WD-40 Co (WDFC) 2011 Q4 法說會逐字稿

Good day and welcome to this WD-40 Company fourth-quarter 2011 earnings release conference call.

Today's call is being recorded.

At this time, I'd like to turn the call over to the Vice President of Corporate and Investor Relations for WD-40 Company, Ms.

Maria Mitchell.

Please go ahead.

Good afternoon, and thank you for joining us for our fourth quarter and fiscal year 2011 earnings call.

Today, we are pleased to have Garry Ridge, President and CEO, and Jay Rembolt, Vice President and Chief Financial Officer.

This conference call 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 forward-looking statements, including the impact of commodity prices; impact of changes in foreign currency exchange rates; the impact of introducing new products; and the fluctuating global 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.

Readers are urged to carefully review these and other documents, and to stay up to date with our most recent Company developments provided in the Investor Relations section of our website at wd40company.com.

Our 2011 annual shareholder meeting is scheduled for Tuesday, December 13, 2011, and will be webcast.

Our first-quarter earnings conference call is scheduled for Monday, January 9, 2012.

And now over to Garry Ridge.

Thank you, Maria.

Good day and thank you for joining us for today's conference call.

Today, we reported net sales of $90.7 million for the fourth quarter of fiscal 2011, an increase of 12% over Q4 of last fiscal year.

Year-to-date, net sales were $336.4 million, an increase of 5% versus last fiscal year.

Net income for the fourth quarter was $10.2 million compared to $6.9 million in Q4 of last fiscal year.

Diluted earnings per share for the fourth quarter were $0.61, up from $0.41 for the same period last year.

Year-to-date, net income was $36.4 million compared with $36.1 million last fiscal year.

Year-to-date, diluted earnings per share were $2.14 compared to $2.15 last fiscal year.

Fiscal year 2011 has been a year that I would describe as big and a year of pain.

It was big in that we achieved another record year of revenues growing 5% over fiscal 2010.

We experienced big growth in many international markets, and we developed new products under our flagship WD-40 brand.

We did not let the pain we experienced overshadow these accomplishments.

The big pain, of course, was higher commodity prices with reduced gross margin and net impact on earnings.

We also experienced pain in the US due to reduction in distribution of promotional activities for part of the year with a key customer.

Despite the rocky road, we prevailed and delivered a big third and fourth quarter results in fiscal 2011.

For the two years that we've been tracking our progress to our Fantastic Four initiatives, and we have been sharing it with you every step of the way.

Our first two strategic initiatives are the main drivers of our growth today, while the last two are the main drivers of our growth tomorrow.

Our first initiative, geographic expansion, was a major driver of our sales growth in fiscal 2011.

Period-over-period, total sales outside the US grew by 28% in the fourth quarter and 17% year-to-date as compared to the prior fiscal year.

As a percentage of total revenues, sales outside the US were 59% of global sales in the fourth quarter compared to 52% in the prior year.

Much of the international growth stemmed from our European and Asia-Pacific segments, which I will cover in more detail in later discussion.

Looking forward into fiscal 2012, we will be targeting new markets such as sub-Saharan Africa.

We are working to build a foundation in emerging markets to generate revenue for the future.

Our second initiative, maximizing our position in the multi-purpose maintenance products segment, also paid us dividends in this fiscal year 2011.

3-IN-ONE is a very strong brand in specific markets around the world, and we've leveraged this power by introducing new products under the line in Australia, in Spain, in Germany, and France.

Looking forward into fiscal 2012, we are evaluating similar opportunities in Latin America and Canada.

We also continue to make progress with BLUE WORKS.

We launched BLUE WORKS in certain select markets in Europe during fiscal year of 2011.

While the build is slow, it continues to move in the right direction, and has definitely strengthened our position in the channels where end users have a need for specialty products.

We have learned quite a bit in selling directly to industrial customers, and our on-the-ground research has opened our eyes to additional formulation opportunities.

We've also found opportunities to leverage formulations between BLUE WORKS and the industrial segment, and our new WD-40 Specialist line for the retail trade.

Now let's discuss our initiatives focused on tomorrow.

Our third strategic initiative is growing our business through acquisitions, joint ventures, partnerships, and licensing.

While we have yet to find an acquisition opportunity that met our criteria, we've been exploring partnerships and licensing arrangements to build product offering for our new WD-40 Specialist line.

The WD-40 Specialist line was born out of our fourth strategic initiative, the WD-40 brand exploration project.

WD-40 Specialist is a portfolio of specialty problem-solving products that bear the famous WD-40 brand trademark and yellow shield, and is aimed at the trade and doer enthusiast.

WD-40 Specialist addresses the Company's need to provide offerings under the WD-40 brand into niche channels and markets where WD-40 multi-use product cannot be used or may not be perceived as a specialty product.

