WD-40 Company (WDFC) Q3 2018 Earnings Report, Transcript and Summary

Good day, and welcome to the WD-40 Company Third Quarter Fiscal Year 2018 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 May 31, 2018. 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 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 could 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, July 10, 2018. 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.

Thanks, Wendy. Good day everyone and thanks for joining us for today’s conference call. Today, we reported net sales of 107 million for the third quarter of fiscal 2018 compared to 98.2 million in the third period last year. This reflects an increase of 9% year-over-year. Foreign currency exchange rates favorably impacted our sales in the third quarter. On a constant currency basis, we grew net sales by 5% year-over-year. Net income for the third quarter was 16.1 million compared to 14.4 million in the third quarter of last fiscal year, an increase of 12% period-over-period, and diluted earnings per share for the third quarter were $1.15 compared to $1.02 for the same period last fiscal year. Now let’s start our discussions about our strategic initiatives. As most of you will recall, our long-term revenue target is to drive consolidated net sales to approximately 700 million in revenue by the end of fiscal year 2025 and to do so while following our 55/30/25 business model. We’d like to remind investors that those long-term targets are guideposts, not guidance. We acknowledge that our anticipated 2025 targets are aspirational, but we continue to believe if we keep our focus in the right places we can be successful in moving towards these targets. Our strategic driver number one is to grow WD-40 Multi-Use Product. Our most important strategic driver 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. In order to achieve our target of 530 million of Multi-Purpose Product revenue, we need to continue our steady building of the Multi-Purpose Product across all markets through both geographic expansion as well as through innovation. In the third quarter, global sales of WD-40 Multi-Use Product were 82.5 million reflecting an increase of 10% compared to the third quarter of last year. Year-to-date, net sales of WD-40 Multi-Use Product were up 8% compared to last year. In our developed markets, we continue to drive revenue growth through innovation of our flagship product which includes premiumization. As part of our premiumization strategy, we continue to successfully convert WD-40 Multi-Use Product end users to our more innovative Smart Straw and EZ-REACH delivery systems. In developing and emerging markets, we continued to build brand awareness among end users through product sampling, specifically targeted end user groups in countries identified as key growth opportunities. As we’ve shared with investors before, we’re investing an additional 1 million in brand building this fiscal year to support initiatives like these. Our strategic driver number two is to grow the WD-40 Specialist product line. Our target under this initiative is to grow the WD-40 Specialist product line through continued geographic expansion as well as by developing new products and product categories. Our focus is on building market awareness and distribution of WD-40 Specialist in order to achieve our stated goal of 100 million in revenue by the end of 2025. In the third quarter, global sales of WD-40 Specialist were 8.5 million, up 16% compared to the third quarter of last year. Year-to-date, net sales of Specialist were 23.4 million, up 26% compared to last year. We are optimistic about the long-term opportunities for WD-40 Specialist. However, there may be some volatility in sales levels along the way due to the timing of promotional programs as we build out distribution and various other factors that come with building out a new product line. Strategic initiative number three is to broaden our product and revenue base. Our goal under this initiative is to leverage the recognized strengths of WD-40 Company, to derive revenue from existing brands as well as from new sources and products. Strategic initiative number three includes maintenance products of 3-IN-ONE, WD-40 Bike and GT85, but also includes homecare and cleaning product brands like Spot Shot, Lava in the Americas; 1001 in EMEA; and No Vac and Solvol in Asia Pacific. We believe we will continue to nurture and grow the products included under this initiative and expect their combined revenue to reach approximately 70 million by the end of fiscal year 2025. In the third quarter, global sales of products included under this initiative were 12.1 million reflecting an increase of 11% compared to the third quarter of last year. Year-to-date, net sales of products included under this initiative were up 6% compared to last year. WD-40 BIKE had a particularly strong third quarter with solid sales growth across all three trading blocks. Much of the success we’ve seen with BIKE has been achieved through our growing digital presence. As I mentioned a few moments ago, we’re investing an additional $1 million in brand building this fiscal year and a sizable portion of that investment is being used to support and enhance our global digital presence where products like WD-40 BIKE and other Specialist products thrive. Strategic driver number four is to attract, develop, and retain outstanding tribe members. Our goal under this initiative is to attract, develop, and retain talented tribe members to grow our tribe member engagement to greater than 95%. At the end of the third quarter, we had 467 tribe members around the globe. To support our tribe’s culture, we launched our Leadership Lab program back in 2011 to develop our tribe, sharpen skills, and ultimately build our company’s bench strength. Today, our Leadership Lab is present in all three trading blocks and over 920 attendees have engaged in more than 21,000 hours of learning under this program. We recently announced our next generation approach to Leadership Lab, a learning laboratory that is a global program for people development. These learning tools delivered by our tribe for our tribe are excellent examples of our continued commitment to our thriving global workforce. Additionally, I’m happy to share with you that we continue to make progress on our plans for renovating a new building to house our UK-based tribe members and we expect to move the tribe to this new building in the second half of fiscal 2019. Finally, our fifth strategic initiative is operational excellence. Our goal under this initiative is best summarized by one of our core values here at WD-40 Company, making it better than it is today. We measure ourselves against the operational excellence initiative by executing