2013 WD-40 Company Annual Shareholder...
Transcript of 2013 WD-40 Company Annual Shareholder...
2013 WD-40 Company Annual Shareholder Meeting The more we learn about the world, the better the solutions we provide.
That’s the power of the shield.
Except for the historical information contained herein, this news release contains forward-looking statements concerning WD-40 Company's outlook for sales, earnings, dividends and other financial results. These statements are based on an assessment of a variety of factors, contingencies and uncertainties considered relevant by WD-40 Company. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements, including impacts of promotional programs, impacts of line extensions and the uncertainty of market conditions, both in the United States and internationally. The Company's expectations, beliefs and projections 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 projections will be achieved or accomplished. The risks and uncertainties are detailed from time to time in reports filed by WD-40 Company with the SEC, including Forms 8-K, 10-Q, and 10-K, and readers are urged to carefully review these and other documents. The information contained in this presentation is a review of the Company’s fourth quarter and fiscal year results for the periods ended August 31, 2013 and 2012. We urge investors to stay informed and updated on the Company’s developments by reviewing the Company’s quarterly press releases and conference calls as they are posted on the website: www.wd40company.com (Investor Relations).
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WHO ARE WE?
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What does a good business look like?
Simple and easy to understand business model. Dominant in its industry and has been through periods of recession and emerged stronger. Superior returns on capital achieved through high margins and relatively low capital reinvestment requirements. Sustainable competitive advantage protecting the business from competition through strong end user loyalty. Significant cash flow generation. Creates excess cash over and above the business’ annual capital requirements. Strong balance sheet with prudent leverage. High quality management with a proven track record of solid performance - with honesty, intelligence and integrity.
Guiding Principles
Vision
• Create positive lasting memories by solving problems in homes and factories around the world.
• (“Problem Solved, Job Done Right”)
Values
• We value doing the right thing. (Trust)
• We value creating positive lasting memories in all our relationships. (Relationships)
• We value making it better than it is today. (Creative Innovation)
• We value succeeding as a tribe while excelling as individuals. (Teamwork)
• We value owning it and passionately acting on it. (Action)
• We value sustaining the WD-40 Company economy. (Economic Value)
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STRATEGIC INITIATIVES
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Refreshed Strategic Initiatives
OUR PEOPLE
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People - Products - Passion
Typhoon Zone
Servant leadership with edge
Review
Values
Planning
Execution
Vision
Learning Moment
Learning Don’t mark my
paper help me get an “A”
Results in a tribal culture that values:
•Caring
•Candor
•Accountability
•Responsibility
What mountain do we want to climb?
Values are principles that guide our
behavior
© 2010 The Learning Moment Inc. All rights reserved. Do not duplicate.
thelearningmoment.net
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OUR BRANDS
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Celebrating 60 years
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Identify & establish geographic WD-40 MUP User Base
Channel development – multi trade channel distribution – execute “The Secret”
WD-40 MUP end user trust established with multi platform usage – “Memories” = EQUITY
General Maintenance
Products
Lawn & Garden
Landscaping Motor Bike New Category New Category New Category
Flanker & new category products – WD-40 Specialist product line
Bundle Bundle Bundle
Grow the core
Bundle Bundle Bundle
Bundle Bundle Bundle
Bundle Bundle Bundle
Bundle Bundle Bundle
Bundle Bundle Bundle 13
Mental Awareness
Physical Awareness
Make the end user aware and make it easy to buy
The Power of the Shield Leveraging the trust of the brand
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Physical Awareness Make it easy to buy
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OUR END USERS
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Auto Pro MRO
At-Home – “Non-Enthusiast”
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INVESTMENT PERFORMANCE
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Five Year Comparison of Total Shareholder Return
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$40
$60
$80
$100
$120
$140
$160
$180
$200
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Value of $100 invested on August 31, 2008
WD-40 Company S&P 500 Russell 2000
What drove that PERFORMANCE?
