WD-40 Co (WDFC) 2017 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Good day, and welcome to the WD-40 Company's Second Quarter Fiscal Year 2017 Earnings Conference Call.

Today's call is being recorded.

(Operator Instructions) I would now like to turn the presentation over to your -- the host for today's call, Ms. Wendy Kelley, Director of Investor Relations and Corporate Communications.

Please proceed.

Thank you.

Good afternoon, and thanks to everyone for joining us today.

On our call today are WD-40 Company's President and Chief Executive Officer, Garry Ridge; and Vice President and Chief Financial Officer, Jay Rembolt.

In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release and Form 10-Q for the period ending February 28, 2017.

These documents are available on our Investor Relations website at investor.wd40company.com.

A replay and transcript of today's call will also be made available at that location shortly after this call.

On today's call, we will discuss certain non-GAAP measures.

The descriptions and reconciliations of these non-GAAP measures are available in our SEC filings as well as our earnings presentation.

As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance.

Of course, actual results could differ materially.

The company's expectations, beliefs and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished.

Please refer to the risk factors detailed in our SEC filings for further discussion.

Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, April 6, 2017.

The company disclaims any duty or obligation to update any forward-looking information whether as a result of new information, future events or otherwise.

With that, I'd now like to turn the call over to Garry.

Thank you, Wendy.

Good day, everyone, and thanks for joining us for today's conference call.

Today, we reported net sales of $96.5 million for the second quarter of fiscal 2017, which was an increase of 2% from the second quarter of last fiscal year.

Additionally, we reported operating income of $18.9 million, which was an increase of 5% from the second quarter of last fiscal year.

Although we do not normally discuss operating income on these calls, we thought it was worth mentioning because there are some nonoperating items, which are distorting our net income and diluted earnings per share for the quarter.

Net income for the second quarter was $12.4 million compared to $13.7 million in the second quarter of last fiscal year, a decrease of 10% year-over-year.

Our net income was negatively impacted as a result of fluctuations in some nonoperating currency-related items period-over-period as well as an adjustment that was rerecorded to our income tax expense in the second quarter of this year.

Diluted earnings per share for the second quarter were $0.87 compared to $0.94 for the same period last fiscal year.

Now let's start with a discussion about our strategic initiatives.

Strategic initiative #1 is to grow WD-40 Multi-Use Product.

Our most important strategic initiative is to take the blue and yellow can with the little red top to more places for more people who'll find more uses more frequently.

We believe we can grow WD-40 Multi-Use Product to approximately $600 million in revenue by the end of fiscal year 2025.

In the second quarter, global sales of Multi-Use Products were up 4%, driven by increased product sales in all 3 trading blocks.

In addition, our WD-40 EZ Reach Flexible Straw continues to perform well in the U.S., and we've just launched this product offering in Australia in the second quarter.

Strategic initiative #2 is to grow WD-40 Specialist product line.

Once we build our brand equity and establish the power of the shield in a particular geography, we can leverage the brand recognition to develop new product lines like WD-40 Specialist.

We believe we can grow WD-40 Specialist to approximately $125 million in revenues by the end of fiscal year 2025.

In the second quarter, sales of WD-40 Specialist were $5.5 million, which represents a 1% increase over the second quarter of last year.

Year-to-date, global sales of WD-40 Specialist are up 17%.

We continue to launch new Specialist categories in markets around the world, although each market, country and segment experiences different short-term trends relating to the sales of WD-40 Specialist product line due to the timing of promotions and the building of distribution.

We continue to believe that WD-40 Specialist will be a significant revenue and earnings growth engine for many years to come.

Strategic initiative #3 is to broaden the product and revenue base.

Our goal under this initiative is to leverage the recognized strength of the WD-40 Company to derive revenue from new sources and brands.

We continue to expand the product offerings within our 3-IN-ONE, GT85 brand as well as WD-40 BIKE.

WD-40 BIKE continues to gain traction, and global sales of the product line increased 40% in the second quarter with particular strength in EMEA where we've experienced solid growth for WD-40 BIKE.

We see a lot of opportunity with these maintenance products.

Strategic initiative #4 is to attract, develop and retain outstanding tribe members.

Our goal under this initiative is to attract, develop and retain talented tribe members.

At the end of the second quarter, we had a total of 445 tribe members globally.

Our long-term target under this initiative is to grow employment -- employee engagement to greater than 95%.

