WD-40 Company (WDFC) Q4 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing-by. Good day and welcome to the WD-40 Company Fourth Quarter and Full Fiscal Year 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 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 August 31, 2016. 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. 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 only current as of today’s date, October 19, 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’d now like to turn the call over to Garry.

Thank you, Wendy. Good day and welcome to our fiscal year 2016 conference call. Today, we reported net sales of $97.2 million for the fourth quarter of fiscal 2016, which was an increase of 6% from the fourth quarter of last year. Changes in foreign currency exchange rates had an unfavorable impact of $2.8 million on consolidated net sales for the fourth quarter of fiscal 2016. So if we removed all currency related impacts, net sales would have increased nearly 9%. Net income was $14.2 million compared to $11.7 million in the fourth quarter of last fiscal year, an increase of 21%. Diluted earnings per share for the fourth quarter were $0.99 compared to $0.80 for the same period last fiscal year. For the full fiscal year net sales were $380.7 million, which was an increase of 1% from last fiscal year. Changes in foreign currency exchange rates had an unfavorable impact of $11.7 million on consolidated net sales for fiscal 2016. So if we removed all currency related impacts, net sales would have increased by about 4%. Net income was $52.6 million in fiscal 2016, reflecting an increase of 17%. Diluted earnings per share for the full year fiscal year were $3.64 compared to $3.04 in the prior fiscal year. For the purpose of this call, after discussing our strategic initiatives, we will be focusing primarily on the financial and operating results for the fourth fiscal quarter. For a complete discussion of our full-year’s results for 2016, please refer to the press release we issued earlier today, or our annual report on form 10-K, which we expect to file with the SEC on Monday, October 24. So let’s start with a discussion about strategic initiatives. 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 uses more frequently. We believe we can grow WD-40 Multi-Use Product to approximately 600 million globally in revenue by the end of fiscal year 2025. In the fourth quarter, global sales of Multi-Use Product were up 7% compared to last year, which includes the growth in all three trading blocks. We have many exciting things planned for the blue and yellow with a little red top during fiscal 2017. We will begin expanding the distribution of our newest innovation, WD-40 EZ Reach Flexible Straw to other geographies beginning with Australia early in 2017. In EMEA, we will increase the rate of converting European end users from – to our more innovating – innovative Smart Straw delivery system. Strategic driver 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 new products and categories within identified geographies and platforms. In the fourth quarter, sales of WD-40 Specialist were 6.3 million, bringing Specialist sales to 21.5 million for the fiscal year. This represents a 14% increase in fiscal 2026 compared to last year. We continue to add new category extensions to the Specialist product line in various geographies around the world. In fiscal 2026, we launched WD-40 Specialist Spray & Stay Gel Lubricant, which solves one of our end users biggest pain points by providing no-drip, no-mess lubrication. We are currently distributing this new product in all major trade channels in the United States. We have many exciting things planned for WD-40 Specialist in fiscal 2017, including a new line of industrial strength cleaners and degreasers, and a full line of greasers designed to simplify lubrication through superior performance. Building on this success we’ve had in EMEA, WD-40 Specialist Motorbike, the United States is introducing a line of WD-40 Specialist motorcycle products. We are optimistic about the long-term opportunities for WD-40 Specialist’s product line, and continue to believe we can grow WD-40 Specialist to approximately $125 million in revenue by the end of fiscal year 2025. Still, there will still be some volatility in sales levels along the way due to the timing of promotional programs, the launch phasing of new products and offerings, and the building of new distribution. Strategic initiative number three, broaden product and revenue base. Our goal under this initiative is to leverage the recognized strengths of WD-40 Company to derive revenues from new sources and brands. Strategic initiative number three includes maintenance products like 3-IN-ONE, WD-40 BIKE, GT85 and we’ve made much progress in evolving these three in the last 12 months. In fiscal year 2017, we will launch a new line under the 3-IN-ONE brand in the United States designed for recreational vehicles, which will appeal to the passionate hobbyists who enjoy creating positive lasting memories with their second home on wheels. Strategic initiative number four is to attract, develop and retain outstanding tribe members. Our long-term target under this initiative is to our grow employee engagement to greater than 95%. At the end of this fiscal year, we had 445 tribe members globally. In 2006, we made an important decision that we believe will help us reach our long-term employment engagement target. We decided to buy a new building that will house both our corporate and Americas tribe members, and last month we closed – we did close escrow on our new facility. We are currently in the progress or process of renovating the property and we expect to move into our new office in San Diego in July 2017. We expect to make a capital investment of approximately $15 million during fiscal year 2017 for the building. Building our company’s bench strength for future success is a top priority. At WD-40 Company succession planning isn’t just a box that we check. We are weaving a complex tapestry, succession planning is a thoughtful and deliberate process, which ultimately results in a clear leadership roadmap. It is my opinion that the most neglected step when it comes to succession planning is preparing for what happens after the successor is named. As a learning and teaching organization, we understand that much support must be provided. To that end, we are making some leadership changes I would like to share with you. Mike Freeman, the President of the Americas will begin to transition to a new role of Chief Strategy Officer. In his role, Mike will continue to report to me and his responsibilities will be to research and understand industry and consumer trends and behaviors that will affect our Company over the next five to seven years. During the transition period, one of Mike’s responsibilities will be to mentor his successor, Steve Brass. Steve will be appointed to the new role of Division President of the Americas in December 2016. Steve has been with our Company for 25 years and has served in various roles during that time. In the most recent role, Steve was the commercial director responsible for the oversight of our EMEA direct markets. We are very excited that Steve and his family have moved to San Diego from the UK, and we wish both Steve and Mike the best in their new roles. Strategic initiative number five is operational excellence. Our goal under this initiative is best summarized by one of our core values here at WD-40 Company, make it better than it is today. 