Last month, we celebrated the first shipment of three products under the WD-40 Specialist line to a key customer.

The national launch for the WD-40 Specialist is scheduled for January 2012 in the US and in select markets in Europe during fiscal 2012.

The national launch is planned to have additional product offerings, and we are already looking to expand the portfolio of products for fiscal year 2013 and beyond.

That completes the update on our strategic initiatives, so let me move on to more detail of the fourth quarter and year-to-date results, starting with sales.

Multi-purpose maintenance products made up 82% of the global sales in the fourth quarter, with the category sales up 16% in Q4 and up 8% year-to-date compared to the prior fiscal year.

All three trading blocks experienced growth in multi-purpose maintenance products in Q4 versus the Q4 last period, with the Americas up 7%, Europe up 26%, and Asia-Pacific up 24%.

The sales increase in the Americas was driven by growth and promotional activities on the WD-40 brand in Latin America and Canada.

The sales increase in Europe was primarily driven by significant promotional programs in the Germanics region in the UK, as well as continuing growth of the WD-40 Smart Straw and 3-IN-ONE products throughout Europe.

Growth in the Asia-Pacific region was driven by promotional activity and increased distribution in Australia and, of course, China.

Global sales of multi-purpose maintenance products by brand were as follows -- WD-40 brand sales were up 16% in Q4 and up 8% year-to-date; sales of the 3-IN-ONE brand were up 15% in Q4 and are up 8% year-to-date; and the BLUE WORKS brand still represents less than 1% of our global sales, both in Q4 and year-to-date.

Homecare and cleaning products made up 18% of the global sales in the fourth quarter, with category sales down 1% in Q4 and 9% year-to-date.

Products out of this category include Spot Shot, 2000 Flushes, Carpet Fresh and No Vac, 1001, X-14, and then the Lava and the Solvol brands.

This category continues to represent a smaller portion of our business as per our strategic roadmap, particularly in the Americas.

By trading block, sales of homecare and cleaning products in the fourth quarter were down 9% in the Americas; up 27% in Europe; and up 34% in Asia-Pacific.

Homecare and cleaning sales in the Americas have been negatively impacted by competition, category declines, lost distribution, reduced product offerings, and the volatility of orders and promotional programs with certain customers, particularly those in the warehouse, club, and mass retail channels.

The decline in the Americas in the fourth quarter was mostly attributed to Spot Shot, which declined 20% versus the period last year.

The decline was driven by lost promotional opportunities with our customers, category declines, lost distribution, and competitive factors compared to the prior year.

However, with every dark cloud, there is a silver lining.

Our Lava soap brand grew 15% and X-14 liquids grew 46% in the fourth quarter versus the same period last year, due to new distribution.

While we made a strategic decision to focus our investment on innovation of our multi-purpose products, we are making progress on various initiatives to stabilize our homecare and cleaning products, particularly in the US market.

We anticipated launching improved formulations and other innovations of our Spot Shot brand to maintain competitiveness.

We are also leveraging our marketing resources with umbrella campaigns to cross-promote our household and homecare and cleaning products, and maintain profitability of the complete portfolio.

Sales growth of homecare and cleaning products in Australia -- sorry, in Asia-Pacific region was driven by No Vac and Solvol sales in Australia.

Sales of the No Vac brand increased 31% in Q4 and were up 23% year-to-date.

Sales of Solvol brand of soap increased 49% in Q4 and 21% year-to-date.

In Europe, sales of the 1001 brand increased 27% in Q4 and 9% year-to-date.

Growth in Australia and Europe were driven by promotional activities, new distribution, as well as the favorable impact in changes in foreign currency exchange rates.

Now let's talk about the results by segment.

Global sales were up 12% in the fourth quarter and 5% year-to-date.

We continue to experience healthy growth in our international segment, driven by increased distribution, the ongoing growth of our base business, and our promotional activities.

In addition to the organic growth, our global sales benefited from price increases and favorable changes in foreign currency exchange rates.

While we implemented increases country by country at various times during the fiscal year, we did not realize the full benefit of price increases in some of our markets, due to price protection of promotions and annual contracts with major customers.

As a result, our gross margin was negatively impacted at the lower level and the flowthrough of price increases did not offset the higher input costs.

The impact from changes in foreign currency exchange rates was favorable and our Q4 fiscal year 2011 results translated at last year's fourth-quarter exchange rates, or what we term as constant currency basis, would have produced net sales of $87 million versus the actual of $90.7 million.

Year-to-date, net sales in constant currency would have been $330.8 million versus the actual of $336.4 million.

Now more details on some of the geographic segments -- firstly, the Americas.

Sales in the Americas segment increased 2% in the fourth quarter and were down 6% year-to-date.

The segment accounted for 51% of global sales in the fourth quarter versus 56% in the prior-year period.