against our 55/30/25 business model and by making improvements to processes and systems while safeguarding our brands. Volatile commodity prices, particularly those for crude oil, have negatively impacted our gross margins recently but over the long term, our 55/30/25 business model guides our business decisions. Accordingly, we have recently made some proactive price increases to ensure our gross margin will remain within our target ranges over the long term. Although some of these price rises were in effect prior to the end of the third quarter, in the Americas the price increases just went into effect in June. As a result, we expect we will begin to see the effect of these price increases reflected in our gross margin in the fourth quarter. That completes our update on the strategic initiatives. So let’s move on to in a little more details around our third quarter results starting with sales. As I mentioned earlier, consolidated net sales were 107 million in the third quarter, up 9% versus the third quarter last year. Translation of our foreign subsidiary results from their functional currencies to the U.S. dollar had a favorable impact on sales. On a constant currency basis, total net sales would have been 102.6 million, an increase of 5% compared to last year. This is what we refer to as translation-related impacts and it affects reported results from Canada, Australia, China, and the EMEA segment. In addition, we experienced about 330,000 unfavorable transaction-related impacts in EMEA which slightly offset the impacts of translation. So in total, changes in foreign currency exchange rates increased our net sales by about 4.1 million in the third quarter. Now we’ll take a closer look at the individual segments and we’ll start with the Americas. Net sales in the Americas, which include the United States, Latin America and Canada, increased to 53 million in the third quarter, up about 8% from last year. Year-to-date, sales in the Americas were up 5% compared to last year. Sales of maintenance products increased 12% or 5 million in the Americas, largely due to higher sales of maintenance products in the U.S., Latin America and Canada. Maintenance products sales in the United States increased 6% in the third quarter, primarily due to the timing of customers’ orders as well as a 12% increase in the sales of WD-40 EZ-REACH. In addition, maintenance products sales were up 34% in Latin America and 39% in Canada mostly due to the timing of customers’ orders and the successful promotional programs that continue in both regions. We estimate that sales of maintenance products in the Americas were up approximately 2 million in the current quarter due to certain customers buying extra product in advance of the price increase which went into effect in June. As a reminder, our maintenance products exclude our homecare and cleaning products. Sales of our homecare and cleaning products in the Americas decreased 18% in the third quarter compared to the prior year largely due to lower sales of 2000 Flushes, Spot Shot and Carpet Fresh. Now we’ll move over to EMEA. Net sales in EMEA, which includes Europe, the Middle East, Africa, and India, increased to 39.6 million in the third quarter, up 15% from last year. Year-to-date, net sales in EMEA are up 13% compared to last year. EMEA reported results in the third quarter were positively impacted by foreign currency exchange rates. On a constant currency basis, sales in the EMEA increased by 4% compared to last year. As you know, we sell into EMEA through a combination of direct operations as well as through marketing distributors. Net sales in EMEA direct markets, which accounted for 66% of the region’s sales, increased 19% during the quarter to US$26.1 million. This increase was a result of increased sales of maintenance products in the region and due to foreign currency exchange rates, new distribution and higher levels of promotional activity. Net sales in EMEA distributor markets, which accounted for 34% of the region’s sales, increased 9% during the quarter to US$13.5 million. This increase is primarily due to the timing of customer orders of WD-40 Multi-Use Products in Northern Europe. Partially offset, these increases was a 7% decline in sales in Russia due to the continued instability in the region. Russian sales during the quarter were also impacted due to restrictions that were placed on shipments of certain products into Russia during the World Cup. These continued challenges in Russia are preventing the distributor market from realizing even higher levels of growth year-over-year. Now we’ll go down to Asia-Pacific. Consolidated net sales in Asia-Pacific, which includes Australia, China, and other countries in the region, decreased to 14.4 million in the third quarter, down 2% from last year. Year-to-date, net sales in Asia-Pacific were up 3% compared to last year. Asia-Pacific’s reported results in the third quarter were positively impacted by foreign currency exchange rates. On a constant currency basis, sales in Asia-Pacific decreased by 5% compared to last year. In Australia, net sales in U.S. dollars were 4.7 million in the third quarter, up 5% compared to last year. Changes in foreign currency exchange rates did not have a significant impact on sales for Australia in the period. This increase in sales was driven primarily by successful promotional activities and the expanded distribution of WD-40 Specialist product line in Australia. In our Asia distributor markets, net sales were 5.5 million in the quarter, down 17% compared to last year. Our marketing distributor business in Asia-Pacific has been negatively impacted due to the transitioning of three major marketing distributor partners in the region. This transition has caused the disruption in the region but we believe that we are through the worst part of that transition and that the region will return to growth in the fourth quarter. Our Asian distributor markets are not impacted by currency since we sell our products in U.S. dollars in the region. In China, net sales in U.S. dollars were 4.2 million in the third quarter, up 17% compared to last year. Changes in foreign currency exchange rates had a positive impact on these sales. On a constant currency basis, sales would have increased 8% period-to-period. The increase in sales was primarily due to successful promotional programs that are ongoing and conducted during the third quarter of this year. We remain optimistic about our long-term opportunities in China, although we do expect volatility along the way due to the timing of promotional programs, the building of distribution, shifting economic patterns and varying industrial activities. Now that's it for me. I'm going to pass over to Jay who will continue the review of the financials.

