WD-40 Co (WDFC) 2013 Q1 法說會逐字稿

Good day, everyone and welcome to the WD-40 Company first quarter 2013 earnings release conference call.

Today's call is being recorded.

At this time, I would like to turn the conference over to the Vice President of Corporate and Investor Relations for WD-40 Company, Ms. Maria Mitchell.

You may begin.

Good afternoon and thank you for joining us for our first quarter and fiscal year 2013 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 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 Company website at WD40Company.com.

Our second quarter fiscal '13 earnings call is scheduled for Thursday, April 4, 2013.

Now I'd like to pass it over to Garry Ridge.

Thank you, Maria.

Good day and happy new year.

Thanks for joining us.

Today, we reported net sales of $95.3 million for the first quarter of fiscal year 2013, an increase of 12% over Q1 last fiscal year.

Q1 was a new record revenue quarter for the Company.

Net income for the first quarter was $10.9 million compared to $6.8 million in Q1 last fiscal year.

Diluted earnings per share for the first quarter were $0.69 compared to $0.42 for the same period last year.

As we review our results for the first quarter, we'll be doing so under our 50/30/20 rule and our strategic initiatives.

Q1 was a good quarter for us.

We grew total sales by 12% versus the prior year quarter and increased our gross margin to over 50%, largely due to the benefits stemming from our strategic initiatives.

So let's take a closer look at the progress we've made in the first quarter towards our strategic initiatives.

Strategic initiative number one is to maximize the WD-40 brand.

Sales of WD-40 Multi-Use Products increased by 13% in the first quarter compared to Q1 last fiscal year.

We experienced double-digit growths in several key markets, including more developed markets such as the US, UK, France, Germany and Australia, as well as our distributor markets in Eastern Europe and the Middle East.

Strategic initiative number two -- to be the global leader in the Company's product categories within our prioritized platforms.

The WD-40 Specialist Product Line, which we launched in the US in the first quarter of last fiscal year, is helping to solidify our leadership in the marketplace.

In fiscal year 2012, we increased distribution in the US as well as launched in a selected other countries in Europe, Canada, Latin America and Asia.

In the current quarter, we launched the Specialist Product Line in Russia and the Middle East as well as some smaller markets such as Puerto Rico, Malaysia and Cyprus.

We are not only excited about the incremental sales that this new product gives us but the power it gives the entire brand and the yellow shield.

We attributed some of the growth in of our Multi-Use Product to the increased distribution and shelf presence we have generated with WD-40 Specialist Product Line.

As for BLUE WORKS, we've decided to transition industrial users in the US to the WD-40 Specialist Product Line over the longer term.

Some SKUs will be in transition this year and we'll be working on new formulations and additional WD-40 Specialist Product Line SKUs to better serve our industrial market.

We are also evaluating the future of BLUE WORKS in other geographic markets.

On strategic driver initiative number three, strategic business relationships, we did not find an acquisition opportunity that met our criteria in the first quarter but we continued to explore licensing and partnership arrangements to build our product offerings for our next generation of WD-40 and 3-IN-ONE products.

Some products within the WD-40 Specialist Product Line, like WD-40 BIKE and WD-40 Specialist Motorbike, stem from alliances with key partners.

We are finding that strategic business relationships enable us to go to market faster with more expertise and less risk.

On our strategic driver number four, which is global innovation efforts, our new business unit, WD-40 BIKE Company LLC, made its first shipments late in the first quarter.

WD-40 BIKE is dedicated to solving cycling and maintenance problems of riders by delivering WD-40 branded solutions that are easy to use, easy to find, provide good value and get the job done.

The go-to-market strategy for WD-40 BIKE is different from our traditional model.

We are concentrating our efforts on user and trial and trade channels where cyclists buy their products such as smaller independent bike dealers versus larger retailers where our WD-40 brand products are sold.

That said, we expect sales to be immaterial in the first year of its launch.

We continue to make progress in the UK to develop a line of motorbike-specific products under the WD-40 Specialist Product Line.

These products will meet maintenance and repair needs among motorcycle enthusiasts and mechanics for uses in garages and workshops and motorcycle race events.

In the first quarter, we continued development and testing of formulations as well as packaging and marketing concepts.

We anticipate launching Motorbike products in the third quarter of the fiscal year.

Strategic initiative number five, people development, last but by no means least.

Under our fifth strategic initiative, we continue to attract and develop and retain Tribe members to execute our vision.

