Ladies and gentlemen, thank you for standing-by. Good day and welcome to the WD-40 Company Third Fiscal Quarter 2016 Earnings Conference Call. Today’s call is being recorded. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the presentation over to the host for today’s call, Ms. Wendy Kelley, Director of Investor Relations & 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 & Chief Executive Officer, Garry Ridge; and Vice President & 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 May 31, 2016. These documents are available on our Investor Relations Web site 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 expectation 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 discussions. 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, July 7, 2016. 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 now like to turn the call over to Garry.

Thanks, Wendy. Good day and thanks for joining us on today’s conference call. Today, we reported net sales of 96.4 million for the third quarter of fiscal year 2016, which was an increase of 4% from Q3 of last fiscal year. Net income for the third quarter was 12.7 million compared to 11 million in Q3 last year, an increase of 16%. Diluted earnings per share for the third quarter were $0.88 compared to $0.75 for the same period last fiscal year. As we review our results for the third quarter, we will be doing so under the umbrella of our 55/30/25 rule and our strategic initiatives. So before we dive into the sales results, let me take a moment to review our strategic initiatives, as well as our long-term targets. Strategic initiative number one is to grow WD-40 Multi-Use Product. Our most important strategic initiative is to take the blue and yellow can with a little red top to more places, for more people who will find more usage more frequently. We believe we can grow WD-40 Multi-Use Product to approximately 600 million globally in revenue over the next 10 years. Global sales of Multi-Use Product were up 7% this quarter compared to last year, this increase was due to solid sales growth of the Multi-Use Product in all three trading blocks. This growth was primarily attributed to successful promotional programs we run in our Asian distributor markets, a change we made to our distribution model in our Germanics region, and sales of WD-40 EZ-REACH in United States, which continues to exceed our original expectation. Strategic initiative number two is to grow the WD-40 Specialist product line. Our goal under this initiative is to leverage the power of the Shield to develop Use Products and categories within identified geographies…

Hi, Gary, thank you. First, let’s review our 55/30/25 Rule. Those are the long-term horizon targets that we use to guide our business. As you may recall, the 55 represents gross margin, which we target to be a 55% of net 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 net sales. Finally, the 25 represents EBITDA. Well, if our gross margin is a 55% and our cost of business is a 30%, our EBITDA will be awfully close to 25%. First the 55 or gross margin, in the third quarter our gross margin was 56.8% compared to the 53.3% last year. Our gross margin was positively impacted by 200 basis points from major input costs and 160 basis points and various other items. Let's begin with the major inputs costs, which include, our petroleum based specialty chemicals, and aerosol cans, crude oil is one of the primary feedstocks of our petroleum-based chemicals. Our gross margin this quarter reflects the lowest cost we've seen in well over a decade. As you may recall and we've shared with you in the past, it takes considerable time approximately 90 to 120 days for changing commodity prices to impact our cost of goods sold. The cost of crude declined sharply in the second quarter of this fiscal year, and this significantly benefited our gross margin in our third quarter. Since the beginning of the third quarter however the price of oil has risen by more than 60% and as a result of this recent trend, we do not expect to realize the same level of benefit to gross margin in future quarters. As a remainder, our long-term gross margin target of 55% is not contingent…

Thanks, Jay. Let me sum up with what we hope you heard on the call today. You've heard that foreign currency exchange rates continue to be a headwind, albeit a weaker one and they reduced our net sales by about 1.2 million in the third quarter. You heard that globally maintenance product sales grew 6% this quarter. You heard that the Americas segment is performing well and in line with our expectations with a 3% growth of maintenance products sales this quarter. You heard that third quarter global sales of WD-40 Specialist were 5.6 million which represents an 8% increase over the third quarter of last year. You heard that most of our EMEA direct markets reported solid double-digit sales growth and that we are seeing some recovery of market conditions in Eastern Europe. You heard that crude oil prices have trended up from recent lows and therefore we expect some pressure on gross margin in the coming quarters. You heard that we'll be making a capital investment of approximately $15 million in order to purchase a new office building for our San Diego-based tribe members to call home. You heard that our Board of Directors approved a new share buyback plan that authorizes the Company to acquire up to 75 million of its outstanding shares through 2018. You heard that there is a lot of uncertainty around the British exit from the EU. Despite some currency related headwinds that we’re likely to encounter, the underlying business will endure because we still see that there are squeaks in the United Kingdom and in other countries in the European Union. You heard that we have revised our fiscal year 2000 guidance to reflect our current view of market conditions in the business. In closing, I’d like to share a quote with you from our famous San Diegan Dr. Seuss. Sometimes you’ll never know the value of a moment until it becomes a memory. Let's wish the memory of the UK a good one. Thanks for joining us on the call today. And being an Aussie I could say God thank the Queen. We’ll now be pleased to open the conference for questions.

