Q4 FY15 Earnings Resultss21.q4cdn.com/612895086/files/doc_presentations/2015/Q4...Q4 FY15 EARNINGS...
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Q4 FY15Earnings Results
October 15, 2015
Q4 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 maintenance products (“MP”) 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 Quarterly Report on Form 10-Q for the period ended May 31,
2015 and in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2015 which the Company expects to file with the
SEC on October 22, 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 October 15, 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.
Q4 FY15 EARNINGS PRESENTATION
FY15 Financial Highlights
3
“Fiscal year 2015
was a year of solid
operating
performance that
was obscured by the
impacts of political
events, economic
instability, a strong
U.S. dollar and a
particularly weak
euro against the
pound sterling.”
– Garry Ridge
• Total net sales for the full fiscal year were $378.2 million, a decrease of 1
percent from the prior fiscal year.
• Translation and transaction impacts due to changes in foreign currency
exchange rates reduced consolidated net sales by about $16 million in fiscal
year 2015.
• Net income for the full fiscal year was $44.8 million, an increase of 2 percent
from the prior fiscal year.
• Diluted earnings per share for the full fiscal year were $3.04 compared to $2.87
in the prior fiscal year.
• Gross margin for the full fiscal year was 52.9 percent, compared to 51.9 percent
in the prior fiscal year.
• During the full fiscal year the Company repurchased $30.3 million in shares
under two repurchase plans
─ Current repurchase plan authorizes the Company to acquire up to $75.0 million of its
outstanding shares through August 31, 2016
• Achieved a return on invested capital (ROIC) of 27.2% in fiscal year 2015
Q4 FY15 EARNINGS PRESENTATION
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
4
Q4 FY15 EARNINGS PRESENTATION
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)
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 Q4 and FY15 the
Company experienced
negative impacts from the
translation of all of the
results of its foreign
subsidiaries into the U.S.
dollar
5
Q4 FY15 EARNINGS PRESENTATION
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)
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
Q4 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
6
Q4 FY15 EARNINGS PRESENTATION
SALESRESULTS
7
Q4 FY15 EARNINGS PRESENTATION
HCCP (Total) ↓ 6% ↓ 1%
Americas ↓ 5% ↓ 2%
EMEA ↓ 6% ↔ 0%
Asia-Pacific ↓ 9% ↑ 2%
Fourth Quarter Fiscal Year
MP (Total) ↓ 6% ↓ 1%
Americas ↑ 6% ↑ 5%
EMEA ↓ 18% ↓ 10%
Asia-Pacific ↓ 4% ↑ 7%
Fourth Quarter Fiscal Year
$12.4 $11.7
$85.2 $80.3
Q4 FY14 Q4 FY15
Net Sales by Product Group
8
Maintenance Products Homecare and Cleaning
Products
$92.0$97.6
$378.2$383.0
Maintenance Product Sales
Homecare and Cleaning Product Sales
Fourth Quarter Sales by Product Group ($M) FY 2015 Global Product Group Sales Mix
FY 2015 Sales by Product Group ($M)
Maintenance product sales
88%
Homecare and cleaning
product sales12%
$45.2 $44.9
$337.8 $333.3
FY14 FY15
Q4 FY15 EARNINGS PRESENTATION
$11.1 $10.6
$40.1 $33.3
$46.4 $48.1
Q4 FY14 Q4 FY15
$50.8 $54.0
$151.4 $136.9
$180.8 $187.3
FY14 FY15
Asia-Pacific (Total) ↓ 5% ↑ 6%
Australia ↓ 8% ↓ 3%
China ↑ 7% ↑ 10%
Asian Marketing Distributors ↓ 12% ↑ 11%
Fiscal YearFourth Quarter
EMEA (Total) ↓ 7% ↓ 10%
Direct Markets ↓ 12% ↓ 7%
Marketing Distributors ↓ 26% ↓ 14%