In the first quarter, we expanded our Tribe by 12 people primarily to support the US, Europe and Latin American businesses.

That completes the update on our strategic initiatives.

So let's move on to the details of our first quarter results, starting with sales.

While we did see some sales -- we expected in the fourth quarter of last fiscal year, to shift into the first quarter of the fiscal year 2013, particularly in Europe, we are proud of the solid sales growth we have had in the quarter.

All of our growth period versus period came from our brands in the Multi-Purpose Maintenance Products category.

Markets outside of the US accounted for 62% of our global sales in both periods.

Sales in the Multi-Purpose Maintenance Products category accounted for 86% of global sales compared to 83% in the prior-year period.

Our Multi-Purpose Maintenance Products sales were up 15% in Q1 compared to prior fiscal year quarter.

By trading bloc, the category was up 19% in the Americas, up 17% in Europe, and up 3% in Asia-Pacific.

While most of the growth was driven by WD-40 Multi-Use Product, we also generated growth from sales of the WD-40 Specialist Product Line.

Global WD-40 brand sales grew by $10.9 million, or 16% in Q1, compared to the prior fiscal year quarter.

This was driven by sales growth in both of the WD-40 Multi-Use Product and the WD-40 Specialist Product Line.

Most of the growth was driven by the Americas and Europe.

Sales in the Americas benefited from the increased distribution and higher promotional activity in the US.

Europe benefited by higher replenishment orders after several quarters of slower sales.

Both trading blocs also benefited from increased distribution and sales of the WD-40 Specialist Product Line.

3-IN-ONE brand sales increased by 2%.

Growth in Europe more than offset declines in the Americas and Asia-Pacific trading blocs.

Europe is the largest market for 3-IN-ONE, with sales growth partially driven by new SKUs in the UK, Spain and Portugal markets.

Home Care and Cleaning Products sales continued to represent a smaller portion of our business per our strategic roadmap.

The category accounted for 14% of global net sales in Q1 compared to 17% in the prior fiscal year period.

These products include Spot Shot, 2000 Flushes, Carpet Fresh and No Vac, 1001, X-14, Lava, and Solvol brands.

Total Home Care and Cleaning Products sales were down 4% globally in Q1.

By trade bloc, sales of Home Care and Cleaning Products were down 10% in the Americas, up 19% in Europe and up 10% in Asia-Pacific.

Decreased sales of Home Care and Cleaning Products in the Americas was mostly attributed to the Carpet Fresh and Spot Shot brands in the US, which were down 29% and 13%, respectively.

These brands were impacted by some lost distribution, decreased promotional programs and category declines, particularly in the warehouse club channel.

The higher sales in Europe were partially due to the timing of promotional activities year-over-year.

In the prior-year period, sales of the 1001 brand dropped significantly following a strong promotional period and price increase.

The current quarter was not impacted by these factors.

The higher sales of Home Care and Cleaning Products in Asia-Pacific were driven by sales and increased SKUs of the No Vac brand in Australia.

Now, let's look a little closer at the segments and we'll start with the Americas.

Sales in the Americas increased to $45.3 million in Q1, up $4.7 million, or 12%, versus Q1 last year.

This segment accounted for 48% of global sales in both periods, Multi-Purpose Maintenance Products were up 19% in Q1 and Home Care and Cleaning Products were down 10% to the prior fiscal year period, primarily driven by sales declines in the US.

Total US sales were up 13% driven by the WD-40 brand, including the new WD-40 Specialist Product Line, Multi-Purpose Maintenance Products sales in total were up 25% in Q1 and Home Care and Cleaning Products were down 12% to the prior-year fiscal period.

Sales in Latin America increased by 6% in the first quarter, driven by higher WD-40 sales in our distributor markets and sales in Canada increased by 2% in the first quarter, primarily due to higher sales of 2000 Flushes and the WD-40 brand, which more than offset decreases in other brands.

Changes in foreign currency exchange rates did not have a material impact on sales.

We'll go across the pond now to Europe.

Sales in Europe increased to $35.2 million in Q1, up 17% versus Q1 last year.

The segment accounted for 37% of global sales compared to 35% in Q1 of last year.

Changes in foreign currency exchange rates, period versus period, did not have a material impact on sales.

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

Sales in our European direct markets were up 22% in Q1.

The increase is due to higher level of replenishment orders, period versus period.

Replenishment orders in the prior-year period were relatively low following a strong promotional sales period in FY '11 and the uncertain economic conditions which existed throughout Europe at that time.

