Fiscal Year 2013s21.q4cdn.com/612895086/files/doc_presentations/... · The information contained in...
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Fiscal Year 2013
Third Quarter
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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 third quarter and fiscal year 2013 results ended May 31, 2013 and fiscal year 2012 results ended August 31, 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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Guiding Principles
Vision
• Create positive lasting memories by solving problems in homes and factories around the world. (“Problem Solved, Job Done Right”)
Mission
• Our purpose is to deliver unique, high value and easy-to-use solutions for a wide variety of maintenance needs of “doer” and “on-the job” users by leveraging and building the brand fortress of WD-40 Company. We seek to develop and acquire brands readily accessible to end-users primarily through automotive, hardware, DIY, and industrial channels, categories, or departments…wherever they are sold.
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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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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Continuum of End-Users for Maintenance Products
Industrial Home Trades Class
Manufacturing & Assembly No Go
Go
Doers Enthusiast
Doers Occasional
Non-Doers Type
On the Production Line
Maintenance
Repair Overhaul
MRO
Mechanic Farmer Fleet Construction
Carpenter Electrician Plumbers Maintain Repair
User Auto, home Improve. DIY, Maintain, Outdoors, Hobbyist
Maintain
Repair, Overhaul, Maintain, Install @ factory, trade, home
Central buyer / Facility Manager / Owner Owner / User User Buyer
Distributor / Pro Outlet Buy Loc- ation Industrial/trade distributors / wholesalers,
automotive, DIY, hardware retail
Retail
Auto, DIY, hardware retail or departments wherever they are sold
Distributor / Pro Outlet
As left + Auto, DIY, Farm, Hardware, distributor
Specified Range
Specific Knowledge
Specific Application
Decision Factor
In Process or on finished goods
In Maintenance In Project or Maintenance Non-User Use In maintenance
Our playground 19
INVESTMENT
PERFORMANCE
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$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
FY07 FY08 FY09 FY10 FY11 FY12
Five Year Comparison of Total Shareholder Return Value of $100 invested August 31, 2007
RUSSELL 2000 S&P 500 WDFC
Five Year Comparison of Total Shareholder Return
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What drove that
PERFORMANCE?
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Investment Snapshot Global, diverse business…
WD-40 sold in 187 countries worldwide.
More than half of revenues were outside the US.
Brands sold in multiple channels: retail, industrial, institutional.
Portfolio of 11 brands.
Efficient Operation…
347 employees during FY12.
Sales per employee of $1.0M.
Net income per employee of $0.1M in FY12.
Asset-light strategy…
Average annual capex needs of $2.8M FY10-FY12.
Outsourced manufacturing and distribution.
Current and long-term return to shareholders...
Dividend yield of 2.2%.*
Dividend payout ratio of 48%.*
Dividend increases of 7%-8% in
FY11, FY12 and FY13
Share repurchases of $41M and $40M in FY11 and FY12
Existing $50M share buy-back plan through December 2013 and new $60M plan through August 2015.
Focused on creating value…
ROIC emphasis. ROIC was 26.4% in FY10, 21.9% in FY11 and 23.1% in FY12.
Employee bonuses tied to sales and profit targets.
Priority in new product development (NPD) investment…
NPD has touched every brand.
NPD delivered more than $24M in sales from FY10-FY12.
NPD priority is MPMP category
Small Market Cap…
$879.7M*
15.4M shares outstanding***
Ownership…
Insiders: 6%*
Institutions: 73%*
Institutions holding 5% or more shares : BlackRock, Parnassus Investments, Kayne Anderson Rudnick, Ceredex Value Advisors, The Vanguard Group **
Statistics as of FY12 unless noted otherwise *as of 7/1/2013 Source: Nasdaq Online
**13F Report date 3/31/2013 *** per 5/31/13 Balance Sheet
Financial Foundation…
Strong balance sheet
Strong free cash flow
Strong liquidity & access to capital
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Dividend
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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 +50%
FY13 50%
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
What makes up the cost of a can?
Approximate Cost Breakdown of a can of WD-40
40%
10%29%
19%
2%Petroleum-based products
Manufacturing Fees
Can
Plastic
Corrugate
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*As of May 2013
RESULTS
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• Net sales increased $6.1 million, or 7%. Sales growth in Multi-purpose maintenance products more than offset sales declines in Homecare & cleaning products.
• Gross margin was 51.3% compared to 49.5% in the prior fiscal year period. The increase was driven by price increases, lower discounts, and favorable impacts from our strategic initiatives.
• Net income increased $1.1 million, or 12%. Diluted earnings per common share were $0.66 versus $0.57 in the prior fiscal year period.
• We are making progress on our strategic initiatives. The WD-40 Specialist product line contributed to the MPMP sales growth. We also benefited from manufacturing in China and the North American Supply Chain architecture project.