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Success Factors for WD-40 Company
• Solid Financial Foundation
Strong Balance Sheet and predictable cash flow
• Efficient business model
Asset light strategy
• High ROIC
• Strong Brands with Global reach
Long runway of growth in front of us
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$- $20 $40 $60 $80
$100 $120 $140 $160 $180 $200 $220 $240 $260 $280 $300 $320 $340
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Global MPMP Revenue 10 Year View - All Years at FY13 FX Rates
Global MPMP
Strong Brands with a Global Reach
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$-
$20
$40
$60
$80
$100
$120
$140
$160
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
MPMP Revenue by Trade Bloc 10 Year View - All Years at FY13 FX Rates
Americas EMEA AsiaPac
Strong Brands with a Global Reach
50 / 30 / 20 RULE
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50 Gross margin–At or above 50% of net sales
- 30 Cost of doing business–At or below 30%
____ of net sales1
=20 EBITDA – At or above 20% of net sales1
1 See appendix for descriptions and reconciliations of these non-GAAP measures.
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The 50 / 30 / 20 Rule
•The “50” or Gross margin improvement
• Product Development • New Product introductions
• Product reformulations
• Operational efficiencies
• Mix - Product mix and market mix
• Pricing – as needed to offset input cost increases
The 50 / 30 / 20 Rule
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FY14 >51%
FY13 51%
FY12 49%
•The “30” or Leveraging our global infrastructure
• 75% of the “30” in 3 areas
Our People – Investments in our tribe
Investments in marketing, advertising and promotion
Freight – the cost of getting our products to our customers
Advertising & Sales
Promotion
Freight
Personnel
Professional Services
Office Overhead
Travel & Meeting Expenses
R&D Project Expenses
Broker Commissions
Insurance
All Other
% COB
The 50 / 30 / 20 Rule
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Revenue growth is key to achieving the “30” target
RESULTS
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YTD FY13 vs. YTD FY12
($M) FY13 FY12 Change
Sales 368.5$ 342.8$ 8%
Gross Profit % 51.3% 49.2% 210 bp
Op Income 56.6$ 51.7$ 9%
Net Income 39.8$ 35.5$ 12%
EPS (Diluted) 2.54$ 2.20$ 15%
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YTD FY13 Compared to YTD FY12
Sales – $368.5M, Up 8%
•Multi-purpose maintenance products up 12%
•Homecare & cleaning products down 15%
•Americas up 2%, EMEA up 16%, and Asia Pacific up 7%
Operating Expenses - $132.5M, Up 14%
• SG&A up $15.5M driven by higher bonus and other employee-related costs, as well as travel and meeting expenses
• A&P investment down $0.9M driven by lower investment in homecare and cleaning products in the Americas
Gross Margin – 51.3% vs. 49.2% (+2.1pp)
• Price increases (+1.1pp)
• Lower discounts (+0.4pp)
• Changes in petroleum-based material costs
and aerosol can costs (+0.2pp)
• Changes in other raw material costs and
manufacturing costs (-0.1pp)
• COG areas impacted by the North American
supply chain architecture project (+0.3pp)
• Lower COGS in China due to local sourcing
(+0.2pp)
• Impact from changes in sales mix and other
misc was negligible
FX Impact – Constant Currency vs. Reported
• At FY12 FX rates, sales would have been higher by $2.0M
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A WORD ABOUT CAPITAL ALLOCATION
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Capital Allocation Strategy
Organic Growth Initiatives
Acquisitions Repurchase
Shares
Determine Liquidity Objectives & Debt/Cash Balance:
Liquidity: Adequate to support growth strategy. Supported by strong BS & available lines of credit Cash /Debt - Neutral Position
F
Excess Capital allocated to the Highest
Return Alternative
Long-term Growth and Return Targets:
Revenue and Earnings growth range: 6-8% ROIC : 20% +
STEP 1
STEP 2
STEP 3 Maintenance Cap Ex and Regular Dividends: Minimal Cap Ex: $2-4M per year Dividends: 50% of Earnings ≈ $20M per year
STEP 4
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FISCAL YEAR 2014 GUIDANCE AS OF OCTOBER 2013
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• Sales growth between 4% and 8%, with Net Sales of $383-$398 million
• Gross margin close to 51%
• A&P investment in the range of 6.5% and 7.5% of Net Sales • Net Income of $40.5-$42.8 million
• Diluted EPS of $2.65 to $2.80 based on estimated 15.3 million
shares outstanding
Fiscal Year 2014 guidance
Conditions that impact our outlook
•Continuing global economic recovery and expansion or ….at least stability
•Initiatives to maximize multi-purpose maintenance products • Continued geographic expansion of WD-40 Multi-Use Product
and WD-40 Specialist product lines
• Gross Margin • Maintain gross margin above 50% of net sales
• Stability in key input costs – petroleum-based spirits & steel
•Harvest Homecare & Cleaning product profits •Current foreign currency exchange rates
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Favorable
Uncertain
Unfavorable
LAST WORD
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What you heard from us today
You heard
… we celebrated our 60th year by growing sales by 8% in FY2013.
… that our three new innovation teams are actively developing new products and categories to fuel growth over the coming years.