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. We measure ourselves against the operational excellence initiative by executing against our 55/30/25 business model, and by making improvements to the processes and systems while still safeguarding the blue and yellow can with the little red top. During the fiscal year, we continued to make progress on several initiatives. These included completing the transition to a lower VOC formula in the United States, making distribution changes in our German market, and nearing the completion of the upgrade of our ERP system in EMEA. That completes the update on our strategic initiatives so let’s move on to the details of the fourth quarter results starting with sales. As I mentioned before, consolidated net sales were $97.2 million in the fourth quarter, up 6% versus last year. As you know, we focus our time, talent, treasure and technology on growing our maintenance products. In the fourth quarter, sales of maintenance products were nearly $87 million, which is an 8% increase from last year. In the fourth quarter, we generated approximately 40% of our sales in currencies other than the U.S. Changing foreign currency exchange rates continue to be a headwind for us. If we were to remove all foreign currency exchange rates, our consolidated revenue would have been about $100 million, up nearly 9% compared to the fourth quarter of last year. Consolidated net sales were reduced by about $5.7 million due to the impact of the strengthening of the U.S. dollar against the functional currencies of our subsidiaries. What is referred to as translational-related exposure, or constant currency, and it impacts reported results from Canada, Australia, China and the EMEA segment. This reduction in sales was partially offset by $2.9 million in transaction-related impacts in EMEA due to the strengthening of the euro and the U.S. dollar against the pound sterling. Now we can take a closer look at what happened into the individual segments during the fourth quarter. We will start with the Americas. Consolidated net sales in the Americas, which included the United States, Latin America and Canada, increased by 7% to $51.6 million, sales of maintenance products increased by 11% in the Americas primarily due to strong sales in the U.S. and Canada. In U.S. maintenance products sales increased by about 13% due to higher levels of promotional activities for maintenance products and the added distribution of the WD-40 EZ-REACH Flexible Straw. In Canada maintenance products sales were up 7% during the quarter driven by a high level of promotional activities for the WD-40 Multi-Use Product. Maintenance products sales in Latin America were flat in the fourth quarter when compared to last year. Our maintenance products do exclude our home care and cleaning products. We continue to consider our home care 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 home care and cleaning products in the Americas during the fourth quarter decreased 10% from last year. Now over to EMEA. Consolidated net sales in EMEA, which include Europe, the Middle East, Africa and India, increased to $34.6 million in the fourth quarter, up about 4% from last year. If we take both translation and transaction currency impacts into consideration, sales in EMEA would have been $36.8 million, an increase of 11% when compared to the prior year. As you know, we sell into EMEA through a combination of both direct operations as well as through marketing distributors. Net sales in our EMEA direct markets, which account for 66% of the region's sales, declined 4% during the quarter to $22.7 million in U.S. dollars. It is also helpful to look at our results in local currencies in which we conduct sales transactions in direct markets. In the United Kingdom, our pound sterling-based direct market, sales decreased only 1% in the fourth quarter. In euro-based markets, sales in euros increased 1% in the fourth quarter. Now, turn to our EMEA distributor markets which accounted for 34% of EMEA sales during the quarter, distributor market sales increased 23% in the fourth quarter to $11.9 million, primarily due to improved market conditions in Eastern Europe, particularly Russia. Although market conditions have begun to stabilize in Russia, we would like to remind investors that the political and economic instability in the region makes it difficult for us to predict what level of sales we will have in the future. Now on to Asia-Pacific. Consolidated net sales in Asia-Pacific, which includes Australia, China and other countries in the Asian region increased to $11 million in the fourth quarter up 4% from last year. Changes in foreign currency exchange rates had an unfavorable impact on sales. On a constant currency basis, sales in Asia-Pacific would have been $11.5 million, an increase of about 8% compared to last year. In Australia, net sales in U.S. dollars were $4.6 million in the fourth quarter, up 9% compared to last year, in its functional currency the Australian dollar, sales increased 13% in the quarter. The growth was primarily due to a high level of promotional programs in the region and continued growth of our base business. In China, net sales in U.S. dollars were $4.1 million in the fourth quarter, up 12% compared to last year, in its functional currency the Chinese RMB, sales were up 22% in the quarter. The growth was primarily driven by an increase in promotional activities. We are also excited to be celebrating our tenth anniversary of having opened a direct distribution operation into China. Over the last 10 years we've sold over $100 million worth of maintenance products into China and we continue to believe there's a significant opportunity in the country for many years to come. We remain optimistic about our long-term opportunities in that region although we expect a lot of volatility along the way due to the timing of promotional programs, the building of distribution, shifting economic patterns and the varying of industrial activities. In Asian distributor markets net sales were $3.2 million for the quarter, down 18% compared to last year. This decline was primarily due to timing of customer orders and promotional activities. Our Asian distributor markets are not impacted by currency translations since we sell our product in U.S. dollars in these markets. I will take break now and I will hand over to Jay, and I will ask him them to review the financials in a little more depth. Thanks Jay.

