WD-40 pany(WDFC)2024-10-21 20:21Sales Performance - Consolidated net sales increased by $53.3 million, or 10%, for fiscal year 2024 compared to the prior fiscal year, with sales volume contributing $41.3 million and average selling price contributing $4.2 million[124] - WD-40 Multi-Use Product sales increased by $45.3 million, or 11%, for fiscal year 2024 compared to the prior fiscal year[127] - WD-40 Specialist sales increased by $7.2 million, or 11%, for fiscal year 2024 compared to the prior fiscal year[127] - EIMEA segment net sales increased by $30.2 million, or 16%, for fiscal year 2024 compared to the prior fiscal year[128] - Americas segment net sales increased by $15.1 million, or 6%, for fiscal year 2024 compared to the prior fiscal year[128] - Latin America sales of WD-40 Multi-Use Product increased by $14.8 million, or 40%, primarily due to the transition to a direct marketing model in Brazil[132] - EIMEA segment net sales increased by $30.2 million (16%) to $221.0 million, driven by a 17% growth in maintenance products, with WD-40 Multi-Use Product sales up $25.5 million (18%) and WD-40 Specialist sales up $3.8 million (14%)[135][138] - Asia-Pacific segment net sales increased by $7.9 million (10%) to $87.6 million, with WD-40 Multi-Use Product sales up $5.7 million (9%) and WD-40 Specialist sales up $1.5 million (17%)[141][144] - Constant currency net sales in EIMEA increased by 12% ($22.2 million) and in Asia-Pacific by 11% ($9.1 million), reflecting underlying growth excluding currency impacts[135][141] - Net sales for fiscal year 2024 were $590.557 million, up from $537.255 million in 2023 and $518.820 million in 2022[177] Profitability and Margins - Gross profit as a percentage of net sales increased to 53.4% for fiscal year 2024 compared to 51.0% for the prior fiscal year[125] - Consolidated net income increased by $3.7 million, or 6%, for fiscal year 2024 compared to the prior fiscal year, with foreign currency exchange rates contributing $1.5 million[125] - Diluted earnings per common share for fiscal year 2024 were $5.11 versus $4.83 in the prior fiscal year[125] - Gross margin increased by 240 basis points to 53.4%, driven by favorable sales mix (130 bps), lower specialty chemical costs (80 bps), and reduced warehousing/distribution costs (80 bps)[149][151] - Americas operating income increased by 7% to $65.0 million in 2024, driven by a $15.1 million increase in sales and higher gross margin, which rose from 48.9% to 50.9%[159] - EIMEA operating income grew by 19% to $46.8 million in 2024, supported by a $30.2 million increase in sales and a gross margin improvement from 52.2% to 54.7%[161] - Asia-Pacific operating income rose by 15% to $29.7 million in 2024, with gross margin increasing from 55.3% to 58.0% due to favorable sales and market mix changes[162] - Net income for 2024 was $69.6 million, or $5.11 per diluted share, compared to $66.0 million, or $4.83 per diluted share, in 2023[169] - Gross margin improved to 53% in 2024, up from 51% in 2023, reflecting progress toward the company's long-term target of 55%[174] - Adjusted EBITDA as a percentage of net sales remained stable at 18% in both 2024 and 2023, consistent with the company's long-term target of 25%[174] - Adjusted EBITDA for fiscal year 2024 was $105.998 million, an increase from $98.697 million in 2023 and $95.042 million in 2022[177] - Adjusted EBITDA as a percentage of net sales remained consistent at 18% for fiscal years 2024, 2023, and 2022[177] Expenses and Costs - SG&A expenses increased by $29.2 million (19%) to $183.9 million, primarily due to higher employee-related costs ($16.1 million) and professional services fees ($6.1 million)[152][153] - Research and development investment increased by $1.8 million to $8.0 million, focused on sustainability, innovation, and product renovation[154] - A&P expenses increased to $33.9 million in 2024, up 18% from $28.8 million in 2023, driven by higher promotional programs and marketing support, particularly in the Americas and EIMEA segments[156][157] - Total expenditure on A&P activities reached $66.6 million in 2024, representing 11.2% of net sales, compared to $57.9 million (10.8% of net sales) in 2023[157] - Unallocated corporate expenses increased by 24% to $45.2 million in 2024, primarily due to higher employee-related costs and ERP system implementation expenses[163] - Cost of doing business as a percentage of net sales increased to 36% in 2024, compared to 33% in 2023, driven by higher operating expenses[176] Cash Flow and Financial Position - Net cash provided by operating activities decreased to $92.034 million in 2024 from $98.391 million in 2023[183] - Net cash used in investing activities increased to $9.735 million in 2024, primarily due to the purchase of the Brazilian distributor Theron[187] - Net cash used in financing activities decreased to $83.936 million in 2024, driven by lower net repayments on the revolving credit facility[187] - The company had $46.7 million in cash and cash equivalents as of August 31, 2024[181] - The 2023 Repurchase Plan authorized the company to acquire up to $50.0 million of outstanding shares, with $41.9 million remaining available as of August 31, 2024[182] - The company increased its regular quarterly cash dividend by 6% to $0.88 per share in December 2023[191] Debt and Interest Rates - The company's consolidated leverage ratio cannot exceed 3.5:1, and the consolidated interest coverage ratio cannot be less than 3:1[181] - The company has a $27.8 million outstanding balance on its $125.0 million revolving credit facility as of August 31, 2024, with interest rates based on SOFR, SONIA, and EURIBOR[207] - A one percentage point increase in variable interest rates would result in a pretax reduction of earnings and cash flows by approximately $0.3 million annually[207] - The weighted average cost of short-term debt, including fixed and variable rate borrowings, was 6.1% as of August 31, 2024[207] Foreign Currency and Hedging - Foreign currency exchange rates favorably impacted EIMEA net sales by $8.1 million but unfavorably impacted Asia-Pacific net sales by $1.1 million[140][145] - The company's U.K. subsidiary uses foreign currency forward contracts to manage exposure to net asset balances held in non-functional currencies[204] - The company does not engage in hedging activities to mitigate foreign currency translation risk, which affects sales, expenses, profits, assets, and liabilities[203] - Unremitted earnings of foreign subsidiaries are generally not considered indefinitely reinvested, except for specific statutory remittance restrictions in China[201] - The company's international subsidiaries operate in functional currencies other than the U.S. Dollar, exposing it to foreign currency risk during financial statement consolidation[203] Product and Market Performance - Homecare and cleaning product sales in the Americas segment decreased by $1.6 million, or 10%, due to reduced demand in the U.S.[134] - WD-40 Multi-Use Product sales in EIMEA benefited from volume recovery and price increases, with significant growth in France ($5.2 million), DACH ($5.0 million), and Iberia ($2.1 million)[138][139] - Asia-Pacific sales growth was driven by successful promotional programs in Indonesia, Korea, and Taiwan ($4.3 million) and increased sales volume in China ($1.6 million)[144][145] - The company expanded its direct market presence in Brazil and implemented a new ERP system in the U.S., contributing to increased professional services costs[153] Commodity and Raw Material Risks - The company does not hedge crude oil price volatility, which impacts the cost of specialty chemicals and aerosol cans, potentially affecting gross margins and operating results[206]