• We repurchased $9.8 million of our shares under our existing $50 million share buy-
back plan and approved a new $60 million plan effective through August 2015.
Q3 FY13 Highlights
Q3 FY13 vs. Q3 FY12
($M) FY13 FY12 Change
Sales 93.1$ 87.0$ 7%
Gross Profit % 51.3% 49.5% 180 bp
Op Income 15.0$ 13.1$ 14%
Net Income 10.3$ 9.1$ 12%
EPS (Diluted) 0.66$ 0.57$ 16%
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Q3 FY13 vs. Q3 FY12 Constant Currency Basis*
($M) FY13CC FY12 Change
Sales 94.9$ 87.0$ 9%
Op Income 15.3$ 13.1$ 16%
Net Income 10.5$ 9.1$ 15%
EPS (Diluted) 0.67$ 0.57$ 18%
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*Q3 FY13 results translated at Q3 FY12 exchange rates
Q3 FY13 Compared to Q3 FY12
Sales – $93.1M, Up 7%
• Multi-purpose maintenance products up
12%
• Homecare & cleaning products down 18%
• Americas up 8%, Europe up 8%, and Asia
Pacific was flat
Operating Expenses - $32.8M, Up 10%
• SG&A up $3.0M driven by higher
employee-related costs and travel and
meeting expenses.
• A&P investment down $0.1M. Higher
investment in Europe was more than
offset by lower investment in the
Americas and Asia Pacific segments.
Gross Margin – 51.3% vs. 49.5% (+1.8pp)
• Price increases (+1.1pp)
• Lower discounts (+0.3pp)
• Changes in petroleum-based material costs
and aerosol can costs (+0.1pp)
• Changes in other raw material costs and
manufacturing costs (-0.2pp)
• Impact from the North American supply chain
architecture project (+0.3pp)
• Lower COGS in China due to local sourcing
(+0.1pp)
• FX Impact in Europe (+0.3pp)
• Impact from changes in sales mix and other
misc (-0.2pp)
FX Impact – Constant Currency vs. Reported
• At FY12 FX rates, sales would have been higher by $1.8M
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YTD FY13 vs. YTD FY12
($M) FY13 FY12 Change
Sales 275.1$ 257.9$ 7%
Gross Profit % 50.8% 49.1% 170 bp
Op Income 45.3$ 38.1$ 19%
Net Income 31.7$ 26.5$ 19%
EPS (Diluted) 2.01$ 1.64$ 23%
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YTD FY13 vs. YTD FY12 Constant Currency Basis*
($M) FY13CC FY12 Change
Sales 275.9$ 257.9$ 7%
Op Income 45.4$ 38.1$ 19%
Net Income 31.7$ 26.5$ 20%
EPS (Diluted) 2.01$ 1.64$ 23%
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*YTD FY13 results translated at YTD FY12 exchange rates
YTD FY13 Compared to YTD FY12
Sales – $275.1M, Up 7%
• Multi-purpose maintenance products up
11%
• Homecare & cleaning products down 15%
• Americas up 2%, Europe up 13%, and
Asia Pacific up 7%
Operating Expenses - $94.4M, Up 7%
• SG&A up $7.6M driven by higher
employee-related costs and travel and
meeting expenses
• A&P investment down $1.5M driven by
lower costs associated with promotional
programs in the Americas period over
period.
Gross Margin – 50.8% vs. 49.1% (+1.7pp)
• Price increases (+1.1pp)
• Lower discounts (+0.5pp)
• Changes in petroleum-based material costs
and aerosol can costs (-0.1pp)
• Changes in other raw material costs and
manufacturing costs (-0.2pp)
• Impact from the North American supply chain
architecture project (+0.3pp)
• Lower COGS in China due to local sourcing
(+0.1pp)
• FX Impact in Europe (-0.2pp)
• Impact from changes in sales mix and other
misc (+0.2pp)
FX Impact – Constant Currency vs. Reported
• At FY12 FX rates, sales would have been higher by $0.8M
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3 Year Trend
40
$310
$315
$320
$325
$330
$335
$340
$345
FY10 FY11 FY12
Net Sales $M
48.0%
48.5%
49.0%
49.5%
50.0%
50.5%
51.0%
51.5%
52.0%
FY10 FY11 FY12
Gross Margin %
$34.0
$34.5
$35.0
$35.5
$36.0
$36.5
$37.0
FY10 FY11 FY12
Net Income $M
Fiscal Year Results FY12 vs. FY11
($M) FY12 FY11 Change
Sales 342.8$ 336.4$ 2%
Gross Profit % 49.2% 50.0% -80 bp
Op Income 51.7$ 54.1$ -4%
Net Income 35.5$ 36.4$ -3%
EPS (Diluted) 2.20$ 2.14$ 3%
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Fiscal Year Results FY12 vs. FY11 Constant Currency Basis*
($M) FY12CC FY11 Change
Sales 343.8$ 336.4$ 2%
Op Income 52.0$ 54.1$ -4%
Net Income 35.7$ 36.4$ -2%
EPS (Diluted) 2.21$ 2.14$ 3%
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*YTD Q4 FY12 results translated at YTD Q4 FY11 exchange rates
FY12 Compared to FY11
Sales – $342.8M, Up 2%
• Multi-purpose maintenance products up
3%
• Homecare & cleaning products down 2%
• Americas up 4%, Europe down 7%, and