Fiscal YearFourth Quarter
Americas (Total) ↑ 4% ↑ 4%
United States ↑ 6% ↑ 4%
Latin America ↑ 8% ↑ 7%
Canada ↓ 20% ↓ 8%
Fiscal YearFourth Quarter
Net Sales by Segment
9
Americas EMEA Asia-Pacific
Fourth Quarter Sales by Segment ($M) Americas
EMEA
Asia-Pacific
FY15 Sales by Segment ($M)
$92.0$97.6
$378.2$383.0
Q4 FY15 EARNINGS PRESENTATION
FINANCIAL RESULTS
10
Q4 FY15 EARNINGS PRESENTATION
Gross Margin Results
11
Q4 FY15 GM of 54.3% vs. Q4 FY14 GM of 52.7%
• Changes in petroleum-based specialty chemicals
and aerosol cans (+2.3pp)
• Price increases, primarily in Asia-Pacific and EMEA
(+0.3pp)
• Sales mix and miscellaneous costs (-0.3pp)
• Changes in foreign currency exchange rates in
EMEA (-0.7pp)
FY15 GM of 52.9% vs. FY14 GM of 51.9%
• Changes in petroleum-based specialty chemicals
and aerosol cans (+1.6pp)
• Price increases, primarily in Asia-Pacific and
EMEA (+0.3pp)
• Discount and allowances, primarily in Asia-Pacific
(-0.3pp)
• Changes in foreign currency exchange rates in
EMEA (-0.5pp)
• Sales mix and miscellaneous costs (-0.1pp)
Gross margin can be impacted positively and negatively by things not under the Company’s
control like changes in foreign currency exchange rates and input costs
YTD Gross Margin up 1.0 ppQ4 Gross Margin up 1.6 pp
Q4 FY15 EARNINGS PRESENTATION
50/30/20 Results
12
* 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 Current
Target
FY15
Actuals
FY14
Actuals
FY13
Actuals
New Target
Gross Margin 50% 53% 52% 51% 55%
Cost of Doing Business 30% 34% 34% 35% 30%
EBITDA 20% 19% 18% 17% 25%
Q4 FY15 EARNINGS PRESENTATION
Q4 FY15 Q4 FY14 % Change(1)
Selling, general and administrative $27.4 $28.3 -3%
Advertising and sales promotion $6.0 $5.8 2%
Amortization $0.8 $0.7 10%
Total operating expenses $34.2 $34.9 -2%
Other expenses(2) $0 $0 0%
Provision for income taxes $4.1 $5.0 -19%
Net Income $11.7 $11.5 2%
EPS (Diluted) $0.80 $0.77 4%
Selected Financial ResultsFourth Quarter
13
($ 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.
Q4 FY15 EARNINGS PRESENTATION
FY15 FY14 % Change(1)
Selling, general and administrative $108.9 $108.6 0%
Advertising and sales promotion $22.9 $23.9 -4%
Amortization $3.0 $2.6 16%
Total operating expenses $134.8 $135.1 0%
Other expenses(2) $2.3 $0.8 193%
Provision for income taxes $18.3 $19.2 -5%
Net Income $44.8 $43.7 2%
EPS (Diluted) $3.04 $2.87 6%
Selected Financial ResultsFY 2015
14
($ 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.
Q4 FY15 EARNINGS PRESENTATION
FY15 FY14 % Change(1)
Cash and cash equivalents $53.9 $57.8 -7%
Short-term investments $48.6 $45.1 8%
Other assets $236.8 $244.8 -3%
Total assets $339.3 $347.7 -2%
Revolving credit facility $108.0 $98.0 10%
Other liabilities $73.4 $80.3 -9%
Total liabilities $181.4 $178.3 2%
Total Shareholders' equity $157.9 $169.4 -7%
Total liabilities and shareholder's equity $339.3 $347.7 -2%
Condensed Balance Sheet
15
($ in millions; except % change)
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.
Q4 FY15 EARNINGS PRESENTATION
GUIDANCE
16
Q4 FY15 EARNINGS PRESENTATION
Fiscal Year 2016 Guidance*
17
Diluted EPS
Net Income
A&P Investment
Gross Margin
Net Sales
Sales Growth Between 6% and 8%
Between $400 and $408 million
Near 53%
Between 6.0% to 7.0% of net sales
Between $47 and $48 million
Between $3.26 and $3.33 based on 14.4
million shares outstanding
* As of 10/15/15. This guidance does not include any future acquisitions or divestitures and assumes that foreign currency exchange rates will
remain close to current levels.