Thank you, Garry. Good afternoon. Let's start with a discussion about how we performed against our most recently 2016 guidance. We expected our fiscal 2016 net sales to be slightly above 2015, or between $378 million and $383 million. Today we reported fiscal year revenue of $380.7 million, reflecting an increase in sales of about 1% from fiscal year 2015. We expected our gross margin to be above 55%. Well today we reported gross margin of 56.3%. We expected our global advertising and promotional investment be near 6% of net sales and today we reported our A&P of 5.9% of net sales. We had expected net income to be between $49 million and $50 million, resulting in diluted earnings per share of between $3.40 and $3.47 assuming 14.4 million weighted average shares outstanding. Today we reported net income of $52.6 million and a diluted EPS of $3.64 based on 14.4 million weighted average shares outstanding. Overall, we delivered our full fiscal year results in line with our most recent guidance with the exception of one non-operating item that favorably impacted other income by $2.4 million. And thus increased EPS by approximately $0.12. While foreign currency has negatively impacted our sales results, we reported this $2.4 million of other income from foreign currency gains as a result of the re-measurement of the balance sheets of our subsidiaries. Now let's review the 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 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. Then finally, the 25 represents our resulting EBITDA. First, the 55, our gross margin. In the fourth quarter our gross margin was 57.4% compared to 54.3% last year. Gross margin was positively impacted by 160 basis points from our major input cost changes, 120 basis points from changes in foreign currency exchange rates in EMEA, and 30 basis points from various other items. Let's begin with the major input costs, which include our petroleum-based specialty chemicals and aerosol cans. Crude oil is one of the primary feedstocks of our petroleum-based specialty chemicals and as we have shared with you in the past, it often takes considerable time, approximately 90 to 120 days, for the changes in commodity prices to impact our cost of goods sold. The average cost of crude oil which flowed through our cost of goods sold in the fourth quarter of this year was much lower than in the prior year and thus benefiting our gross margin. As a reminder, our long-term gross margin target of 55% is not contingent on oil staying at any particular price point. We cannot control the global market dynamics such as the price of crude oil or fluctuating currencies, but we can continue to be focused and deliver in managing the rest of our business so that we maintain gross margin at a level close to our target 55% over the long-term. Let's briefly talk about some of the other items impacting gross margin in the fourth quarter. Primarily the changes in foreign currency exchange rates, which positively impacted our gross margin by 120 basis points. This is because in EMEA our cost of goods are sourced primarily in pound sterling. And approximately 45% of our revenues are generated in euros, 30% in pound sterling and the remaining 25% in the U.S. dollar. The combined effect of the strength in both the euro and the U.S. dollar against the pound sterling caused our revenues in total to be worth more this year in pound sterling, thus improving our gross margin. The net effect of sales mix and other miscellaneous costs had a favorable impact in this quarter of about 30 basis points. Now we will look at the 30, or our cost of doing business. In the fourth quarter our cost of doing business was approximately 38% compared to 35% last year. Our goal is to have our cost of doing business to be near 30%. Now period to period, our sales increased by 6%, while our operating expenses increased by 12%, causing a significant increase in our cost of doing business percentage. Our SG&A expense was $32 million in the fourth quarter versus $27.4 million in the prior year. The increase was driven primarily by higher employee costs, which increased year over year due to higher employee-earned incentive accruals. Our growth reward program is based on bottom line results, and our incentive plan applies to every member of the tribe at every level in the organization, and we couldn’t be more pleased to reward their individual and collective efforts. In addition, we continue to make investments for both the future and in support of our fifth strategic initiative, operational excellence, and this includes investments in new product development, R&D quality assurance, regulatory compliance as well as intellectual property protection to safeguard the blue and yellow can with the little red top. We aspire to move closer to our stretch target of 30 over time as revenues grow. For the fourth