Asia-Pacific up 18%
Operating Expenses - $116.8M, Up 2%
• SG&A up $1.6M primarily due to higher
employee related expenses, as well as
higher professional services and freight
costs
• A&P investment is up by $0.6M, due to a
higher level of activities in our Asia-
Pacific segment
Gross Margin – 49.2% vs. 50.0% (-0.8pp)
• Price increases (+2.2pp)
• Changes in petroleum-based material costs
and aerosol can costs (-1.1pp)
• Higher costs for other raw materials (-0.6pp)
• Net lower manufacturing costs in China
(+0.3pp)
• Net impact from the supply chain architecture
project (-0.6pp)
• FX Impact in Europe (-0.2pp)
• All other impacts/sales mix (-0.8pp)
FX Impact – Constant Currency vs. Reported
• At FY11 FX rates, sales would have been higher by $1.0M
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FISCAL YEAR 2013 GUIDANCE
AS OF JULY 2013
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• Sales growth between 4% and 8%, with Net Sales of $356-$370 million
• Gross margin close to 51%
• A&P investment in the range of 6.5% and 7.5% of Net Sales
• Net Income of $37.6-$39.0 million
• Diluted EPS of $2.40 to $2.48 based on estimated 15.7 million shares outstanding
Fiscal Year 2013 guidance
Conditions that impact our outlook
• Global economic recovery and expansion or ….at least
stability
• Initiatives to maximize multi-purpose maintenance products
– the continued launch of WD-40 Specialist products
• Gross Margin
-Grow gross margin to 50% or more of net sales
-Stability in key input costs – petroleum-based spirits & steel
• Stabilized Homecare & Cleaning product revenues
• Current foreign currency exchange rates
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Favorable
Uncertain
Unfavorable
LAST WORD
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Key Takeaways
• RESULTS FOR YTD FY13
Net sales increased $17.1 million, or 7%. Sales growth in Multi-purpose
maintenance products more than offset sales declines in Homecare & cleaning
products.
Cost savings from the North American supply chain architecture project and our
local sourcing initiative in China helped us exceed our 50% gross margin target.
Net income increased $5.2 million, or 19%. Diluted earnings per share grew from
$1.64 to $2.01 per share.
•OUR PERSPECTIVE
We have updated our guidance with sales growth of 4% to 8% with diluted EPS of
$2.40 to $2.48 for fiscal year 2013.
We are excited about the future opportunities we see!
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APPENDIX
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50 / 30 / 20 Rule
Measure of Net Sales Target YTD FY13 FY12 FY11
Gross Margin 50% 51% 49% 50%
Cost of Doing Business* 30% 33% 33% 33%
EBITDA* 20% 18% 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 5/31/13 Ended 5/31/12
Total Operating Expenses- GAAP $32,826 $29,942
Amortization of definite-lived intangible assets ($523) ($504)
Depreciation (in Operating Departments) ($483) ($417)
Cost of doing business $31,820 $29,021
Net Sales $93,103 $87,022
Cost of doing business as % of net sales 34% 33%
Three Months Three Months
EBITDA Ended 5/31/13 Ended 5/31/12
Net Income- GAAP $10,267 $9,136
Income Tax Expense $4,520 $3,736
Interest income ($105) ($61)
Interest expense $182 $159
Amortization of definite-lived intangible assets $523 $504
Depreciation $804 $712
EBITDA $16,191 $14,186
Net Sales $93,103 $87,022
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:
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Nine Months Nine Months
Cost of Doing Business Ended 5/31/12 Ended 5/31/12
Total Operating Expenses- GAAP $94,379 $88,414
Amortization of definite-lived intangible assets ($1,454) ($1,669)
Depreciation (in Operating Departments) ($1,354) ($1,189)
Cost of doing business $91,571 $85,556
Net Sales $275,079 $257,933
Cost of doing business as % of net sales 33% 33%
Nine Months Nine Months
EBITDA Ended 5/31/12 Ended 5/31/12
Net Income- GAAP $31,672 $26,512
Income Tax Expense $13,958 $10,993
Interest income ($362) ($182)
Interest expense $483 $484
Amortization of definite-lived intangible assets $1,454 $1,669
Depreciation $2,311 $2,022
EBITDA $49,516 $41,498
Net Sales $275,079 $257,933
EBITDA as % of net sales 18% 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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