the U.S., 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 Information

As previously announced, WD-40 Company’s board of directors declared on Tuesday, March 16, 2021 a quarterly dividend of $0.72 per share reflecting an increase of greater than 7 percent over the previous quarter’s dividend. The quarterly dividend is payable on April 30, 2021 to stockholders of record at the close of business on April 16, 2021.

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 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 February 28, 2021 which the Company expects to file with the SEC on April 8, 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 April 8, 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)








February 28,


August 31,


2021


2020

Assets






Current assets:






Cash and cash equivalents

$

72,381


$

56,462

Trade accounts receivable, less allowance for doubtful accounts of $550 and $362 at February 28, 2021 and August 31, 2020, respectively


93,577



80,672

Inventories


44,539



41,264

Other current assets


11,339



6,756

Total current assets


221,836



185,154

Property and equipment, net


67,077



60,759

Goodwill


95,987



95,731

Other intangible assets, net


8,020



8,633

Operating lease right-of-use assets


8,741



8,168

Deferred tax assets, net


498



464

Other assets


3,828



3,728

Total assets

$

405,987


$

362,637







Liabilities and Shareholders’ Equity






Current liabilities:






Accounts payable

$

27,729


$

21,676

Accrued liabilities


24,451



21,660

Accrued payroll and related expenses


16,667



14,767

Short-term borrowings


800



800

Income taxes payable


2,236



1,213

Total current liabilities


71,883



60,116

Long-term borrowings


116,731



113,098

Deferred tax liabilities, net


11,535



11,291

Long-term operating lease liabilities


6,945



6,520

Other long-term liabilities


11,313



11,299

Total liabilities


218,407



202,324







Commitments and Contingencies












Shareholders’ equity:






Common stock ― authorized 36,000,000 shares, $0.001 par value; 19,855,666 and 19,812,685 shares issued at February 28, 2021 and August 31, 2020, respectively; and 13,707,767 and 13,664,786 shares outstanding at February 28, 2021 and August 31, 2020, respectively


20



20

Additional paid-in capital


158,897



157,850

Retained earnings


421,129



398,731

Accumulated other comprehensive loss


(24,386)



(28,208)

Common stock held in treasury, at cost ― 6,147,899 and 6,147,899 shares at February 28, 2021 and August 31, 2020, respectively


(368,080)



(368,080)

Total shareholders’ equity


187,580



160,313

Total liabilities and shareholders’ equity

$

405,987


$

362,637

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)














Three Months Ended February 28/29,


Six Months Ended February 28/29,


2021


2020


2021


2020













Net sales

$

111,905


$

100,049


$

236,464


$

198,605

Cost of products sold


49,898



46,447



104,211



91,460

Gross profit


62,007



53,602



132,253



107,145













Operating expenses:












Selling, general and administrative


35,478



29,906



71,455



62,505

Advertising and sales promotion


5,512



4,857



11,031



10,447

Amortization of definite-lived intangible assets


362



654



720



1,304

Total operating expenses


41,352



35,417



83,206



74,256













Income from operations


20,655



18,185



49,047



32,889













Other income (expense):












Interest income


19



28



38



53

Interest expense


(610)



(593)



(1,180)



(1,035)

Other income (expense), net


151



(229)



330



(224)

Income before income taxes


20,215



17,391



48,235



31,683

Provision for income taxes


3,024



3,064



7,421



5,162

Net income

$

17,191


$

14,327


$

40,814


$

26,521













Earnings per common share:












Basic

$

1.25


$

1.04


$

2.97


$

1.92

Diluted

$

1.24


$

1.04


$

2.96


$

1.92













Shares used in per share calculations:












Basic


13,700



13,712



13,687



13,713

Diluted


13,729



13,737



13,718



13,741

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)








Six Months Ended February 28/29,


2021


2020

Operating activities:






Net income

$

40,814


$

26,521

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






Depreciation and amortization


3,458



4,024

Net gains on sales and disposals of property and equipment


(104)



(66)

Deferred income taxes


152



(79)

Stock-based compensation


4,542



3,889

Unrealized foreign currency exchange losses


139



(249)

Provision for bad debts


175



61

Changes in assets and liabilities:






Trade accounts receivable


(10,111)



(1,313)

Inventories


(2,104)



(1,648)

Other assets


(4,386)



(1,781)

Operating lease assets and liabilities, net


9



211

Accounts payable and accrued liabilities


7,398



1,969

Accrued payroll and related expenses


1,584



(7,345)

Other long-term liabilities and income taxes payable


944



(812)

Net cash provided by operating activities


42,510



23,382







Investing activities:






Purchases of property and equipment


(7,605)



(10,695)

Proceeds from sales of property and equipment


239



212

Net cash used in investing activities


(7,366)



(10,483)







Financing activities:






Treasury stock purchases




(9,658)

Dividends paid


(18,416)



(17,642)

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)



20,524

Shares withheld to cover taxes upon conversions of equity awards


(3,495)



(2,640)

  Net cash used in financing activities


(20,311)



(9,816)

Effect of exchange rate changes on cash and cash equivalents


1,086



187

Net increase in cash and cash equivalents


15,919



3,270

Cash and cash equivalents at beginning of period


56,462



27,233

Cash and cash equivalents at end of period

$

72,381


$

30,503







Supplemental disclosure of noncash investing activities:






Accrued capital expenditures

$

1,638


$

5,724

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/wd-40-company-reports-second-quarter-2021-financial-results-301265364.html

SOURCE WD-40 Company