While Europe continues to be impacted by uncertainty, we've seen improvement in some of our direct markets after a weak third and fourth quarter sales in fiscal year 2012.

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

Our distributor markets in total were up 10% in Q1.

Sales increased in the Middle East and Eastern Europe due to the continued growth of the WD-40 Multi-Use Product as well as initial sales of WD-40 Specialist Product Line.

This growth more than offset lower sales in northern Europe.

The distributor markets accounted for 40% of Europe's total sales in Q1 compared to 43% in the prior fiscal year period.

Now let's slip over to Asia-Pacific.

Sales in Asia-Pacific increased to $14.7 million in Q1, or up 3% versus Q1 last year.

The segment accounted for 15% of global sales in Q1 versus 17% in the prior-year period.

Changes in foreign currency exchange rates period versus period did not have a material impact on sales.

Sales in Australia increased 13% in Q1 compared to the prior fiscal year period, driven by higher sales of the WD-40 Multi-Use Product and No Vac.

Sales in Australia benefited by the more stable -- from the more stable economic conditions and the ongoing growth of our base business.

Sales in China decreased 9% to $2.8 million, due to a lower level of promotional activities, period versus period.

In addition, China has experienced a much lower rate of growth for sales since the second half of fiscal 2012 due to some of the adverse economic conditions and the slowing of some of the industrial activities throughout China at the time.

Sales in the rest of Asia increased by 3% to $7.3 million in the first quarter.

The region benefited from the growth of WD-40 Multi-Use Products through distributor markets and those were markets such as Indonesia, Malaysia and into India.

That's it for the sales update for now.

I'll pass over to Jay, who will continue the review of the financials.

Garry, thanks.

Just a reminder, in addition to the information that we're presenting on the call today, we'll suggest that you review our Form 10-Q, which will be filed tomorrow.

Now to look at the rest of the financials.

First, a quick review of our 50/30/20 rule.

Those are the measures we use to guide our business.

As you may recall, 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 then finally on to the 20, which 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 our target or above of 20%.

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

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

First, I'll look at the gross margin, or the 50.

Gross margin in the first quarter was 50.1% compared to the 48.7% in the prior fiscal year quarter.

The increase of 140 basis points in gross margin was primarily driven by price increases, lower promotional discounts and benefits from our supply chain-related initiatives.

These favorable impacts were partially offset by higher input costs and unfavorable impact of foreign exchange rates.

Let's look at input costs first.

We experienced a net unfavorable impact of 30 basis points from our input costs.

The impact from changes in the cost of petroleum-based materials and aerosol cans combined unfavorably to impact our gross margin by 20 basis points.

Most of the impact was related to the higher cost for aerosol cans.

Changes in other input costs including raw materials related to our Home Care and Cleaning Products as well as valves and other components unfavorably impacted our margin by 10 basis points.

Our sales price increases, which we consider and implement on a country by country basis, are focused on helping us offset the impact from input costs increases.

Period versus period, our gross margin improved by 130 basis points as a result of price increases implemented over the past 12 months.

Lower advertising and sales promotional discounts positively impacted our gross margin by 40 basis points.

A lower percentage of sales during the current quarter was subject to promotional allowances compared to that in the prior-year quarter.

This was partially a result of lower sales mix in our Home Care and Cleaning Products as well as lower promotional discounts on these products.

The cost of promotional activities such as sales incentives, trade promotions and discounts that we give to our customers are recorded as a reduction to sales.

The timing and magnitude of these can cause fluctuations in gross margin period to period.

We achieved lower manufacturing costs from our local sourcing project in China as well as of the North American Supply Chain Project.

The lower costs resulted -- resulting from these initiatives positively impacted our margin by 50 basis points in the first quarter.

China transitioned to local sourcing part way through fiscal year 2012.

This quarter, the lower cost positively impacted our gross margin by 30 basis points.

We began our North American Supply Chain Architecture Project in the first quarter of fiscal 2012 with the goal to improve service delivery to our customers and to reduce the overall cost of our supply chain network.

During the period of transition, we have incurred additional costs to implement our new network and to reduce the number of our third-party packagers.

In the quarter, any of the transition costs were more than offset by the savings we realized from lower manufacturing costs.

The net savings related to the project positively impacted our gross margin by 20 basis points this period versus prior period.

While we expect to incur some additional transition costs during the remainder of the year, we expect that the lower cost envisioned from the new structure to result in a positive impact on gross margin for the year.