In support of this objective, earlier this fiscal year, we completed the acquisition of a new building that will house our WD-40 San Diego-based tribe members.

We are currently in the process of renovating the property and expect to make a total investment of approximately $18.5 million in this facility.

This includes $10.7 million for our recent purchase of the land and building and the remaining costs being associated with building improvements as well as the purchase of new furniture, fixtures and IT equipment.

This dovetails nicely into strategic initiative #5: operational excellence.

We are continuously focused on optimizing resources, systems and processes as well as applying rigorous commitment to quality assurance, regulatory compliance and intellectual property protection.

Part of the investment at our new facility is being made on information technology infrastructure and equipment, which will enhance our ability to operate more effectively as a tribe.

We look forward to providing you updates on these initiatives throughout the remainder of this year.

That completes the update on the strategic initiative.

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

Consolidated net sales were $96.5 million in the quarter, up $2 million versus last year.

If we were to remove all foreign currency exchange impacts, our consolidated revenue would have been about $98.6 million, up 4% compared to the second quarter of last year.

This $2.1 million difference is due to the fact that in the second quarter we generated approximately 40% of our sales in currencies other than U.S. dollar and changes in foreign currency exchange rates continue to negatively impact our consolidated results.

Translation of our foreign subsidiary results from their functional currencies to the U.S. dollar had an unfavorable impact on sales.

On a constant currency basis, total net sales would have been $102.9 million, an increase of 9% compared to the last year.

In the second quarter, our net sales were reduced by about $6.4 million due to the strengthening of the U.S. dollar against the functional currencies of our subsidiaries.

That is what we refer to as translation-related exposures, and it impacts reported results from Canada, Australia, China and the EMEA segment.

However, due to the changing foreign currency exchange rates, our consolidated net sales were actually improved this quarter by $4.3 million due to transaction-related impacts.

This currency exposure only impacts reported results in EMEA segment and was primarily due to the impact of the strengthening of the euro and the U.S. dollar against the pound sterling.

Now let's take a closer look at what's happening in the individual segments.

We'll start with the Americas.

Consolidated net sales in the Americas, which includes the United States, Latin America and Canada, decreased to $45.1 million in the second quarter, down about 1% from last year.

Sales of maintenance products in the Americas increased just over 1% in the second quarter, primarily due to a 25% increase in sales of maintenance products in Canada.

This quarter's results in this region can be linked to some of the successful promotional programs and the improving market and economic conditions, and we're very pleased to see this improvement in our Canadian market.

We believe that we've reached a turning point in Canada and that this market will continue to see growth in the coming quarters.

Maintenance product sales in Latin America were down 3% in the quarter, primarily due to the continuing uncertain business conditions in Mexico as a result of the current political climate.

Though maintenance product sales in the United States were relatively flat in the second quarter, our WD-40 EZ Reach Flexible Straw product continues to make good traction and favorably impacted sales in the U.S. during the quarter due to added distribution.

As a reminder, our maintenance products exclude our homecare and cleaning products.

We continue to consider our homecare and cleaning products, particularly those in the U.S., as harvest brands that continue to generate meaningful contributions and cash flows but are generally expected to become a smaller part of the business over time.

Sales of our homecare and cleaning products in the Americas decreased 10% in the second quarter compared to the same period of last year.

Now on to EMEA.

Consolidated net sales in EMEA, which include Europe, Middle East, Africa and India, increased to $36.2 million in the second quarter, up 2% from last year.

EMEA's reported results in the second quarter were negatively impacted by foreign currency exchange headwinds.

On a constant currency basis, sales in EMEA would have been $42.6 million, an increase of $7 million or 20% compared to the last year.

However, these constant currency numbers do not paint a complete currency picture since we experienced favorable impacts of $4.3 million from the transaction-related exposures in the second quarter.

We think the best way to give you a complete look at how our markets are performing is to look at our results in local currencies, which we conduct sales transactions in our direct markets in EMEA.

Although the overall sales in direct markets decreased 2% in U.S. dollars in the second quarter, sales in our euro-based direct markets increased by 7% driven by growth throughout Continental Europe mainly due to the expanded distribution.

These sales increases were more than offset by a sales decrease in our pound-sterling-based market of 5%, primarily due to decreased sales of the 1001 brand as a result of lost distribution in the U.K. Our EMEA direct markets accounted for 64% of the region sales.

The remaining 36% of EMEA's sales during the quarter were generated by our EMEA distributor markets.