… that our growth was fueled by both our WD-40 Multi-Use Product and new and increased distribution of our WD-40 Specialist Product line.
… we achieved a gross margin of 51.3% in part due to cost saving initiatives.
… we continued to return capital to shareholders through regular dividends and share buybacks.
… that WD-40 Company has been a good investment, yielding return on invested capital of over 20% for the last four years.
…that we expect sales growth of 4-8% for fiscal year 2014 and
You heard that we are excited about our future!
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WD-40 Company Business Score card
Simple and easy to understand business model
Dominant in its industry
Superior returns on capital
Sustainable competitive advantage
Significant cash flow generation
Strong Balance Sheet
Growth opportunities
Thank You
Questions ?
APPENDIX
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50 / 30 / 20 Rule
Measure of Net Sales Target FY13 FY12 FY11
Gross Margin 50% 51% 49% 50%
Cost of Doing Business* 30% 35% 33% 33%
EBITDA* 20% 17% 16% 17%
* See next slide in appendix for descriptions and reconciliations of these non-GAAP measures.
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(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our management believes provide our shareholders 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 WD-40 Company’s financial statements as prepared under GAAP are as follows:
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Three Months Three Months
Cost of Doing Business Ended 8/31/13 Ended 8/31/12
Total Operating Expenses- GAAP $38,147 $28,339
Amortization of definite-lived intangible assets ($806) ($464)
Impairment of definite-lived intangible assets ($1,077)
Depreciation (in Operating Departments) ($497) ($408)
Cost of doing business $35,767 $27,467
Net Sales $93,469 $84,851
Cost of doing business as % of net sales 38% 32%
Three Months Three Months
EBITDA Ended 8/31/13 Ended 8/31/12
Net Income- GAAP $8,141 $8,973
Income Tax Expense $3,096 $4,435
Interest income ($144) ($79)
Interest expense $210 $245
Amortization of definite-lived intangible assets $806 $464
Depreciation $788 $714
EBITDA $12,897 $14,752
Net Sales $93,469 $84,851
EBITDA as % of net sales 14% 17%
(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our management believes provide our shareholders 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 WD-40 Company’s financial statements as prepared under GAAP are as follows:
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Twelve Months Twelve Months
Cost of Doing Business Ended 8/31/13 Ended 8/31/12
Total Operating Expenses- GAAP $132,526 $116,753
Amortization of definite-lived intangible assets ($2,260) ($2,133)
Impairment of definite-lived intangible assets ($1,077)
Depreciation (in Operating Departments) ($1,851) ($1,597)
Cost of doing business $127,338 $113,023
Net Sales $368,548 $342,748
Cost of doing business as % of net sales 35% 33%
Twelve Months Twelve Months
EBITDA Ended 8/31/13 Ended 8/31/12
Net Income- GAAP $39,813 $35,485
Income Tax Expense $17,054 $15,428
Interest income ($506) ($261)
Interest expense $693 $729
Amortization of definite-lived intangible assets $2,260 $2,133
Depreciation $3,099 $2,736
EBITDA $62,413 $56,250
Net Sales $368,548 $342,748
EBITDA as % of net sales 17% 16%
(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our management believes provide our shareholders 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 WD-40 Company’s financial statements as prepared under GAAP are as follows:
Twelve Months Twelve Months
Cost of Doing Business Ended 8/31/12 Ended 8/31/11
Total Operating Expenses- GAAP $116,753 $113,980
Amortization of definite-lived intangible assets ($2,133) ($1,537)
Depreciation (in Operating Departments) ($1,597) ($1,637)
Cost of doing business $113,023 $110,806
Net Sales $342,748 $336,409
Cost of doing business as % of net sales 33% 33%
Twelve Months Twelve Months
EBITDA Ended 8/31/12 Ended 8/31/11
Net Income- GAAP $35,485 $36,433
Income Tax Expense $15,428 $17,098
Interest income ($261) ($228)
Interest expense $729 $1,076
Amortization of definite-lived intangible assets $2,133 $1,537
Depreciation $2,736 $2,849
EBITDA $56,250 $58,765
Net Sales $342,748 $336,409
EBITDA as % of net sales 16% 17%
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50 / 30 / 20 Rule
Measure of Net Sales Target FY13 FY12 FY11
Gross Margin 50% 51% 49% 50%
Cost of Doing Business* 30% 35% 33% 33%
EBITDA* 20% 17% 16% 17%
* See next slide in appendix for descriptions and reconciliations of these non-GAAP measures.
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