Corporate Overview January 2016
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Corporate Overview
January 2016
2
Forward-Looking Statements
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 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 Annual Report on Form 10-K for the fiscal year ended August
31, 2015 and in the Company’s Quarterly Report on Form 10-Q for the period ended November 30, 2015 which the Company filed with the
SEC on January 7, 2016.
All forward-looking statements included in this presentation should be considered in the context of these risks. All forward-looking statements
speak only as of January 7, 2016 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.
WHO WE ARE
4
What Does A Good Business Look Like?
• 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
• Proven management team
5
176
WD-40 Company’s Origins
In the 1950’s a chemist in San Diego set out to
create a compound that would prevent rust and
corrosion. It took him 40 attempts to get the water
displacing formula right, but the end result became
the original secret formula for WD-40 Multi-Use
Product (“MUP”).
1958WD-40 MUP
makes its first
appearance on
store shelves in
San Diego
1953Rocket Chemical
Company
Incorporated
1970The name
WD-40
Company
was
adopted
1973WD-40 Company
goes public on
the NASDAQ;
stock increases
61% on first
trading day
1993MUP sales
reach $100
million in
annual
sales
1995 - 2000Acquired 3-in-ONE,
Lava, Solvol, 2000
Flushes, X-14,
Carpet Fresh, and
Spot Shot
2008For the first time
over 50% of net
sales generated
outside of the
United States
In 2016…Over 63 years of growth,
flagship WD-40 brand is more
popular than ever, Company
achieved over $378 million in
net sales in FY2015 and its
products are available in over
countries and territories
worldwide
2011Introduced WD-
40 Specialist
product line
1953 - 1958WD-40 MUP is used by
aerospace industry and
on the SM-65 Atlas
missile
1997Garry
Ridge
named
president
and CEO
6
Our Brands
WD-40 Multi-Use Product
WD-40 Specialist
3-IN-ONE
WD -40 Bike
GT85
MAINTENANCE
PRODUCTS
• Currently make up over 85% of net
sales
• Core strategic focus and growth engine
X-14
2000 Flushes
Carpet Fresh
No Vac
Spot Shot
1001
Lava
Solvol
HOMECARE AND
CLEANING PRODUCTS
• Available in niche segments and
geographies
• Generate positive cash flows but are not
core strategic focus
7
People - Products – Passion – Purpose
SERVANT LEADERSHIP WITH AN EDGE
© 2010 The Learning Moment Inc.
All rights reserved. Do not duplicate.
thelearningmoment.net
Results in a tribal culture
that values:
•Caring
•Candor
•Accountability
•Responsibility
8
Our Purpose
Vision Create positive lasting memories by solving problems in workshops, factories and
homes around the world.
Values • We value doing the right thing.
• We value creating positive lasting memories in all our relationships.
• We value making it better than it is today.
• We value succeeding as a tribe while excelling as individuals.
• We value owning it and passionately acting on it.
• We value sustaining the WD-40 Company economy.
CIRCLE OF COMPETENCE
10
“You have to stick within what I call your circle
of competence. You have to know what you
understand and what you don’t understand.
It’s not terribly important how big the circle is.
But it’s terribly important that you know where
the perimeter is.”
– Warren Buffett
11
WD-40 Company Circle of Competence
Culture
Global
Distribution
End Users
12
The Power of the Shield
13
Culture: Tribe Member Engagement Survey
Question Result
Average of all questions 93.7
I understand how my job contributes to achieving WD-40 Company’s goals. 99.7
I know what results are expected of me. 98.6
I love to tell people that I work for WD-40 Company. 97.6
I am clear on the company’s goals. 97.1
I respect my supervisor. 97.1
I feel my opinions and values are a good fit with the WD-40 Company culture. 96.8
WD-40 encourages employees to continually improve in their job, to “make it better” 96.3
I am excited about WD-40 Company’s future direction. 95.6
“At WD-40 Company I am inspired by our tribal culture and
the ability I have to make a difference every day!”
- Erin Bala, Brand Manager, WD-40 Specialist
14
Global: Infrastructure
Our products are currently available in 176 countries and territories worldwide
and in over 62 unique trade channels
The Company’s unique infrastructure enables it to take its products to more places,
with more people, who have more uses, more frequently.