Q4 FY15 EARNINGS PRESENTATION
APPENDIX
18
Q4 FY15 EARNINGS PRESENTATION
Q4 FY15 Q4 FY14 % Change
Net Sales $92.0 $97.6 -6%
Gross Profit (%) 54.3% 52.7% 160 bps
Operating Income $15.8 $16.6 -5%
Net Income $11.7 $11.5 2%
EPS (Diluted) $0.80 $0.77 4%
Q4 FY15 CC* Q4 FY14 % Change
Net Sales $96.2 $97.6 -1%
Operating Income $16.8 $16.6 1%
Net Income $12.5 $11.5 9%
EPS (Diluted) $0.86 $0.77 12%
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Foreign Currency Translation Impact or“Constant Currency” Q4 FY 2015
Financial ResultsAs reported
Financial ResultsConstant currency basis
*Q4 FY15 results translated at Q4 FY14 foreign currency exchange rates
($ in millions; except % change and EPS)
Q4 FY15 EARNINGS PRESENTATION
FY15 CC* FY14 % Change
Net Sales $389.1 $383.0 2%
Operating Income $67.9 $63.7 7%
Net Income $46.6 $43.7 6%
EPS (Diluted) $3.16 $2.87 10%
FY15 FY14 % Change
Net Sales $378.2 $383.0 -1%
Gross Profit (%) 52.9% 51.9% 100 bps
Operating Income $65.4 $63.7 3%
Net Income $44.8 $43.7 2%
EPS (Diluted) $3.04 $2.87 6%
Foreign Currency Translation Impact or“Constant Currency” – FY 2015
20
Financial Results(As reported)
Financial Results(Constant currency basis)
*FY15 results translated at FY14 foreign currency exchange rates
($ in millions; except % change and EPS)
Q4 FY15 EARNINGS PRESENTATION
Non-GAAP Reconciliation - Fourth Quarter
21
(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 $ 34,187 $ 34,868
Amortization of definite-lived intangible assets (759) (687)
Depreciation (in operating departments) (683) (618)
Cost of doing business $ 32,736 $ 33,563
Net sales $ 91,981 $ 97,622
Cost of doing business as a percentage of net sales 35% 34%
EBITDA:
Net income - GAAP $ 11,723 $ 11,541
Provision for income taxes 4,063 5,034
Interest income (159) (171)
Interest expense 293 293
Amortization of definite-lived intangible assets 759 687
Depreciation 881 836
EBITDA $ 17,560 $ 18,220
Net sales $ 91,981 $ 97,622
EBITDA as a percentage of net sales 19% 19%
Three Months Ended
8/31/2015 8/31/2014
Q4 FY15 EARNINGS PRESENTATION
Non-GAAP Reconciliation – Fiscal Year
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 $ 134,788 $ 135,116 $ 132,526
Amortization of definite-lived intangible assets (3,039) (2,617) (2,260)
Impairment of definite-lived intangible assets - - (1,077)
Depreciation (in operating departments) (2,664) (2,218) (1,851)
Cost of doing business $ 129,085 $ 130,281 $ 127,338
Net sales $ 378,150 $ 382,997 $ 368,548
Cost of doing business as a percentage of net sales 34% 34% 35%
EBITDA:
Net income - GAAP $ 44,807 $ 43,746 $ 39,813
Provision for income taxes 18,303 19,213 17,054
Interest income (584) (596) (506)
Interest expense 1,205 1,002 693
Amortization of definite-lived intangible assets 3,039 2,617 2,260
Depreciation 3,425 3,243 3,099
EBITDA $ 70,195 $ 69,225 $ 62,413
Net sales $ 378,150 $ 382,997 $ 368,548
EBITDA as a percentage of net sales 19% 18% 17%
8/31/2013
Twelve Months Ended
8/31/2015 8/31/2014