Q4 FY15 Earnings Resultss21.q4cdn.com/612895086/files/doc_presentations/2015/Q4...Q4 FY15 EARNINGS...

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.


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


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




business, typically the same



headquartered


costs, expenses are




takes place




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




business; typically the same



headquartered


costs, expenses are




takes place




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


SALESRESULTS

7


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


$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%


Americas (Total) ↑ 4% ↑ 4%

United States ↑ 6% ↑ 4%

Latin America ↑ 8% ↑ 7%

Canada ↓ 20% ↓ 8%


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


FINANCIAL RESULTS

10


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


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 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.


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


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.


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.


GUIDANCE

16


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.


APPENDIX

18


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%

19

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



FY15 CC* FY14 % Change

Net Sales $389.1 $383.0 2%


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


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



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


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

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