• HVAC
• Aircraft Supplies
• Automotive
• Bicycle
• Body Shop
• Building Supplies
• Chemicals
• Farming Equipment
• Electrical Equipment
• Industrial Supplies
• Lawn and Garden
• Grocery
• Big Box
• Hardware
• Janitorial
• Locksmith
• Marine
• Motorcycle
• Office Supplies
• Plumbing
• Refrigeration
• Sporting Goods
• Appliance Repair
• Welding Equipment
• Drug Store
15
Distribution: Unique Strategy
One brand, one
trade channel,
multiple products
“ACME”
TOOLS
Multiple brands, multiple
trade channels, multiple
products
16
End Users
Maintenance, Repair & Overhaul
Construction & Skilled Trades
At-Home Passionate Hobbyist
At-Home Non-Enthusiast
• 8 out of 10 U.S. households have at least one can of WD-40 Multi-Use Product in their home
• The majority of sales of maintenance products come from end-users in workshops and factories
Annual usage amounts vary dramatically among our end users
$70.00 per year $0.40 per year
STRATEGIC INITIATIVES
18
1. Grow WD-40 Multi-Use Product
Maximize the WD-40 product line through geographic
expansion and increased market penetration. More places,
more people, more uses, more frequently.
Double our WD-40 Multi-Use Product
net sales over the next 10 years
2. Grow the WD-40 Specialist Product Line
Leverage the WD-40 brand to grow specialist by
developing new products and product categories within
identified geographies and platforms.
Grow WD-40 Specialist to $125 million
in net sales over the next 10 years
3. Broaden Product and Revenue Base
Leverage the recognized strengths of WD-40 Company to
derive revenue from new sources and brands.
Continue to develop or acquire
maintenance products that fit well with
our unique multi-channel distribution
network
4. Attract, Develop and Retain Outstanding Tribe
Members
Succeed as a tribe while excelling as individuals.
Grow employee engagement to greater
than 95 percent
5. Operational Excellence
Continuous improvement by optimizing resources,
systems and processes as well as rigorous commitment to
quality assurance, regulatory compliance, and intellectual
property protection.
Execute the 55/30/25 business model
while safeguarding the “Power of the
Shield”
Strategic Initiatives
Target
19
Our Latest Innovation
• Patented new delivery system currently included on select WD-40 Multi-Use Product
SKUs in the United States
• Targeted at high volume end users - intended to make the product easier to use in
workshops and factories
• On store shelves now - though it’s still early, we’ve seen encouraging point of sale
results so far and end-user reviews have been positive
20
Category Leadership
Make it EASY TO BUY by maximizing store placement and shelf space
21
Focused Leverage of the Trust in the Shield
22
WD-40 Specialist Product Line Examples
Our first line of specialty products worthy of wearing the WD-40 Shield
General Maintenance
Motor Bike Lawn and Garden
23
Growth Expectations for Maintenance Products
FY 2006 FY 2015 FY 2025(1)
$191M $291M ~$600M(1)
$19M
~$125M(1)
WD-40 Multi-Use Product Net Sales WD-40 Specialist Net Sales
1) Growth expectations for maintenance product net sales are based on the Company's expectations, beliefs and forecasts. They are expressed in good faith and are believed by
the Company to have a reasonable basis, but there can be no assurance that they will be achieved or accomplished.
Note: Historical revenue numbers reflect net sales as reported and have not been adjusted for changes in foreign currency exchange rates.
INVESTMENT PERFORMANCE
25
$80
$100
$120
$140
$160
$180
$200
$220
$240
$260
$280
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Value of $100 Invested on August 31, 2010
WD-40 Company S&P 500 Russell 2000
5-Year Comparison of Total Stockholder Return
*$100 invested on 8/31/10 in stock or index, including reinvestment of dividends.
26
What drove the performance?