In the US, sales were down 4% in the fourth quarter and down 9% year-to-date.

It was a tough year in the US market.

WD-40 sales in the US were tempered earlier in the fiscal year due to lost distribution and lost promotional activities with a key customer.

Sales were further impacted in the back half of the year by the announcement of price rises.

The US also continued to experience challenges with homecare and cleaning products, as previously mentioned.

The Spot Shot, 2000 Flushes, and Carpet Fresh brands had the largest negative impact to the US results in both the fourth quarter and year-to-date.

Despite these challenges, the WD-40 brand sales in the US were flat in the fourth quarter and in line with expectations, given our heavy promotional period in the third quarter.

We made progress in putting the WD-40 brand back into a growth mode for fiscal 2012, as we recently secured distribution previously lost with a major customer, and also introduced WD-40 Specialist to several customers, with distribution targeted for the national launch in January 2012.

We are very excited about the outlook for WD-40 and WD-40 Specialist.

Sales in Latin America increased 32% in the fourth quarter and 13% year-to-date, with most of the growth coming from the WD-40 brand.

Sales in Canada increased 42% in the fourth quarter and 14% year-to-date, driven by high sales of both multi-purpose maintenance products and homecare and cleaning products.

Now let's take a look at Europe.

Sales in the Europe segment were up 26% in the fourth quarter and are up 14% year-to-date as compared to the prior fiscal year period.

This segment accounted for 38% of global sales in Q4 compared to 34% in the prior fiscal year period.

European sales in the fourth quarter benefited from changes in foreign currency rates, as sales on a constant currency basis would have produced net sales of $32.3 million versus $34.7 million.

Year-to-date sales on a constant currency basis would have produced net sales of $123.1 million versus the actual of $125.4 million.

We sell into Europe through a combination of direct markets in certain countries as well as through exclusive marketing distributors in others.

We have a direct sales force in the UK, Italy, France, and Iberia, which includes Spain and Portugal, and the markets we term as the Germanics region, which include Germany, Austria, Denmark, Holland, Switzerland, and Belgium.

Overall, we are seeing unit growth in our European direct markets due to the continued growth of the WD-40 Smart Straw product, our increased focusing on the industrial channel, and the ongoing growth of our base business.

The direct markets also benefited from a higher level of promotional activities.

Sales throughout our Europe direct markets increased 33% in Q4 and were up 13% year-to-date.

We sell through exclusive, independent marketing distributors in eastern and northern Europe, and the Middle East and Africa, with virtually all sales consisting of the WD-40 brand.

Sales in our European distributor markets grew 12% in the fourth quarter and 14% year-to-date.

Growth has been driven by northern and eastern Europe, with minimal growth in the Middle East as a result of unstable economic conditions.

Now let's go down to Asia-Pacific.

Sales in the Asia-Pacific segment were up 25% in the fourth quarter and are up 31% year-to-date.

This segment accounted for 11% of global sales in Q4, up from 10% in the prior fiscal year period.

Asia-Pacific sales in the fourth quarter benefited from changes in foreign currency exchange rates, as sales on a constant currency basis would have produced net sales of $8.7 million versus $9.6 million.

Year-to-date sales on a constant currency basis would have been $33.8 million versus $41.1 million.

Sales in Australia increased 57% in Q4 and 32% year-to-date compared to the prior fiscal year period.

There was a favorable impact from changes in foreign currency exchange rates.

On a constant currency basis, the increase would have been 27% in Q4 and they were up 15% year-to-date.

The sales growth was attributed to the improved economic conditions, promotional activities, new distribution, and the ongoing growth of our base business.

We believe our Tribe's successful introduction of category management of the multi-purpose products in Australia also contributed to the growth.

China continues to be a growth engine for us with growth of 24% in the fourth quarter and 46% growth year-to-date.

We benefited from ongoing growth of our base business and significant promotional activities aimed at building a user awareness and distribution.

We anticipated that our investment in new Tribe members and market research in China during the fourth quarter will enable us to further penetrate and grow the market.

While WD-40 brand is primarily sold in industrial markets in China, we are working to build awareness and distribute our products in other trade channels, and reach the Chinese customers.

Sales throughout the rest of Asia decreased 8% in Q4 but they grew 24% year-to-date.

The decrease in Q4 was due to phasing of promotions.

The 24% growth for the fiscal year was due to continuing growth of WD-40 products throughout the -- our distributor markets, including Indonesia, the Philippines, and Taiwan.

I am going to take a breather now and I'll pass over to Jay, who will review the financials and our progress towards our 50/30/20 measures.

Over to you, Jay.

Garry, thanks.

In addition to the information represented on this call, we suggest that you also review our Form 10-K, which will be filed this Thursday.

I will continue on now with the rest of the financials.

First, looking at our 50/30/20 rule.