quarter, 77% of the cost of doing business came from three areas: people costs, or the investments we make in our tribe, and this would include the impact of paying higher earned incentive compensation; the investments we make in marketing advertising and promotion, as a percent of net sales our A&P investment was 5.6% in the fourth quarter; and finally, freight costs. The cost to get our products to our customers. That brings us to EBITDA, the last of our 50/30/25 measures. EBITDA was 22% of net sales for the fourth quarter compared to 19% last year. This increase was primarily driven by the improvements to gross margin that I discussed earlier as well as the other income from foreign currency gains. In the fourth quarter of fiscal 2016 we recorded foreign currency exchange gains of $2 million, whereas in the prior year we recorded approximately $100,000 of such gains. That completes our discussion of our 50/30/25 model for the current quarter, now I will discuss a couple of other items worth noting. The provision for income taxes was 26.3% in the fourth quarter compared to 25.7% last year. The higher tax rate was driven primarily by a shift in earnings mix in the fourth quarter. Compared to the prior-year quarter, a higher level of taxable earnings was generated in countries with higher tax rates. Net income for the fourth quarter was $14.2 million versus $11.7 million in the prior year. Diluted earnings per common share were $0.99 in the fourth quarter compared to $0.80 in the same period last year and diluted weighted average shares decreased to 14.3 million shares from 14.5 million shares a year ago. Now, a word about capital allocation. Capital allocation at WD-40 is a very thoughtful and deliberate process. We focus both on return of capital to our shareholders and investing for the future. We typically target maintenance CapEx of between 1% and 2% of net sales. For fiscal 2017, our capital expenditures will exceed this percentage to accommodate the purchase of our new San Diego facility that Garry discussed earlier. We understand the importance of regular dividends to our stockholders and we targeted dividend payout ratio of 50% of net income and have increased dividends in each of the last five years. On October 11, our board of directors approved a regular quarterly cash dividend of $0.42 a share payable October 31 to stockholders of record at the close of business on October 21. Based on today's closing price of $106.42, the annualized dividend yield is 1.6%. Next, we look at opportunities to invest for future growth. This can be either internal growth such as market expansion and new product introductions or by acquisition. Return on invested capital is a guiding principle for us and we evaluate opportunities based on the highest expected returns. I'm pleased to share with you that for fiscal 2016, our total return on invested capital was an exceptional 33%. After that we look to return capital to stockholders through share repurchases. During the fourth quarter, we acquired approximately 65,000 shares of our stock at a total cost of $7.4 million, bringing total purchases under the $75 million stock purchase plan, which had been approved by our board of directors in October 2014, to approximately 503,000 shares at a total cost of $47.8 million. This plan expired on October 31, 2016. In order for the Company to continue our share repurchase activities the board of directors approved a new share buyback plan on June 21, 2016. This new plan became effective September 1. Under the new plan, the Company is authorized to acquire up to $75 million of outstanding shares through August 31 of 2018. So with that, let's turn to fiscal 2017 guidance. Net sales growth is projected to be between 4% and 6%, with net sales expected to be between $395 million and $404 million. Gross margin for the full year is expected to be near 56%. Advertising and promotional investment is expected to be around our 6% level, and net income is projected to be between $51.3 million and $52.3 million. Diluted earnings per share will be expected to range between $3.64 and $3.71 based on an estimated 14.1 million weighted average shares outstanding. Our sales projections for 2017 reflect the recent and significant deterioration of the pound sterling. The foreign currency exchange rates for the pound sterling against the U.S. dollar has recently declined by approximately 15% from the average rates we experienced last year. This guidance does not include any future acquisitions or divestitures, and assumes that foreign currency exchange rates and crude oil prices will remain close to the current levels for fiscal 2017. In addition the guidance does not assume any significant impact in other income from future balance sheet re-measurements as we experienced in 2016. That completes the financial overview, and I will turn it back to Garry.

