Ladies and gentlemen, thank you for standing-by. Good day and welcome to the WD-40 Company Second Quarter Fiscal Year 2017 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 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 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, 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 non-operating 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 non-operating 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 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 in revenue by the end of fiscal year 2025. In the second quarter global sales of multiuse products were up 4% driven by increased product sales in all three trading blocks. In addition WD-40 EZ-REACH Flexible Straw continues to perform well in the U.S. and we have just launched this…

Thanks Gary. First let's review our 55, 30, 25 business model, the long-term targets we use to guide our business. You may recall the 55 represents gross margin which we target to be 55% of sales. But 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 of 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 margins by 160 basis points. This is because in EMEA our cost of goods are sourced primarily in pounds 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 and exchanges 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 the petroleum based specialty chemicals in aerosol cans which together impacted our gross margin by just…

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 non-operating 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 continued 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 the 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 were strong in Asia with a 21% sales growth in our distributor markets and a 17% sales growth in China. You heard we are 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 2015 annual report to shareholders. The vision crushing ritual of quarterly earnings is no measure of success. The company must have a clear and compelling vision and a set of cold 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 state of 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 and 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. Please proceed with your question.

Thank you. Good afternoon Gary, good afternoon Jay.

Good afternoon Liam.

Gary 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 currently the only market that it has 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 go into EMEA, maybe not later in this fiscal year. We've just completed the work to order made one of the machines that make the core element which has given it 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 is 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 more BIKE centric markets in Europe. Thinking of places like Denmark and whatever so there are a number of markets over there that we have been able to build distribution a little more widely than we have in the U.S. because they're not as modernized as the U.S. but we are very -- we are pleased that we've now been able to -- with the line of bike product determine which of 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 Tire which was a great win for us as well. So it's a long-term play but it's coming in to what we wanted 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.

Okay, thank you Garry.

Thanks Liam.

Our next question comes from the line of Linda Bolton Weiser from B. Riley. Please proceed with your question.

Hi, how are you?

Good.

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 line for under 3 and 1 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.

Okay, sure. In the U.S. the two 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 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. They are the products 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 and now moving into that in the UK in quarter three and four. And then on top of that of course is the overall growth of the MUP product, the blue and yellow can and particularly 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, this is the kind of 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 motorbikes 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 us it's right we like -- as you know we like to pilot things a little bit so we are going to roll that out and then it will become fully into distribution late in the latter part of the year and into the early part of next year.

Okay, thank you that's very helpful. And then when you look at the gross margin guidance I mean you kind of just kind of 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 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 are 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 costs it is about three to four 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 is 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 is 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 that because we are broiling the brand under the WD-40 brand as well we're making sure that we're getting good efficiencies there. And through the year if you look at where we are through the year we have to substantially increase to even get to the 6% for the year. So we will come in below 6%. We are 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 will be for the rest of the year.

Okay and then finally look in terms of the lowering of the sales guidance, you know 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 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 into a lower consolidated number because of the pound. So there's a little mix going on there 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. But mainly it's a mix of sales out of Europe, a little bit out of Mexico, well that is not a little bit, a couple of million out of Mexico probably and then the balance is just getting sure about the year.

Okay, alright thanks so much Garry.

Well the other thing two into two is 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 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 products does have an impact on the top line.

Right, thank you.

Our next question comes from the line of Daniel Rizzo from Jefferies. Please proceed with your question.

Hi everyone, how are you doing. I was just wondering if it is -- why it doesn't make sense maybe to go from the Multi-Use product to straight to the EZ-REACH Straw, why you take the step to go to the Smart Straw first. I mean would it make more sense just to go I guess the more advanced product?

No, the people in the homes don't want that. The EZ-REACH is being developed for our heavy end users that's why we only put it into one size of one can. But all the people who have cans under the sinks in homes don't want to pay for the extra flexi straw because it doesn't add value to them. It adds value to people who want to get the product to an unusual places more often. So it is not either the whole.

Okay, thank you very much.

Okay.

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.