Distributor market sales increased 10% in the second quarter due primarily to an increase of 20% in sales in Russia.

Although the market conditions in Russia have begun to stabilize and sales have increased in the second quarter of fiscal 2007 (sic) [ 2017 ], our year-to-date sales have not returned to the level we experienced prior to the political and economic crisis in Russia.

We'd like to remind our investors that the political and economic instability in the region makes it difficult for us to predict what level of sales we'll have in this market in the future.

Now let's pop down to Asia Pacific.

Consolidated net sales in Asia Pacific, which includes Australia, China and other countries in the region, increased to $15.2 million in the second quarter, up 14% from last year.

In Australia, net sales in U.S. dollars were $3.9 million in the second quarter, flat compared to last year.

Changes in foreign currency exchange rates had a favorable impact on these results.

In its functional currency, the Australian dollar, sales were down 2% for the quarter, primarily due to the timing of promotional activities and certain promotional programs that were conducted in the second quarter of last year but not repeated this year.

In China, sales in U.S. dollars were $3.4 million in the second quarter, up 17% compared to last year.

Changes in foreign currency exchange rates had a negative impact on these results.

In its functional currency, the Chinese RMB, sales were up 25% in the quarter.

The growth in China was due to new distribution and increased promotional activities.

We continue to remain optimistic about the long-term opportunities in China, although we expect a lot of volatility along the way due to the timing of promotional programs and building of distribution and shifting economic patterns and varying of the -- of industrial activities.

In our Asian distributor markets, net sales were $7.9 million in the quarter, up 21% compared to last year.

These sales increases were driven primarily by higher levels of promotional activities, particularly in Malaysia and Thailand and the timing of some customer orders.

Our Asian distributor markets are not impacted by currency since we will -- we sell our products in U.S. dollars in that region.

I'll pause now and turn over to Jay who'll continue to review the financials.

Thanks, Garry.

First, let's review our 55/30/25 business model, the long-term targets we use to guide our business.

As you may recall, the 55 represents gross margin, which we target to be at 55% of sales.

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

Our target is to be at 30% of sales.

And finally, the 25 represents EBITDA.

First, the 55 or our gross margin.

In the second quarter, our gross margin was 56.4% compared to the 55.4% in the second quarter of last year.

Changes in foreign currency exchange rates positively impacted our gross margin by 160 basis points.

This is because in EMEA, our cost of goods are sourced primarily in pound sterling, while approximately 45% of our revenues are generated in euros with 25% in U.S. dollars and only the remaining 30% are generated in pound sterling.

The combined effect of the strengthening of both the euro and the U.S. dollar against the pound sterling caused revenues in total to be worth more in sterling, thus, improving our gross margin.

Additionally, advertising, promotion and other discounts that we give to our customers decreased compared to the last year in our Americas segment and positively impacted our gross margin by 30 basis points.

These improvements to gross margin were partially offset by sales mix changes and other miscellaneous costs, which negatively impacted our margin by 70 basis points, primarily due to product mix shifts in the Americas and the fact that a larger portion of our sales in EMEA were made within our lower-margin distributor markets.

Also, negatively impacting our gross margin this year were changes in the cost of petroleum-based specialty chemicals and aerosol cans, which, together, impacted our gross margin by just 10 basis points.

We experienced positive impacts on gross margin from costs in the Americas, but these were more than offset by some unfavorable impacts in EMEA and to a lesser extent, in Asia Pacific.

While cost of petroleum-based specialty chemicals for our EMEA segment are sourced in pound sterling, the underlying inputs are denominated in U.S. dollars as a result of the overall strengthening of U.S. dollar against the pound sterling from period to period, resulting in a significant increase in the cost of goods in pound sterling.

Gross margin was also negatively impacted by 10 basis points due to some higher warehousing and inbound freight costs, primarily associated with the Americas.

And that completes our discussion on gross margin.

Now we'll address the 30 or our cost of doing business.

In the second quarter, our cost of doing business was approximately 35% and flat as a percentage compared to last year.

While our target is to have our cost of doing business at 30% of net sales, we plan to continue to make thoughtful and deliberate investments in support of our fifth strategic initiative: operational excellence, and to support the long-term growth objectives of the business.

And this includes investments in quality assurance, regulatory compliance, intellectual property protection in order to safeguard the blue and yellow can with the little red top.

We expect to move closer to our long-term target of 30% over time as revenues continue to grow.