Thanks Jay. To sum up, in summary what did you hear from us on this call? You heard that foreign currency exchange rates continue to be a headwind, and they reduced our net sales by about $12 million for the fiscal year. And on the flip side, we had a non-operating income windfall which resulted in foreign currency gains of about $0.12 per share. You heard that for the full fiscal year we achieved EPS of $3.64 which would have been $3.52 excluding the $0.12 windfall, which is still a record and $0.05 above the top-end guidance of our most recent guidance. You heard that global sales of the blue and yellow can with a little red top grew 7% this quarter. You heard that global sales of WD-40 Specialist were $21.5 million in fiscal 2016 representing 14% increase over last year. You heard that the Americas segment is performing well with an 8% growth in sales this quarter. You heard that we will be transitioning Mike Freeman into a new role of Chief Strategy Officer and promoting Steve Brass into the role of Division President of the Americas, and you heard that we met or exceeded all of our most current fiscal year 2016 guidance. In closing, I would like to share a quote with you from someone I consider a kindred spirit, optimist and best selling author, Simon Finnick: Imagine a world where nearly everyone wakes up each day inspired to go to work, feels safe while we're there, and returns home at the end of the day fulfilled by the work they do, feeling they've made a contribution to something greater than themselves. This is the world we envision. Thank you for joining us on the call today. I'll turn back to the operator and be happy to take any questions.