[Operator Instructions] Our first question comes from the line of Liam Burke from Wunderlich. Please proceed with your question.

Garry, could you give us a sense how the emerging markets are doing particularly China. You talked a bit about Asia-Pacific, you talked about currency. But how is the, generally how is the market doing in China?

We continue to build distribution in China, in fact Liam after this call today I’m headed to LA and I’ll be on a flight to Shanghai and I’ll have a fresh view. But we are still comfortable and confident that we will build the business in China overtime that’s going to be worth about $100 million as we see it today. So we don’t see anything that would tell us it’s any different other than events that we’re unaware of. So China to us continues to be a focused growth market and the thing that gives me Goosebumps is this morning someone in China woke up and met WD-40 for the first time and if that continues to happen we’ll be fine.

And in terms of the new product innovation is a big push for your incremental revenue growth. How is the new product pipeline looking, I mean without being specific but I mean a lot of these things you’d like to wait until the last night before announcing, but how does the pipeline look?

It looks very solid. I just attended our 12 month rolling planning meeting a week ago and was witnessed to some of the very exciting products that are getting ready to launch later this year and early next year. So the pipeline is solid and we’re optimistic. The other thing that we’re really happy about Liam is even with all the noise and everything that’s going on in the world. Our multi-purpose maintenance products year-to-date are up 4% globally. And that takes into account all these other events that are happened when you strip out the impact of currency. So our strategy is to drive our focus of time, talent, treasure and technology, on activity that we see to be the most opportunity and that’s growing the blue and yellow can and then using the power of the Shield to grow Specialist and we know what our circle of competence is and we’re not going to get outside that. So we feel good in the world we will deal with events as they come.

Our next question comes from Linda Bolton-Weiser with B. Riley. Please proceed with your question.

So in terms of the UK and the devaluation of the British pound, I know that that has a couple of different effects on your income statement, top-line effects as well as, I think it’s going to be a positive, a favorable growth margin effect because of the cost side. Can you maybe just go over what those effects are just so we’re all clear on the nature of those impacts?

I’ll let Jay handle that.

Well, I think you’re exactly right that as the pound weakens against dollar and the euro, what happens is the sterling results, which the -- all of our European businesses denominated sterling results. They get translated over at lower rates. So that effects top-line, middle-line and bottom-line. However, in sterling, you’re right that’s the lower or the weekend sterling results in higher sales in non-sterling currencies in that market and that’s does impact in benefit gross margin. So there is a little offset.

So net-net, is the British pound devaluation a positive or a negative to net income for your Company?

It would be a net-net negative, but although a small one.

Okay, got you. And then of course we don’t know what’s going to happen with aftereffects in the economy in Europe, but is it safe to say that if the economy were to soften that your product I mean it's an industrial type product, I mean your business would be somewhat impacted by that if that were to happen, is that the way to think about it?

We don't know, Linda. I mean he who runs business by the crystal ball lens to a glass, I would say we been through different economic and whatever periods overtime. I think it's a shambolic condition in Europe right now and we don’t and I am not smart enough to predict it. Right now, early indications are we're not seeing evidence of that, but who knows, time will tell we'll know more in a few -- little time. We've grown in past years through most financial crises that there are and it's because of our global diversity and the diversity of our business across multiple trade channels. Sure, industrial is a big part of our business, but DIY is a huge part of that business so is automotive, so is marine, so is farming. So, we feel blessed to have that shield if you will excuse the pun, but we'll see what happens.