We expect -- we experienced unfavorable impact from changes in foreign currency exchange rates within our European segment, which negatively impacted our gross margin by 60 basis points.

Costs of product are sourced in pounds sterling while revenues are generated in Europe, pound sterling and the dollar.

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

All of the other miscellaneous impacts combined positively impacted our gross margin by 10 basis points.

Now onto the 30, or our cost of doing business.

In the first quarter, the cost of doing business was 33% of net sales compared to 35% in Q1 of the prior fiscal year.

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

Period versus period, our sales increased by 12% in Q1 while our operating expenses increased by 3%, causing a decrease in our cost of doing business percentage.

In the first quarter, approximately 71% of our cost of doing business came from three areas -- 37% related to our people costs, or our investment in our Tribe; 20% from our investments in marketing, advertising and promotion; and 14% related to freight costs, costs to get our products to our customers.

Now, more details on our SG&A expenses, in Q1, our SG&A was $25.3 million versus the $22.6 million in the prior fiscal quarter.

As a percentage of net sales, it was 26.6% in both periods.

We had higher employee costs of $1.9 million due to higher bonus expense accruals and higher compensation costs associated with annual merit increases and higher staffing levels.

Other changes of note were freight expense, up by $0.4 million versus the prior period due to the higher sales.

We also had increases in travel and meeting expenses, which were up $0.3 million, period versus period.

Overall the impact from changes in foreign currency exchange rates had an immaterial impact.

Advertising and sales promotion expense in Q1 was $6.1 million compared to $7.8 million in the prior-year period.

As a percentage of sales, advertising and promotional investment was 6.4% in Q1 compared to 9.2% in the prior-year period.

The decrease in advertising and sales promotion expenses was primarily due to the timing of advertising and promotional activities in the Americas as well as a reduction in the Europe segment.

Amortization of intangible assets remained relatively constant at $0.5 million in Q1 compared to the $0.6 million in the prior-year period.

Total operating expenses in the current quarter were $31.9 million versus $31 million in Q1 of last year.

Operating income in Q1 was $15.9 million compared to the $10.3 million in the prior-year quarter.

EBITDA, the last of our 50/30/20 measures was 18% of net sales in Q1 compared to 13% in the prior-year quarter.

We target our EBITDA at 20% of net sales but expect variations from time to time as sales, advertising and promotion investment and other expenses fluctuate with the timing of our activities.

Our EBITDA percentages are also affected by ongoing investments we make for future growth.

The provision for income tax in Q1 was 31% versus 31.6% in the prior fiscal year quarter.

The lower tax rate in the current quarter is primarily driven by the increasing proportion of the Company's earnings which are foreign and taxed at lower rates.

Net income in Q1 was $10.9 million versus the $6.8 million in the prior-year quarter.

Changes in foreign currency exchange rates did not have a material impact on net income.

Diluted earnings per common share were $0.69 in Q1 compared to $0.42 in the prior fiscal year quarter.

Diluted shares outstanding decreased from 16.2 million shares to 15.8 million shares.

Regarding our dividend, on December 11, the Board of Directors declared a 7% increase in the quarterly cash dividend, increasing the dividend from $0.29 per share to $0.31 per share.

The dividend will be payable on January 31, 2013, to shareholders of record on January 7. Based on today's closing price of $47.77, the annualized dividend yield would be 2.6%.

A look at our financial position at November 30, we have a solid financial foundation that continues to support our strategic initiatives.

It allows us to meet our working capital needs as well as helps us weather the uncertainties in the capital markets and the global economy.

Our strong balance sheet is supported by a large cash balance and low debt and our growing and diversified revenues enable us to support our growth initiatives, which include market expansion and new product introductions.

Our net cash position decreased from $24.7 million in -- at August 31, to $7.4 million at the end of Q1, primarily as the result of purchases of short-term investments and treasury stock under our share repurchase plan.

Net cash is based on cash and cash equivalents less our outstanding debt.

At November 30, our cash and cash equivalents were $52.4 million and we had $21.9 million in short-term investments.

These consist of term deposits and callable time deposits held in money center banks.

Our debt in both periods was $45 million from our existing line of credit.

Yesterday, you might note that we amended our line of credit with the Bank of America.

The amendment extends maturity to a five-year term and increases the commitment to an amount not to exceed $125 million.

The new maturity date for the revolving facility is January 7, 2018.

In addition, the LIBOR margin also decreased to 85 basis points.

At WD-40 Company, we focus on the balance between investing for the future and returning capital to our shareholders.