EFFICIENT BUSINESS MODEL WITH
ASSET-LIGHT STRATEGY
• Average annual CAPEX needs of ~1% to 2%
of net sales
• Outsourced manufacturing and distribution
• Sales per employee of $0.87M in FY15
FOCUSED ON CREATING VALUE
• High Returns on Invested Capital
• ROIC was 23.5% in FY12, 27.7% in
FY13, 28.2% in FY14 and 27.2% in
FY15
• Employee earned incentives tied to EBITDA
growth
SOLID FINANCIAL FOUNDATION
• Strong balance sheet
• Predictable free cash flow
• Strong liquidity & access to capital
We invest in brands and people, not factories and warehouses
GROWTH PLATFORM SUPPORTED BY
STRONG BRANDS
• Brand portfolio includes many well-known
brands and products
• Global diversification reduces risk
• Long runway of growth ahead
27
$182$197
$211$223
$256$271 $281
$317 $328 $333
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Strong Brands with a Global Reach
1) FY15 presented as reported, all prior years presented on a constant currency basis using FY15 foreign currency exchange rates.
Maintenance product sales continued to increase over the last ten years
despite various macroeconomic challenges
Global
financial
crisis
Largest ever
turndown in
U.S. housing
Largest GDP
decline in
Eurozone
history
Largest drop
in U.S. auto
production
Political and
economic
instability in
Europe
Maintenance Product Sales (In millions)
28
Global Maintenance Product Sales
1) In millions – all years at FY15 foreign currency exchange rates
MPMP Sales by Segment
$-
$20
$40
$60
$80
$100
$120
$140
$160
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Americas EMEA AsiaPac
THE 55/30/25 RULE
30
The New 55/30/25 Rule
Gross Margin
55% of net sales55
Cost of Doing Business(1)
30% of net sales- 30Maintenance CAPES & Regular Dividends
Maintenance CAPEX of between $2M to $4M per fiscal year
Annual dividends targeted at ~50% of earnings or ~$20M= 25 EBITDA(1)
25% of net sales
1) See appendix for descriptions and reconciliations of these non-GAAP measures.
WD-40 Company’s business is guided by the newly revised 55/30/25 Rule – we target gross margin of
55%, cost of doing business of 30%, and an EBITDA of 25%
31
The “55” - Gross Margin
• FY 2015 the Company achieved its highest annual
gross margin in over a decade at 53% compared
to 52% in FY 2014
• Continually focus on driving gross margin
improvement
– New product development, innovations and
reformulations
– Operational efficiencies
– Product mix and market mix
– Pricing adjustments as needed to offset input cost
increases
Gross margin can be impacted positively and negatively by things not under the Company’s
control like changes in foreign currency exchange rates and changes in input costs
FY15
53%
FY14
52%
FY13
51%
32
What Makes Up the Cost of a Can?
Approximate Cost Breakdown of a Typical Can of
WD-40 MUP Manufactured in the United States
Data as of October 2015. Represents average input costs over 6-month period of a typical 12 ounce can of WD-40 Multi-Use Product manufactured in the United States.
Current manufacturing and input costs typically take approximately 90-120 days to be reflected in the Company’s consolidated statement of operations due to production and
inventory life cycles.
We estimate only
a small portion of
the input costs
associated with
petroleum-
based specialty
chemicals
directly correlate
to the price of a
barrel of crude oil
Petroleum-Based
Specialty Chemicals
Manufacturing Fees
Can
Plastic
Corrugate
34%
12%
30%
21%
3%
33
The “30” – Cost of Doing Business
• FY 2015 cost of doing business was at 34% of
net sales flat compared to FY 2014
• In FY 2015 cost of doing business came from
three primary areas:
– People
– Marketing, advertising and promotion
– Freight costs to get products to customers
• Additional investments in research and
development, brand protection, and regulatory
and quality assurance remain a high priority
Revenue growth is the most important factor in achieving the “30” target
34
55/30/25
* See appendix for descriptions and reconciliations of these non-GAAP measures.