For the second quarter, 78% of the cost of doing business came from 3 areas: people costs or the investments we make in our tribe, the investments we make in marketing, advertising and promotion.

As a percentage of sales, our A&P investment was 5.2% in the second quarter.

And then finally, freight cost, the cost to get our products to our customers.

And that brings us to EBITDA, the last of our 55/30/25 measures.

EBITDA was 21% of net sales in the second quarter compared to 22% last year.

That completes our discussion of the 55/30/25 business model for the current quarter.

Now I'll discuss a couple of other items worth noting.

Operating income was $18.9 million in the second quarter compared to $17.9 million last year, reflecting a 5% increase year-over-year.

As Garry mentioned earlier, we typically don't discuss operating income but thought it was worth noting because of the nonoperating items, which were affecting our net income and diluted earnings per share in the quarter.

One of the items impacting net income this quarter was a significant variance in the -- to the prior year in other income and expense, of which the majority was related to large foreign currency gains, which were recorded in the second quarter of 2016.

Also impacting net income this quarter is the provision for income taxes, which was 32.8% in the second quarter compared to 28% last year.

The increase in the effective tax rate from period to period was primarily driven by an adjustment that we recorded in the second quarter associated with the tax impacts from unrealized foreign currency exchange losses.

We expect our tax rate for the full fiscal year, however, to be close to 30%.

Net income for the second quarter was $12.4 million versus $13.7 million in the prior year.

Changes in foreign currency exchange rates had an unfavorable impact on the translation of our consolidated results.

On a constant currency basis, net income would have remained relatively flat compared to the same period last year.

Diluted earnings per common share were $0.87 in the second quarter compared to $0.94 in the same period last fiscal year, and diluted weighted average shares outstanding decreased to 14.1 million from 14.4 million shares a year ago.

Now we're at about our capital allocation.

Our capital allocation strategy includes a comprehensive approach to balanced investing for long-term growth while providing returns to our stockholders.

We target maintenance CapEx of between 1% and 2% of net sales, and as Garry mentioned earlier on our call, in addition to the maintenance CapEx in the current year, we're making an investment of approximately $18.5 million to buy and renovate a new office building to house our San Diego-based tribe members.

In the first quarter of fiscal year, we closed escrow on the property and invested $10.7 million in the building in the San Diego neighborhood of Scripps Ranch.

We -- currently in the process of renovating this building and plan to relocate there later this fiscal year.

In addition, we continued to return capital to our shareholders through regular dividends and share repurchases.

On March 21, our Board of Directors approved a regular quarterly cash dividend of $0.49 per share payable April 28 to stockholders of record at the close of business on April 14.

Based on today's closing price of $106.95, the annualized dividend yield is 1.8%.

So far, this fiscal year, we've repurchased approximately 174,000 shares of our stock at a total cost of $18.7 million under our current $75 million share repurchase plan, which was approved by the Board in June of 2016.

At the end of the second quarter, we had $56.3 million remaining under the plan.

With that, let's turn to guidance.

While net income and EPS guidance has not changed, we have revised some of the other components of our fiscal 2017 guidance.

Net sales growth is projected to be between 2% and 4% with net sales expected to be somewhere between $390 million and $395 million.

Gross margin for the full fiscal year is expected to be above 56%.

Advertising and sales -- advertising and promotion investment is projected to be below 6%.

And net income will be projected to be between $51.3 million and $52.3 million.

Diluted earnings per share is expected to be in the -- in between $3.64 and $3.71, and that's based on an estimated 14.1 million weighted average shares outstanding.

As a reminder, this guidance doesn't include any future acquisitions or divestitures and assumes foreign currency rates and crude oil prices will remain close to current levels for the duration of 2017.

And that completes the financial overview.

Now back to Garry.

Thanks, Jay.

So let's sum up on the call and what did you hear from us on this call today.

You heard that, globally, maintenance products sales grew 4% in the second quarter.

You heard that our operating income grew 5% in the second quarter.

You heard that our diluted earnings per share and net income were negatively impacted as a result of fluctuations in some nonoperating currency-related items period-over-period as well as an adjustment that we recorded to our income tax expense in the second quarter of the year.

You heard that foreign currency exchange rates continue to be a headwind and on a constant currency basis, reduced our net sales by approximately $6.4 million.

Additionally, you heard that the reduction in sales was significantly offset by $4.3 million in transaction-related impacts in EMEA due to the strengthening of the euro and the U.S. dollar against the pound sterling.