As you may remember, the 50/30/20 rule is a set of financial measures we use to track our business.

The 50 represents gross margin, which we target to be at or above 50% of net sales.

The 30 represents our cost of doing business, which is our total operating expenses excluding depreciation and amortization.

Our target is 30% or less.

And finally, the 20 represents EBITDA.

If our gross margin is at or above our 50% and our cost of business is 30% or less, our EBITDA will be at or above our targeted 20% of net sales.

EBITDA is earnings before interest, taxes, depreciation and amortization.

The descriptions and reconciliations of these non-GAAP measures are available in our 10-K and our investor presentation.

First, a look at our 50 -- our gross margin.

Gross margin in the fourth quarter was 48.2% compared to the 50.7% in the prior fiscal year period.

The decrease of 250 basis points was primarily attributable to the higher cost of raw materials and other increases in manufacturing costs, which were partially offset by the positive impact from price increases and slightly lower trade discounts.

Our input costs had a large effect.

We experienced a net unfavorable impact of 190 basis points from petroleum-based materials and aerosol cans in the fourth quarter.

Due to the inventory -- our inventory cycles, we generally experience a quarter delay for changes in these input costs to flow through to our cost of goods sold.

The fourth quarter had the largest impact from petroleum-based materials, driven by the peak in oil prices that occurred during our third fiscal year quarter.

We also experienced the full flowthrough of higher aerosol can costs that were announced earlier in fiscal 2011.

In the fourth quarter, we also experienced higher raw material costs related to our homecare and cleaning products, as well as higher manufacturing costs in certain segments.

Combined, these negatively impacted our gross margin by 80 basis points.

Sales price increases and slightly lower selling discounts favorably impacted our gross margin by 120 basis points in the quarter versus the prior-year period.

Our price increases were staggered in the fiscal year and implemented country-by-country to help offset the impact of rising input costs.

While these price increases were implemented in the US and in a few markets in Europe, during the fourth quarter, we didn't experience the full impact due to the price protection and full calendar year contracts with certain customers that Garry had talked about earlier.

Year-to-date, sales price increases and lower discounts combined favorably to impact our gross margin by 80 basis points versus the prior-year.

All other impacts combined negatively impact our gross margin by 100 basis points.

And these include the following -- changes in sales mix negatively impacted our margin by 50 basis points, primarily attributed to heavy promotional activities and sales mix in our European segment.

We also continued to experience unfavorable impact from foreign currency exchange rates within our Europe segment, which negatively impacted our gross margin by an additional 30 basis points.

Cost of goods are sourced in pounds sterling, while revenues are generated in euros, pounds sterling, as well as the US dollar.

Period to period, the value of the euro to the sterling deteriorated, causing revenues from euro-based countries to be worth less in pounds sterling, and thus eroding the gross margin in parts of our European segment.

All other miscellaneous impacts combined to negatively impact our gross margin by 20 basis points.

The themes discussed for the fourth quarter also apply to our year-to-date results.

Gross margin for the fiscal year 2011 was at our threshold of 50% compared to the 51.4% we achieved in the prior fiscal year.

The decrease of 140 basis points in gross margin was attributable to the higher raw material and manufacturing costs, while some were partially offset by the positive impact from sales price increases and lower promotional trade discounts.

Well, that completes the gross margin.

Now on to the 30, our cost of doing business.

In the fourth quarter, the cost of doing business was 30% of net sales compared to 37% in Q4 of the prior fiscal year.

Our goal is to have the cost of doing business to be at or below 30%.

The decrease in cost of doing business percentage in Q4 reflects lower operating expenses on higher net sales period versus period.

SG&A expense in Q4 was $21.4 million versus $24.1 million in the prior fiscal year quarter.

As a percentage of net sales, it was 23.6% in Q4 versus 29.9% in the prior year.

The decrease in SG&A expense was primarily due to lower employee-related costs stemming from lower bonus expense compared to the prior-year period.

The lower bonus expense was due to having fewer segments achieve the sales and profit performance metrics required to trigger the payout of bonuses.

Lower bonus expense was partially offset by higher compensation costs associated with annual merit increases as well as higher staffing levels.

We also experienced higher costs for professional services, legal fees, increased freight expenses, and the unfavorable impact of foreign currency exchange rates period to period.

For the fiscal year, SG&A expense was $87.3 million and flat to the prior fiscal year.

As a percentage of net sales, SG&A expense was 26% year-to-date versus 27.2% in the prior year.

The themes discussed for the fourth quarter also apply to the overall fiscal year.

Increased expenses within certain areas of SG&A were fully offset by decreases in other areas, primarily bonus expense.

We experienced higher employee-related costs of $2.3 million due to higher staffing levels and annual merit increases.

Other costs associated with running our business increased by $3.9 million, driven by higher costs of professional services, legal fees, freight, travel and meeting expenses, and office overhead.