We provide cash to our shareholders through regular dividends.

We target our dividend payout at 50% of net income.

This is our third consecutive year of dividend increases.

We also return capital to shareholders through our share repurchase program.

During the first quarter, we acquired a little over 171,000 shares of our stock at a total cost of $8.1 million.

These shares were acquired under our most recent share repurchase plan approved by the Board of Directors on December 13, 2011.

It provides authorization to acquire up to $50 million of the Company's outstanding shares through the plan's end date of December 12, 2013.

Through November 30, 2012, the Company had repurchased 634,000 shares at a total cost of $29.3 million.

We expect to continue executing on our share repurchase program through the remainder of the year.

That completes the financial overview.

Again, more information is available in our Form 10-Q, which we'll file tomorrow.

Thank you and now back to Garry.

Great.

Thanks, Jay.

There are several macroeconomic factors that impact our outlook as well as our progress towards our strategic initiatives.

We are cautiously optimistic about the macroeconomic factors, which include the stability in the global economy, major input costs and foreign exchange rates.

In terms of sales in the global economy, we feel the growth of our WD-40 Multi-Use Product and the WD-40 Specialist Product Line will overcome possible slower growth and uncertainties that could be in China and Europe.

We expect that our Multi-Purpose Maintenance Products will also offset any decreases that may occur in Home Care and Cleaning Products.

As for import costs, we hope that the recent stability in petroleum-based materials and aerosol can costs will continue in the near term and that our initiatives will help us maintain, if not grow, our gross margin.

We now again look back at our guidance, which remains unchanged from what we shared with you in October and at the Annual Shareholder Meeting just in December.

The following fiscal year 2013 guidance does not include any acquisition activity, and assumes that foreign currency exchange rates will remain close to recent levels.

We expect fiscal year net sales results to be in the range of $356 million to $370 million, or growth of between 4% and 8% versus fiscal year 2012.

We project gross margin to be close to 50%.

We expect our global advertising and promotional investment to be in the range of 7% to 8% of net sales.

We expect net income to be in the range of $36.5 million to $38 million which would achieve our diluted earnings per share of between $2.31 and $2.40, that would assume that there were 15.8 million weighted average shares outstanding.

So as we sum up, what did you hear from us in the call today?

You heard that we grew global sales by 12% versus the prior-year period, driven by higher sales and increased distribution of the WD-40 Multi-Use Product and the Specialist Product Line.

You heard it was the best revenue quarter in the Company's history.

You heard that we realized cost savings from our local sourcing initiatives in China and our North American Supply Chain Architecture Project, both which helped us reach our goal of a minimum of 50% gross margin.

You heard that we continue to make progress on our strategic initiatives, including shipping out the first orders for WD-40 BIKE, the development of new formulations and the launch of the WD-40 Specialist Motorbike in the UK later in fiscal year 2013.

You heard that we grew diluted earnings per share from $0.42 to $0.69 per share and we have increased our regular quarterly dividend by 7% to $0.31 per share.

You heard that our outlook is cautiously optimistic, and that we are maintaining our guidance and our sales growth of 4% to 8% for this year coming.

You heard that there are very exciting times at WD-40.

In closing, I'd like to share one of my very favorite quotes with you from Nelson Mandela -- It always seems impossible until it's done.

Thanks for joining us today.

We'd be pleased to now open the conference and take any of your questions.

(Operator Instructions)

We'll pause a moment to assemble the queue.

Liam Burke, Janney Capital Markets.

Garry, could you talk a little bit about the core WD-40 brand in the US?

It looks like you had healthy sales.

It looks like you got a little benefit from Specialist but WD-40 seems to be chugging along pretty well.

What's driving that?

Typically, there would be some promotion behind it or an introduction of smart straw.

It - what is stepping up with this double-digit growth rate?

Well, again, we are looking at this, Liam, as you rightly identified, as the WD-40 brand.

So we talk about it as being WD-40 Multi-Use Product, which is the blue and yellow can with the little red top, WD-40 Specialist, which is our new product line, and then, of course, WD-40 BIKE, which had very little.

Certainly, WD-40 Specialist did contribute to our growth of the brand in the US in the first quarter.

We do feel we may have got some lift from the core brand because of that also.

Liam, if you go to our investor presentation, you'll see now there's a new slide in there that talks about physical awareness.

It's a picture of a shelf.

You will see now how the brand has a lot more overall dominance now that we've got both of those products into distribution.