You heard that our sales was strong in Canada and that we believe the market will continue to see growth in the coming quarters.

You heard that our sales was strong in Asia with a 21% sales growth in our distributor markets and a 17% sales growth in China.

You heard we're maintaining our net income and EPS guidance for the fiscal year, but we revised a couple of other components of our fiscal year guidance.

In closing, I'd like to share this thought with you, which I originally wrote in our 200 -- 2015 annual report to shareholders.

The vision crushing ritual of quarterly earnings is no measure of success.

A company must have a clear and compelling vision, a -- and a set of core values that drive the culture.

Values must be clearly acted upon.

A clear set of strategic drivers must determine how time, talent, treasure and technology are invested to achieve the stated outcomes.

I believe as long as we continue to execute against our strategic initiatives and stay focused, we will deliver on our 2025 vision.

Thank you for joining us today.

We would be pleased to now open the conference call to your questions.

(Operator Instructions) Your first question comes from the line of Liam Burke from Wunderlich.

Garry, could you give us a little update on how you're rolling out the EZ Reach delivery system outside of the North American markets?

Surely.

And now currently, the only market that it's gone into outside of the U.S. is Australia, and that launched there in the second quarter.

We would expect that later in the year we will see it going to EMEA, maybe not later in this fiscal year.

We've just completed the work to automate one of the machines that make the core element for it, which has -- given the increased capacity that we wanted to be able to take it out into other markets.

So for the rest of this fiscal year, primarily U.S. and some for Australia.

Okay.

I think I got this right.

You mentioned that the WD-40 BIKE product in Europe or EMEA was up 40%.

Is that...

Yes, that's correct.

Is that doable in other regions?

Or is that just unique to Europe?

And how does that make you think about other brand extensions?

Well, there are a lot of -- a lot more bike-centric markets in Europe, thinking of places like Denmark and whatever.

So there are a number of markets over there that we've been able to build distribution in a little more widely than we have in the U.S. because they're not as homogenized as the U.S. But we -- we're very -- we're pleased that we've now been out to, with the line of BIKE product, determine which are the SKUs that are most important to us.

We've also had really good success with BIKE in Canada.

We now have BIKE products distributed through Canada, right through our Canadian tie, which was a great win for us as well.

So it's a long-term play, but it's coming into what we want it to, and that's to be part of the family.

And it's seasonal, too, as you know, so that's something that we deal with that's not normal for us.

Our next question comes from the line of Linda Bolton-Weiser from B. Riley.

So Garry, I think when you guys originally gave the guidance for the fiscal year, you listed off quite a few growth initiatives.

I thought it sounded like a lot for this year, including -- well, I think you are expanding the BIKE line into the U.S. and then on RV lines under 3-IN-ONE for the U.S. and things like that.

So can you just remind us what these things are and what the timing is?

So I'm trying to look for confidence that you can have decent sales growth in the second half, even though your comparisons in the prior year actually get quite a bit harder.

So is there something...

Okay, sure.

So in the U.S., the 2 major initiatives were the launch of WD-40 Specialist Grease, and that launch started in November.

It has full distribution now in Home Depot.

And we're actually coming into the grease season now and it's being -- the distribution is moving out into other retail chains and other customers.

But grease is very seasonal.

It's a lot stronger through spring and summer as people start to put their boats in water and whatever.

So that was one.

The second is our WD-40 Specialist Degreaser product line.

We had expected that to be a little more dominant in the second quarter.

We had a delay in our launch in that and in fact are only now starting to ship that.

And you'll start to see that in shelves through the third and the fourth quarter.

The other initiatives were in Europe.

The RV products are going into distribution, but that won't have a huge impact on us.

That's a small part of the business.

In Europe, one of the major growth impacts was the increasing of WD-40 Smart Straw, and we're starting to progressively convert more countries to a greater percentage of Smart Straw.

We started that in Denmark, have -- now moving into that in the U.K. in quarter 3 and 4. And then on top of that, of course, is the overall growth of the MUP product, the blue and yellow can, in particular, in regions like China and some of Asia and through some of the distributor markets.

And I think those were the major -- Jay, Wendy, did I miss any of the major...

No, those are the kind of the key initiatives.

Those were the key initiatives.

Okay.

And then -- well, what about -- I mean, you mentioned the strength of the -- I think that's the motorbike line, right, not regular bikes.