Changes in foreign currency exchange rates further increased SG&A by another $1.4 million, or a total increase in SG&A of $7.6 million.

However, these increases were fully offset by lower bonus expense of $7.6 million compared to the prior year.

Advertising and sales promotional expense in Q4 increased to $6.6 million compared to the $5.8 million in the prior year.

As a percentage of sales, A&P investment was 7.2% in both periods.

The increase in advertising and sales promotional expenses was primarily due to market research and a higher level of activities in our direct market in China, period versus period.

Changes in foreign currency exchange rates also contribute to the increase.

Year-to-date advertising and sales promotion expense increased $3 million compared to the prior year.

As a percentage of sales, it increased to 7.5% for the year-to-date period from the 6.9% in the prior year.

The increase in advertising and sales expense was primarily due to a higher level of advertising and promotional activities in our Europe and our Asia-Pacific segments.

Changes in foreign currency exchange rates contributed to the increase year-to-year as well.

Amortization of intangible assets was $0.6 million in Q4 compared to $0.2 million in the prior-year period.

The increase in amortization is related to our decision to change our 2000 Flushes, Spot Shot, and 1001 trade names from indefinite-lived intangible assets to definite-lived intangible assets.

The change was effective February 28, 2011, and amortization of these three trade names began on March 1, 2011.

The prior-year quarter only included amortization of the Carpet Fresh and X-14 trade names and the customer list associated with the brand 1001.

Year-to-date, amortization was $1.5 million compared to $0.7 million in the prior fiscal year period, the increase again being attributable to the reclassification of the 2000 Flushes, Spot Shot, and the 1001 trade names.

Total operating expenses in the quarter were $28.6 million versus $30.1 million in Q4 of last fiscal year.

Operating income in Q4 was $15.1 million compared to $10.8 million in the prior-year quarter.

Year-to-date, total operating expenses were $114 million versus $110.1 million in the prior-year period.

Operating income year-to-date was $54.1 million compared to $55.2 million in the prior fiscal year.

EBITDA, the last of our 50/30/20 measures, was 18% of net sales in Q4 compared to 14% in the prior-year quarter.

Fiscal 2011 EBITDA was 17% to net sales compared to 18% in the prior fiscal year.

We target EBITDA at 20% of net sales but expect variations from time to time, as sales, A&P investments and other expenses fluctuate with timing of our activities.

Our EBITDA percentage is also affected by investments that we make for our future growth.

Interest income in both quarters was under $0.1 million.

Interest expense in Q4 was $0.3 million, down $0.1 million versus the same period last year, due to lower principal balance on our long-term debt.

We experienced slight foreign currency exchange gains in the current period compared to having foreign exchange losses in the fourth quarter of last year.

This resulted in other income in the current year of under $0.1 million versus $0.2 million of other expense in the prior-year period.

Year-to-date, our interest income was $0.2 million and slightly higher than the prior year.

Interest expense was $1.1 million compared to $1.7 million in the prior year -- again, due to the lower principal balance on our long-term debt.

Other income year-to-date was $0.2 million compared to other expense of $0.1 million in the prior year, the differences, again, driven by foreign currency exchange gains versus losses in the prior-year period.

The provision for income taxes in Q4 was 31.9% versus 32.8% in the prior fiscal year quarter.

The decrease in the effective tax rate was primarily due to tax benefits from increased deductions related to qualified production activities; a higher portion of income from our foreign operations, which are taxed at lower rates; as well as the favorable impact of recent reinstatement of the federal research and development credit.

Year-to-date, the provision for income tax was 31.9% versus 32.6% in the prior year.

The lower tax rate year-to-date was due to the same factors that we discussed for the Q4 period.

Net income in Q4 was $10.2 million versus $6.9 million in the prior-year quarter.

Changes in foreign currency exchange rate had a favorable impact on net income of $0.6 million.

Our current fiscal year fourth-quarter results on a constant currency basis would have produced net income of $9.6 million.

Diluted earnings per common share were $0.61 in Q4 compared to $0.41 in the prior fiscal quarter.

Diluted shares outstanding decreased from 16.8 million shares to 16.7 million shares.

Year-to-date, net income of $36.4 million versus $36.1 million in the prior-year.

Changes in foreign currency exchange rates had a $0.8 million favorable impact on net income, and year-to-date, fiscal year 2011 results on a constant currency basis would have produced net income of $35.6 million.

Diluted earnings per common share were $2.14 year-to-date compared to $2.15 in the prior fiscal year.

Diluted shares outstanding increased from 16.7 million for the year to 17 million shares.

Regarding the dividend, on October 7, the Board of Directors declared a quarterly cash dividend of $0.27 per share, payable on October 31, 2011, to shareholders of record on October 18, 2011.

Based on today's closing price of $42.28, the annual dividend yield would be 2.55%.