Note: Percentages may not aggregate to EBITDA percentage due to rounding
55/30/25 Business Model Target FY15
Actuals
FY14
Actuals
FY13
Actuals
Gross Margin 55% 53% 52% 51%
Cost of Doing Business 30% 34% 34% 35%
EBITDA 25% 19% 18% 17%
CAPITAL ALLOCATION
36
Capital Allocation Strategy
Long-term Growth & Return Targets
Drive revenue and earnings growth of 6-8%
Target return on invested capital of >20%
Liquidity, Debt & Cash Objectives
Adequate liquidity to support growth strategy
Strong balance sheet & available lines of credit - cash & debt in neutral position
Maintenance CAPES & Regular Dividends
Maintenance CAPEX of between $2M to $4M per fiscal year
Annual dividends targeted at ~50% of earnings or ~$20M
Long-term Growth & Return Targets
Drive revenue and earnings growth of 6-8%
Target return on invested capital of >20%
Liquidity, Debt & Cash Objectives
Adequate liquidity to support growth strategy
Strong balance sheet & available lines of credit - cash & debt in neutral position
Maintenance CAPEX & Regular Dividends
Maintenance CAPEX of between 1% to 2% of net sales per fiscal year
Annual dividends targeted at ~50% of earnings or ~$20M per fiscal year
Excess Capital Allocated to the Highest Return Alternative
1
2
3
4
Organic Growth Initiatives Acquisitions Share Repurchases
37
Cash Returns to Stockholders
• Over $97.4 million in cash dividends paid
to shareholders over past five years
• Paid dividends without interruption for over
40 years
• Dividend increased 48% over past five
years
• Future increases expected to grow in-line
with earnings over time
• Current $75 million share repurchase plan
became effective March 1, 2015
• Provides authorization to acquire up to
$75 million of the Company’s outstanding
shares through the plan’s end date of
August 2016.
• Company repurchased 386,000 shares at
a total cost of $30 million during FY15
• Company repurchased over $185 million
in shares over last five years
Share Repurchases
Dividends
$1.08 $1.14 $1.22
$1.34 $1.48
50%52%
48%47%
49%
FY11 FY12 FY13 FY14 FY15
FY Dividend per Share Dividend Payout Ratio
$41,399 $39,840
$31,437
$42,773
$30,259
FY11 FY12 FY13 FY14 FY15
Share Repurchases
FINANCIAL RESULTS
39
FY15 FY14 % Change
Net Sales 378.2$ 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%
Fiscal Year 2015 Results
• Top-line sales growth was challenged in fiscal year 2015
• When you take both translation and transaction exposure into
consideration, the impacts of foreign currency exchange rates
reduced our total net sales by approximately $16 million
40
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
Foreign Currency Impact
Translation
Impact
Transaction
Impact
Subsidiary - FCUK – GBP
CANADA- CAD
AUSTRALIA- AUD
CHINA- CNY
Subsidiary- non FCUK – USD & Euro
41
Foreign Currency Exchange Impact
In FY15
changes in
foreign
currency
exchange
rates reduced
net sales by
~$16M
$378
$389$394
Reported Net Sales Translation Impact Transaction Impact
Translation Impact(Functional Currency)
Translation and
Transaction ImpactReporting Currency
FY 2015 Net Sales(In millions)
(constant currency) (constant currency plus transaction impacts)(as reported)
FY15 net sales at FY15 FX rates FY15 net sales at FY14 FX rates FY15 net sales at FY14 FX rates
FINAL THOUGHTS
43
What Did You Hear From Us Today?
• Long history with simple and easy to understand business model
• Clear understanding of our circle of competence
• Long runway for growth driven by our strategic initiatives
• Superior returns on invested capital (ROIC)
• Solid business model which aligns organization behind stretch targets
(55-30-25)
• Significant cash flow generation and a clear capital allocation strategy
which returns excess capital to stockholders
• Sales growth was challenged in FY 2015 due to the impacts of foreign
currency exchange rates
• EPS growth was 6 percent in FY 2015
THANK YOU
APPENDIX
46
FY15 FY14 % Change(1)
Selling, general and administrative 108.9$ 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
($ 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.
47
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
($ 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.
48
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
Financial Results(As reported)
Financial Results(Constant currency basis)
*FY15 results translated at FY14 foreign currency exchange rates
($ in millions; except % change and EPS)
49
Non-GAAP Reconciliation – Fiscal Year
(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
Related Documents
