WD-40 Company — FY2021 Form 10-K Summary
Business context and reporting period
WD-40 Company markets maintenance products, led by WD-40 Multi-Use Product and WD-40 Specialist, and homecare and cleaning products in more than 176 countries. This annual report covers the fiscal year ended August 31, 2021; it is not a report for a standalone calendar fourth quarter.
Key financial metrics
Amounts are in U.S. dollars; figures in millions unless stated otherwise.
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $488.1 | $408.5 | +19% (+15% constant currency) |
| Gross profit / gross margin | $263.7 / 54.0% | $223.0 / 54.6% | Profit +18%; margin down 0.6 percentage points |
| Operating expenses | $174.9 | $145.8 | +20% |
| Income from operations | $88.8 | $77.2 | +15% |
| Net income | $70.2 | $60.7 | +16% |
| Diluted earnings per share | $5.09 | $4.40 | +16% |
| Cash provided by operations | $84.7 | $72.7 | +$12.0 |
| Capital expenditures | $15.1 | $19.3 | Down $4.2 |
| Cash and cash equivalents, year-end | $86.0 | $56.5 | +$29.5 |
| Total borrowings, year-end | $115.7 | $113.9 | +$1.8 |
Maintenance products generated $448.8 million in sales, up 21%; homecare and cleaning products generated $39.3 million, up 1%. By segment, Americas sales rose 7% to $214.6 million, EMEA rose 33% to $208.3 million, and Asia-Pacific rose 26% to $65.3 million. Foreign exchange added $19.7 million to reported sales and $3.7 million to net income compared with FY2020.
Year-end current assets were $241.2 million and current liabilities were $85.9 million. The company reported $46.5 million drawn on its $150 million revolving credit facility and $69.2 million of fixed-rate senior notes; $114.9 million of borrowings were classified as long-term. It reported compliance with debt covenants and stated that available cash, operating cash flow and credit access were expected to fund operating needs, capital spending, dividends and other planned uses.
Material changes versus FY2020
- Sales and earnings rebounded, with growth across all three geographic segments. Management attributed higher demand in part to pandemic-era renovation and maintenance activity, market recoveries and e-commerce growth.
- Gross margin declined to 54.0%. Supply-chain constraints, higher manufacturing, freight and warehousing costs, and unfavorable currency effects outweighed some favorable input-cost changes and pricing actions.
- SG&A increased by $23.5 million, largely from employee incentives and stock compensation, foreign exchange, and freight and information-system costs. Advertising and sales promotion expense rose by $6.4 million to $28.0 million.
- Operating cash flow increased, while cash at year-end rose to $86.0 million. The company issued $52 million of senior notes and repaid $50 million of U.S. revolving borrowings during the year; the remaining revolving-facility balance was denominated in euros and pounds sterling.
Outlook, commentary, risks and unusual items
- No quantified FY2022 earnings or sales guidance is provided in the supplied filing text. Management expects pandemic-related supply-chain and distribution costs to pressure cost of goods sold and gross margin in the near term. It also cautioned that demand could ease if elevated renovation and maintenance activity subsides.
- Key risks include aerosol production capacity and raw-material shortages, freight constraints and cost inflation, dependence on third-party manufacturers and suppliers, foreign-exchange exposure, commodity-price volatility, competition, and uncertainty over post-pandemic consumer demand. Approximately 66% of FY2021 sales were outside the United States.
- The company’s long-term 55/30/25 model targets gross margin of at least 55%, cost of doing business of 30% of sales, and EBITDA above 25% of sales. FY2021 results were 54%, 35% and 20%, respectively; these are management targets, not near-term guidance.
- The board raised the quarterly dividend 7%, from $0.67 to $0.72 per share, in March 2021. A new share repurchase authorization of up to $75 million through August 31, 2023 was approved after year-end; no repurchases occurred in FY2021.
- In Indonesia, a claimant sought more than $25 million in damages in a trademark dispute. WD-40 said it would vigorously defend the case, considered an unfavorable outcome not probable, and could not estimate a possible loss. A separate action to cancel the disputed trademark was granted in August 2021; the claimant appealed in September.
- Unrecognized tax benefits were approximately $9.3 million, excluding related interest and penalties. Management estimated up to $0.3 million could be affected by examinations or expiring statutes within 12 months.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The audit identified cooperative-marketing accruals as a critical audit matter: the year-end rebate and other discount liability was $8.4 million, and $28.7 million of such discounts reduced FY2021 sales.
Important facts for investors to verify
- Whether pandemic-related maintenance demand and elevated sales levels persist, particularly in the Americas and EMEA.
- Whether aerosol capacity, freight and input-cost pressures ease, and how they affect gross margin and the effectiveness of pricing increases.
- How the $75 million repurchase authorization is used alongside dividends, debt obligations and liquidity needs.
- Developments in the Indonesian trademark litigation and any change to the company’s loss assessment.
- Changes in foreign exchange exposure, tax uncertainties and the $9.3 million unrecognized tax-benefit balance.