About our balance sheet, at August 31, cash and cash equivalents were $56.4 million, down from $75.9 million at the end of fiscal year 2010.

Net cash from operating activities was $30 million, while issuance of common stock upon the exercise of stock options provided additional cash of $20.2 million.

These cash inflows were offset by our annual $10.7 million principal payment on our debt; dividends of $18.2 million; $41.4 million of share repurchases; and $2.9 million used for capital expenditures.

Cash was also positively impacted by $2.6 million, due to changes in foreign currency exchange rates, and some other miscellaneous items combined positively impacted cash by $0.9 million.

Under the Company's $60 million share buyback plan, the Company repurchased just over 1 million shares at a total cost of $41.4 million during the period from December 14, 2010, to August 31, 2011.

WD-40's financial strength continues to be strong and supported by consistent cash flows, a strong balance sheet, with significant cash balance and relatively low debt, and additional sources of liquidity.

Our long-term debt is scheduled to be repaid in full this calendar year, with our final principal payment of $10.7 million due later this week.

Should we need additional liquidity, the Company recently obtained a $75 million, three-year revolving unsecured line of credit.

We believe these resources will enable us to fund operations, invest in opportunities to grow our sales and profits, and create long-term returns to shareholders.

This completes the financial overview.

Again, more information will be available in our 10-K, which we filed Thursday.

Thanks so much.

Now back to Garry.

Thank you, Jay.

WD-40's Company vision is to create positive lasting memories by solving problems in homes and factories around the world.

Our mantra -- Problem Solved, Job Done Right.

WD-40 Company's goal is to execute on its vision through its strategic initiatives.

Like an aircraft continuously adjusting its flight path to deal with air pockets or bad weather, we too, as a company, must make continuous adjustments to meet the growing needs of our business.

We recently refreshed our strategic initiatives to better fit where our business is today and to address the needs for future growth.

Our refreshed, strategic initiatives are as follows.

Number one, we maximize the WD-40 brand through geographic expansion and increased market penetration.

We're taking the WD-40 brand to more places, more people, have them discover more uses, and use more of the brand more frequently.

The second strategic initiative is to be the global leader in WD-40's products categories and platforms currently multi-purpose maintenance products.

We do that through platforms which are solutions that cut across multiple categories, whereas categories are more specific to certain applications.

Our WD-40 Specialist product line will serve as the conduit to deliver application-specific solutions to our end users.

Our third strategic driver is focused on strategic business relationships, primarily acquisitions and joint ventures, and strategic partnerships.

Our fourth is to pursue long-term fundamental innovations for continued profitable growth of our Company.

And finally, and very importantly, continue to attract, develop, and retain Tribe members that are passionate about executing our vision.

Now on to fiscal year 2012.

As we consider the uncertainty around the world today, we really do not know what the pace of the global markets will be and what experiences of recovery there will be, nor do we know or have control over oil and steel prices, which impact our import costs, or the shifts in foreign currency exchange rates, which impact our consolidated results.

While uncertainty could impact our results in fiscal year 2012, we have demonstrated that we have the discipline, talent, and drive to continue growing our business.

We expect geographic expansion and innovation in our multi-purpose maintenance products to deliver revenue growth in fiscal 2012.

We are also making significant investments in our business to grow sales and profits in the long-term.

This includes investment in new Tribe members, research and development, advertising and promotional investments to support our new product launches, and significant investment in cost-containment initiatives to meet our margin target of 50%.

We are seeing the fruits of our labors and are very excited about fiscal year 2012.

The following fiscal year 2012 guidance does not include any acquisition activity and assumes foreign currency exchange rates will remain close to fiscal 2011 levels.

So, we expect our fiscal year net sales results to be in the range of $353 million to $370 million, or growth of between 5% and 10% versus fiscal year 2011.

We project our gross margin to be close to 50%.

We expect our global advertising and promotional investment to be in the range of 6.5% and 8% of net sales.

We expect net income in the range of $37.2 million to $39.2 million, which would achieve a diluted earnings per share of $2.28 to $2.40, assuming 13.3 million weighted average shares outstanding.

So let's sum up.

In summary, what did you hear from us on the call today?

You heard fiscal year 2011 was a record year for sales, driven by our international growth markets.

You heard that our gross margin got squeezed as the impact of higher raw materials and manufacturing costs hit our cost of goods.

You heard that we are managing through the cost of goods challenges with cost-containment initiatives in place.

You heard we refreshed and continue to execute on our strategic initiatives, particularly geographic expansion, being a leader in multi-purpose maintenance products, and driving long-term innovation to support profitable growth.

You heard we shipped the first three products of the WD-40 Specialist product line to a key customer last month, with a full market launch planned for January 2012.

You heard that we made progress in restoring distribution and promotional levels in the US with certain customers.