Motorbike in Europe.

So is the motorbike line rolling out in the U.S.?

Yes, we are going to start shipping Motorbike in the U.S. in the third quarter, and it will be initially going into a couple of customers as we get confident that the SKU offering we have developed.

Even though our research tells it's right, we like -- as you know, we like to pilot things a little bit.

So we're going to roll that out, and then it will become fully in the distribution in the latter part of the year and into the early part of next year.

That's very helpful.

And then when you look at the gross margin guidance, I mean, you kind of just modified the wording such that it's a little bit more favorable for the year in the sense that you said "above" instead of "around," I think, was the words before.

So it looks to me like FX and the oil comparison, oil is about the same as it was last quarter when you reported.

So what makes you change that to be a little more favorable on the gross margin guidance?

Well, the impact from currency has -- was quite significant this year, certainly through where we are today, and it looks like we should be able to continue maintaining the gross margin where we're at unless currency rates change quite a bit.

The other aspect is that most of our costs that we're going to see in our cost of goods are already in our system.

By the time we have the -- are affected by any change in cost, it's about 3 to 4 months maybe.

So we're going to see -- we've got, I think, a much better view of our ability to achieve that in the second half.

Okay.

So it's more like a confidence level more than something majorly changing?

Right.

Okay.

I got you.

And then just on the A&P ratio.

It's sort of like -- I mean, if you've been a little bit struggling to achieve your targeted top line growth, I wonder about the idea that you're actually lowering the plans for advertising and promotion spend.

I mean, is that kind of a dangerous strategic way to approach it?

It seems like you might want to spend more if you're having trouble generating top line.

We're not deliberately making any short-term or long-term changes to our execution.

We are finding some efficiencies.

And as you know, a lot of our marketing is not advertising.

It's other activity, sampling, trade shows.

In fact, only a small portion of our business is -- or our marketing is what you would call traditional advertising.

The other thing is because we're umbrella-ing the brand under the WD-40 brand as well, we're making sure that we're getting good efficiencies there.

And through the year, well, if you look at where we are through the year, we have to substantially increase to even -- to get to the 6% for the year.

So we will come in below 6%.

We're not saying how far below of course because we're not there yet.

But we felt it was -- this was not a decision we made to preserve the bottom line.

This was an outcome, probably more of a confidence thing as well as saying, "Well, here's where we are now.

Where do we think we'll be for the rest of the year?"

Okay.

And then finally, just in terms of the lowering of the sales guidance, I mean, because, actually, Canada was pretty good in the quarter and you've got these other initiatives that are going to be kicking in, in the second half.

And FX hasn't really changed all that much.

So I mean, what is it that's really different?

Like, what's -- what are the key things that are different in the outlook that makes you lower that sales line?

Mexico is not going to get any better.

So we know that now and we're tracking a couple of million for the year behind in Mexico.

And the mix of sales is a little different.

In fact, we're getting more revenue out of Europe as a percentage than before, and that revenue now is translating or -- translating into a lower consolidated number because of the pound.

So there's a little mix going on there.

So -- and then there's a few other markets that, when we looked at the full year, we thought it was prudent to just trim a little bit.

So -- but mainly, it's a mix of sales out of Europe, a little bit out of Mexico.

Well, not a little bit, a couple of million out of Mexico probably and then the balance is just getting sure about the year.

The other thing, too, in the 2 is our -- when you look at the performance of homecare products, we don't talk about it, but they are down and we talk about them being down.

When you look at our -- the core business, which is our maintenance products, it was up 4% in the quarter, and we're happy with the way that all of that is tracking.

So the homecare product does have an impact on the top line.

Our next question comes from the line of Daniel Rizzo from Jefferies.

I was just wondering if -- why it doesn't make sense maybe to go from the Multi-Use Product to -- straight to the EZ Reach Straw, why you take this up to go to the Smart Straw first.

I mean, is -- I mean, would it make more sense just to go to, I guess, the more advanced product?

No.

The people in the homes don't want that.

The EZ Reach has been developed for our heavy-end users.

That's why we only put it into 1 size of 1 can.

But all the people who have cans under their sinks in homes don't want to pay for the extra flexi straw because it doesn't add value to them.

It add values to people who want to get the product to unusual places more often.

So it's not an either/or.

Ladies and gentlemen, that does conclude our allotted time for questions.

We thank you for your participation on today's conference call and ask that you please disconnect your lines.