Okay. And then just in terms of the gross margin pressure that you mentioned in your press release that we shouldn't expect this high level to continue so when you talk about pressure, I assume you mean coming down off this high growth margin level, but doesn't that mean though you still to be up year-over-year for a couple more quarters, I am picturing first half 2017 maybe up, but then second half down year-over-year, is that, am I thinking of that correctly?

Yes, certainly we could be up for another couple of quarters on a year-over-year basis and we would just expect that given the current cost and the current market. What we saw, however, though in our third quarter was some very unusually low prices that were in the market in our second quarter and when that flowed into our cost of goods this quarter it -- we don't see those likely repeating. However, if we do see it oil fallback to that point, we would see similar opportunities in future. Now there was a period of time Linda you probably may remember in the January-February-March time, when oil was in the high 20s, low 30s. It's now up around 40 to 50, or high 40s to 50s. So we could see some of that impact in this quarter.

Okay. And then you had mentioned that you adopted a new modeling something in the Germanics I didn't quite catch what that was? I mean that’s a -- you're not using distributors there I don't think, and can you explain is that strong growth was like a onetime channel fill or is that strong growth going to continue do you think?

Basically it's an evolution of the market, in the Germanics and it's happened elsewhere as we build markets, but sometimes we use wholesalers to sell into major retail chains, so we don’t -- I mean it's a direct market but we would sell to a theater or a wholesaler who would then sell into a retail chain. The reason being you have to have a certain velocity within a retail chain for it to be economical for us to service that retail chain directly and in some cases they didn't have their own internal distribution that was aligned to the way we sell. So in the DIY trade channel in Germany, we are converting to direct supply to people like Bell House and OB and whatever. And in doing that, we get closer to the customer we're able to expand the product offering and take in more sizes and more product like Specialist and Bike and we’ve been in the early stages of doing that all this year, so we're going to continue we think to see some pretty good growth in that channel in Germany for a while to come. And as part of our strategy and that we've identified for a while now that Germany is the second biggest DIY market in the world. And we're only about 65% of our potential in that trade channel, so this was a strategic move to start to accelerate our expansion in that trade channel.

And then just the Canada weakness I mean you kind of mentioned that again, I guess that's related to the oil industry weakness, so does the trend there is it looking like it's getting worse or better or just what do you think?

Canada has been a basket case this year and I feel for our tribe members up there. They’ve done a lot of hard work and they fought a hard battle, where we see it's kind of stabilizing but it is the oil going to -- is oil going to regenerate activity in the west, I don't know. But we're going to lap a bad year so hopefully it won’t look so bad next year, but it's been a tough year for our folks up in Canada and we're hopeful that we'll get through this and next year will be better.

And then I guess the distributor markets in the EMEA like the Russia and all that that was up about what mid single-digit in the quarter? Is that, do you consider that then a recovered level of business activity so we could see modest growth then going forward do you think?

Well, as far as Russia is concerned, I don't think Russia is out of the -- out of where it should be now, the sales remain depressed, the economic sanctions and lower oil prices have led Russia into a deep recession. Some experts believe the economy in Russia will start to grow in calendar year 2017, but even with the growth rate being relatively low maybe 1% to 2%, in the third quarter our sales were up nearly 31% in Russia over the last year, but this was less to do with the Russian market improving dramatically, meaning there were more to do with the fact we've been experiencing, in our Russia distributor markets from Q3 '15 because that's when the economic crisis began. So, we -- I think it'll take us a while to get back to where we were in Russia. I think it's -- we've seen over two quarters now, a flattening out of the downtrend if you will. So, hopefully we'll just have to take it step-by-step as that economy gets better overtime.

And then just lastly you made it clear that you’ll have this 15 million CapEx investment next year for the new headquarters and you're adding some debt, so does that imply that your usual share repurchase level could be expected to remain as expected you wouldn't change it just because of that?

That would be our expectation. We see the activity that's taken place over the last five years to continue and we see the -- and our dividend policy is unchanged and as Jay said he's personally happy with this because he can put a bit of long-term debt on the balance sheet, and put the balance sheet to work for a good purpose.

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 line.