And then the core product, we just had a good quarter.

We had some good promotional activity going on across the board.

We saw good activity in both the industrial and the home improvement trade channels.

So it was one of those quarters that things played out a little better than we probably expected them to.

Just to touch on that last point though, if you're looking at home improvement and industrial, would you expect that to have some momentum there?

Or are you just looking at, saying -- okay, we just had a good quarter here?

We don't see that this is absolutely abnormal, but again, it will depend on how things pan out going forward.

But it seems, if you look at some of the retail numbers that we've been getting out of home improvement, they seem to be reasonably better than they've been in the past.

So I think that whole area is reasonably buoyant -- not buoyant but at least it's not suffering at the moment.

So we, overall, expect to have a good year around the core of our business, which is Multi-Purpose Maintenance Products, driven by global expansion of the core product and the continued development of WD-40 Specialist.

Great.

Europe performed well as you pointed out, getting sales that had been deferred from fourth quarter.

China was off this year -- this quarter, excuse me.

Do you anticipate any catch-up in the subsequent quarters this year?

Well, we're in -- as you know, Liam, we're in China for the long haul.

We've shared before that China will bounce around quarter to quarter, probably more than anywhere else as we continue to develop that market.

But we feel that it will grow again in China this year as we have every other year for the last seven since we've started there.

We've got our eyes on that $100 million that we think is in China sometime in the future.

Joseph Altobello, Oppenheimer.

This is Cristina in for Joe.

I was just wondering if you could at all quantify the sales shift in the quarter?

Sorry?

I was hoping you could quantify the sales shift in the quarter.

You mean from the sales shift from Q4 to Q1?

Yes.

We haven't identified that, but if you would recall when we talked about it last time, we said that the sales shift that we felt would probably be mainly in Europe.

If you look at Europe, it grew about $5 million quarter over quarter.

So the shift would probably be some part of that.

Okay.

Great.

Then my next question was the impact from Hurricane Sandy.

Did you have anything from there?

No.

Nothing that we could see that was material.

We're certainly saddened that it happened.

I'm sure there was some WD-40 used later on, but we haven't -- there's nothing that we could point to.

(Operator Instructions)

Jeff Zekauskas, JPMorgan.

Hi, good afternoon.

(multiple speakers) We're privileged to have you on the call.

We haven't heard you for so long.

There we are.

How large is your -- How large do you intend to grow your Specialist Product Line, say, for 2013 or 2014?

Jeff, we believe that Specialist can be a meaningful part of our Multi-Use Product business.

We haven't disclosed our targets overall, but we believe that from some of the early testing we did with the 3-IN-ONE brand in France and understanding what portion of our Multi-Use Product business, could a well executed flanker brand strategy wearing the shield be?

We believe it will be a meaningful growth road for us for a number of years to come.

Certainly in the first year, it's proving out to fulfill that goal.

As far as your China strategy, do you wait for the Chinese economy to improve?

Or do you have a means of growing that business in 2013?

We will continue to grow it.

I think that the bouncing around over there, Jeff, is purely that.

Our strategy in China is to make the end-user aware and make it easy to buy.

We're doing that by identifying geographically the industrial regions that have high consumptions of our type of product.

In fact, this time next week, I'll be visiting Foxconn in Shenzhen, who are users of our product.

But we think that it's just a matter of, as we've done in many other markets, as you would recall having followed us for many years, Jeff, it's a step-by-step basis that's very disciplined.

We think China is $100 million market in the future sometime down the road.

We're just going to continue like the steamroller.

We just keep coming on it and we'll continue to build it.

Thanks for that.

Then lastly, of the coming three quarters, which are the quarters that you think will have the highest promotional activity?

Which ones do you think will have the lower promotional activity, as far as you can tell?

Jeff, it's really hard to predict because sometimes that is not necessarily under our control, depending on when we move promotions around.

But we do know that we will fall in between our 7% and 8% for the whole year.

But today, it's a lot harder.

We're in so many geographic markets and timing is different in each one.

So it would be very difficult to give you a meaningful prediction.

Well, how about the next quarter?

Is that a high promotional quarter or a low one or you can't tell?

I think it will probably be in line with a normal promotional quarter.

There appear to be no further questions, so I'll turn it back over to management for any closing or additional comments.

Thank you very much, everybody.

We have nothing more.

Wish you a good afternoon, and we'll talk to you again sometime in April.

All the best.

Cheers.

Once again, that concludes our call.

Thank you all for joining today.