You heard we have initiatives to stabilize household products in the US.

You heard that we've made progress executing on our share buyback plan.

You heard we anticipate 5% to 10% sales growth for next fiscal year.

You heard we are investing in new Tribe members, research and development, and advertising and promotion investments in fiscal year 2012 to support our new product launches and international growth.

You heard we are very excited about fiscal year 2012.

In closing, I'd like to share with you a quote -- Perseverance is the hard work you do after you get tired of doing the hard work you already did.

And that's from Napoleon Hill.

Thank you and we'll be happy to take any questions as they are queued up.

(Operator Instructions).

Ben Richardson, JPMorgan.

Just had a brief question here about your raw materials basket.

You've spoken to initiatives you might have in place to offset raw materials inflation.

But just can you get a little more specific about the way you see oil trending, the way you see steel negotiations going maybe in the first part of the year here as you --?

Well, as far as trending of oil, we can only see what's been.

We've seen the pricing of oil come down from its peak in our third quarter.

But as far as we look out, I think we're just as curious of what the future will bring as you.

With respect to tin plate, we have -- we heard information around potential price increases prior to the January time frame; we haven't seen that.

We'll wait till January to better assess what sort of potential impact any sort of changes in that will take place.

And having said that, as Jay shared, we believe that our plan for the year with the initiatives we had, will allow us to meet our 50% gross margin for the year, which is what is reflected in our annual guidance.

We believe there will be lots of bad weather and lots of good weather to go through to get there, but we are committed to maintaining and improving our 50/30/20 business model.

And we have to take actions along the way to do that.

Okay.

In terms of volume trends that you might be seeing, particularly in Europe or the US, what kind of visibility do you have?

And what might you see into your first fiscal quarter here?

We don't guide quarter to quarter, but we certainly do -- if you're talking about actual volume of products sold, we continue to see real growth in both Europe and Asia.

We're introducing our products, particularly multi-purpose maintenance products, to new people in those regions every day.

They continue to use more of our product every day.

Although we don't disclose it, we actually track revenue per ounce and -- sorry, actual ounces and revenue per ounce geographically.

So most -- the big portion of the growth that we're seeing outside of the United States is driven by real growth of volumes.

Okay.

And one last question, just speaking to product launches, given that you have Specialist coming out and BLUE WORKS in the mix now, is it possible that you might incur higher costs related to those launches here in the US and later in Europe?

Nothing that is going to be outside of the guided 6.5% to 8% marketing costs.

Most of the development costs of those products have been sunk, so, no, there's nothing that we would see that would be out of the normal.

Okay, thank you very much.

I have just been reminded that I slip over my words sometimes.

In the guidance I said 13.3 million weighted shares -- I should have said 16.3 million.

So, sorry about that.

A lot of words in this thing.

Anything else, Mr.

Richardson?

I'll step back in the queue, thanks.

Liam Burke, Janney Montgomery Scott.

Garry, you had a good quarter and good year in China.

And during Jay's remarks, you mentioned that there were ad and promotion dollars allocated to the Chinese market.

But what specifically are you doing there?

Are you growing into the -- are you just growing the commercial business?

Or do you see consumer opportunities there?

No, we're a long way from consumer, Liam.

The investments that we've been making -- there was a fair bit of market research that was undertaken in the past year where we've been there for a while; we've been there on our own now for -- we just celebrated our fifth-year anniversary of opening our operation in China.

We've just engaged, employed a new marketing director for China.

So we're really looking at understanding the end-user.

And then most of the marketing investment is sampling, making the end-user, who we've identified as the trade end-user, the industrial end-user -- making them aware of our product; and then through distribution, making it easy for them to buy.

And Jay, it looked like you had some significant working capital needs at the end of the year on the inventory and receivables side.

Is there anything different?

I think we did see a little lift in inventory as we got ready for Specialist and a couple of other product launches.

So do we see our inventory trending maybe at that level?

We wouldn't be surprised.

I know at the time we ended the prior fiscal year, our inventory levels were very, very low.

So inventory about this isn't too unusual for us.

With respect to our accounts receivable, we had an increase in the portion of our sales that were weighted to the last half -- or the last part of our quarter, this year versus last year, as well as a $10 million increase in revenue quarter-on-quarter anyway.

So that's really caused a lumpiness, if you will, in the AR at the end of this period.

Both Q3 and Q4, in that order, were the biggest two quarters in the Company's history.

Okay.

And then Jay, you reclassified two brands from -- so there will be a step up in amortization costs in -- going forward?

Yes, we did that at the end of our second quarter --

Right.

-- actually, three brands.

And you're right, we've seen a half a year's impact of that this year and we'll see the remainder of that next year.

Great.

Thank you.

(Operator Instructions).

Eric Hollowaty, Stephens Inc.

Thanks for taking my questions.