[Operator Instructions] Your first question comes from the line of Daniel Rizzo from Jefferies. Please proceed with your question.

Good afternoon, guys.

Hi, Daniel.

How are you? Can you tell me what the operating income is for the different regions do you break that out before the 10-K is distributed?

We have not.

Okay. And then you’ve indicated that the easy use spray was kind of a strong driver in the Americas or particularly in North America. I was wondering if you breaking out at this point with the percentage of sales of this what that’s really contributing to the overall growth.

No, we haven’t broken it out as an individual product line but we are very happy with its origin – initial launch and as we shared will be taking it out to a more global geographies over the next year, in particular we’ll start in Australia, we’re already in Canada and moving into Latin America and hopefully EMEA later on in the end of next year.

Okay, and that I'm sorry, you indicated there was an operating income windfall of what $0.12 per share in the quarter. Can you just go over what you said I missed what you say that came from exactly, I know it has something to do with FX but what exactly was it?

Well Jay, I’ll do that. Yes it from the revaluation the re-measurement of our balance sheets, our foreign subsidiary balance sheets that are their functional currencies are other than the U.S. dollar and as we remeasure them for reporting them in consolidation they generated losses.

Or excuse me gains.

And it was particularly caused by the Brexit exit and the massive reduction in the value of the pound against the U.S. dollar.

So it was – because of Brexit.

Okay, all right thank you for clarification.

Sure.

Our next question comes from the line of William Burks from Wunderlich. Please proceed with your question.

Thank you. Good afternoon Gary, good afternoon Jay.

Hey William.

Hey William.

Garry, you guided to 56% gross margin which is a little about above your longer term target presuming that oil prices or your input cost on oil remains flat. Where do you see the pickup in terms of margin? Gross margin?

Our plan for next year assumes oil will be in the $45 to $60 range. If it stays there in my are a member William, part of our gross margin enhancement strategy apart from some of the – you got from oil was developing products particularly in Specialist line and particularly also in areas of immunization like EZ-REACH and et cetera that would be margin positive. As the mix changes around that, you will see some of that embeds into place. We'd also see that Europe we have as Europe continues to stabilize, margins there again hold up. We feel reasonably comfortable that this margin number is pretty good, Jay.

Yes, that’s right Garry. In addition there's also an impact from currency, the current weekend sterling against the pound and the dollar, generates a higher gross margin in Europe, in our current period. And as we project forward if that stays at the same rates we would see that benefit accruing as well.

You noted that we got 120 basis points benefit in the quarter because of that.

Right. Garry you talked a lot about currency translations. You didn't talk about other headwinds in the business that would – revenue growth. Can you talk about anything that you are worried about in terms of slowing your plan and growing the revenue?

William we are very comfortable with the two major strategic drivers we have. Year-over-year if you broke out the impact of currency we grew our maintenance products revenue globally by about 5%. So our whole business is in we believe some – in very good condition. As long as we stay focused on strategic driver number one and number two which is grow the blue and yellow can more people more prices more uses more often and then deliberately working on leveraging the shield or specialist will be happy with that. We've also done some great work on 3-IN-ONE, you may have heard we are releasing a new range of recreational vehicle maintenance OpEx under the 3-IN-ONE brandthat we already have gain distribution on those it is a major distribution channels. So the business is in good shape. What could blow us off course? We still don't know what the recoveries going to be like in Eastern Europe. We had a bit of a comeback in Russia it seems to settle down but who knows. But we wake up every day knowing we live in this volatile uncertain complex world all of ambiguity but I think we've proven over the past years that in calm seas we sail okay and in rough seas we kind of do okay as well. So is a lot of confidence around our business right now, the tribe are in great shape and employee engagement is extremely high. They are passionate and up is driven so this is a great time to be at WD-40 company.

Great, thanks Garry, thanks Jay.

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.