Going back to Ben's question about raw materials, could you just help us understand how to think about your guidance vis-a-vis trends in raw materials costs?

Does that basically assume today's levels?

Is it average levels for fiscal year '11?

Is it fourth quarter average?

If you could just help us think about what you are embedding, that would be great.

You mean as far as raw material costs are concerned?

You know, our cost of goods?

Yes.

Okay, one of the things that affect us more than ever is the fluctuation.

So what we look for is stability.

And as we ended the fiscal year and oil came in around a high $80s, $90s, and then to $100, we assumed that type of oil price going forward.

So we would like to see oil stay under $100 a barrel.

And if it did, then all other things being equal, that should be beneficial to our margin for the year.

So our ceiling, probably thinking is around that number.

As far as steel is concerned, we have embedded a anticipated increase into our steel prices for next year.

We are not publicly disclosing that for reasons that would be obvious.

That hasn't been negotiated yet, but we feel that what we have in there -- given unforeseen, unexpected behavior, should also help us meet the 50% or more gross margin goal for the year.

Okay, great.

That's very helpful, Garry, thank you.

In terms of the share count for fiscal '12 that you're guiding to, is that a function of where it ended, or where it is today?

Or are you embedding any buybacks into the share count going forward, or --?

Yes, we ended the year at 16.35, 16.36, I believe it was.

And we are continuing on our share buyback for the balance of the authorization.

Okay, so your guidance basically assumes where you ended.

And then you're saying you may have incremental reductions to it from a buyback (multiple speakers) --?

(multiple speakers) [I would say buy] any options exercised or equity exercised that may happen, so.

Yes.

And a level of dilution that takes place as well.

Right, of course.

And it was nice to see that you got some sales traction in parts of the Americas, although it sounds like the US still continues to struggle.

What's the single biggest thing that needs to happen that would enable the US to begin punching above its weight again?

Well, the US for our multi-purpose maintenance products business is a mature market -- 95% brand awareness; eight out of 10 households have a can; more people use it every day than dental floss.

And that's a very enviable position for any brand, but it also does cause volatility from time to time.

We're very excited that our new Specialist line will now take us into areas of the market that, one, we will steal some share from some of those who have stole some of our uses, not our users.

And secondly, in some of the Specialist products, we believe we've identified some market opportunities that are under-developed.

And our first three products are in the market now.

Two more will be added in May -- in January.

Our full load -- we're only selling in two customers right now.

We start to ship our full customer base that have decided to support the Specialist program in January.

So we believe Specialist could be a very significant opportunity for us to develop categories and platforms around that very strong brand of WD-40.

That's really the area.

We have the ebbs and flows of household.

That continues to be a smaller part of our overall business, but it's a very, very profitable business for us.

And as we've stated, eventually, long-term, that may not be part of our business.

But it's hard to grow a business without bringing in new product line like Specialist in the US when you've got such a dominant brand as WD-40.

Sure.

Yes, that makes sense.

All right, thanks very much, Garry.

I'll get back in the queue.

(Operator Instructions).

Joe Altobello, Oppenheimer.

Just a couple questions.

First, I was somewhat surprised by the strength that you guys saw in Europe in the quarter.

And I was curious, did you see anything at all in terms of end-user demand, or possibly the inclination on the part of retailers to build inventory, given the macro headwinds that they're facing over there?

No.

No, it's just continued growth of the markets where we still have growth, Joe.

It comes at different levels through months and quarters, but we didn't see anything unusual at all.

Europe, as we've said, still has a long way to grow overall.

You get some of that faster than other -- at other times than you do quarter-to-quarter, but we continue to have a lot of confidence in our ability to grow our core business outside of the United States, including Europe and Asia.

Okay, that's helpful.

And then, secondly, I guess this one's for Jay.

In terms of the SG&A, it looks like you guys held it pretty steady for the full year this year and actually got some nice SG&A leverage.

How much was the bonus expense down year-over-year in 2011?

It was a little over $7 million.

Okay.

That was the full year, right?

That was the full year impact, year-on-year.

Okay.

So as we think about 2012, it looks like, based on your guidance, you're not assuming any additional SG&A leverage.

So it looks like, if we're modeling it out, just take this year's SG&A and maybe add $7 million to it to get to something for 2012?

Well, that's assuming that we don't invest in additional activities that we may choose to.

We certainly are choosing to increase some of our sales teams in parts of our developing world.

For example, we see some Asian sales staff being added.

So we will have increases in some of those areas of growth that are not reflected in our current year.

Got you.

Okay.

Thank you.

And we currently have no other questions in our queue.

Okay.

Well, thank you very much.

We appreciate you taking the time to be with us today.

Go out and buy a can of Specialist.

It's a great product.

Have a good one.

Good afternoon.

And that does conclude today's call.

Thank you all for your participation.