Thanks, Garry. First, let's review the 55/30/25 business model. These are 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 net sales. The 30 represents our cost of doing business, which is our total operating expenses excluding depreciation and amortization. Our goal is to drive our cost of doing business over time toward 30% of net sales. And finally, the 25 which represents EBITDA. Let’s look at the 55 or our gross margin. In the third quarter, our gross margin was 55.8% compared to 55.3% last year. This represents a decline of 50 basis points and for the first time in a few years that our gross margin has dipped below our long-term target of 55%. Changes in major input costs, which include petroleum-based specialty chemicals and aerosol cans, was the primary driver of this decline and negatively impacted our margin by 140 basis points. As you know, crude oil is one of the primary feedstocks of our petroleum-based specialty chemicals and recently we’ve experienced rising oil costs which have put pressure on our cost of goods in all three of our trading blocks. Rising petroleum-based specialty chemical costs negatively impacted our gross margin by 100 basis points in the quarter. Also contributing negatively to our gross margin by 40 basis points was the increased cost of aerosol cans. In addition, gross margin was also negatively impacted by 40% due to higher warehousing and inbound freight costs, mostly in the Americas segment and primarily due to the freight market in the U.S. Promotion and other discounts that we give our customers also negatively impacted gross margin by 30 basis points. Then finally we had changes in foreign currency exchange rates negatively impacted gross margin by 20 points due to fluctuations in exchange rates for the euro and U.S. dollar against the pound sterling in our EMEA segment. This is because in EMEA, our cost of goods are sourced primarily in pound sterling or approximately 70% of our revenues are generated in currencies other than the pound sterling. These negative impacts to gross margin were partially offset by the combined effects of favorable sales mix changes and decreases in other miscellaneous costs primarily in the Americas and EMEA segments which positively impacted gross margin by 130 basis points. In addition, sales price increases which we implemented in EMEA and Asia-Pacific over the last 12 months positively impacted gross margin by 50 basis points. Continually rising input costs have made it necessary for us to review our pricing structure and implement price increases in each of our trade blocks. The price increases in the Americas will take effect in the fourth quarter of this year and will begin to be reflected on our gross margin in coming quarters. In the near term, we expect with these price increases in place we can manage gross margin at a level that is near our target of 55%. Unfortunately, due to the recent volatility in the price of crude oil, it is uncertain the level to which our gross margin will be impacted over the short term. However, we will continue to be focused and deliberate in managing our business so that we can maintain our gross margin at a level that is above our target of 55% over the long term. Now I’ll address the 30 or our cost of doing business. In the third quarter, our cost of doing business was approximately 32% compared to 33% last year. Revenue growth is the most important factor in achieving our long-term target of 30%. In the third quarter of this year, our reported revenue increase positively affected our cost of doing business percentage. And for the third quarter, 72% of our cost of doing business came from three areas; people costs or the investments we make in our tribe; the investments we make in marketing, advertising and promotion. As a percent of sales, our A&P investment was 5.1% in the third quarter. And then finally, freight costs, the cost to get our products to our customers. In the third quarter, our cost of doing business increased $2.4 million compared to last year primarily due to $1.2 million in unfavorable impacts from changes in foreign currency exchange rates. Various other items also contributed to the increase in our cost of doing business including increased travel and meeting expenses along with general overhead costs. Increased investment in research and development also impacted the cost of doing business in the third quarter. These increases were slightly offset by lower employee-related costs due to lower earned incentive compensation. While our long-term objective is to have our cost of doing business closer to our target of 30% of net sales, we’ll continue to make the necessary investments in support of our strategic initiative that of operational excellence. And that brings us to EBITDA, the last of our 55/30/25 measures. EBITDA was 23% of net sales in the quarter. That completes our discussion of the 55/30/25 business model for the current quarter. I’ll now discuss a couple of other items worth noting. The first, our provision for income tax was 24.3% in the third quarter compared to 28.8% last year. The decrease in the effective income tax rate was primarily due to the favorable impact from the Tax Cuts and Jobs Act in the U.S. which became effective for us in the second quarter of this year. Based on our initial analysis of the U.S. tax reform but subject to revisions of our provisional amounts, we expect that our effective tax rate for the full fiscal year 2018 will be in the 22% to 23% range. Net income for the third quarter was $16.1 million versus $14.4 million in the prior year reflecting an increase of 12%. Changes in foreign currency exchange rates had a favorable impact of about $800,000 on the translation of our consolidated results this quarter. On a constant currency basis, net income would have increased by 6% compared to last year. Diluted earnings per common share were $1.15 in the third quarter compared to $1.02 for the same period last year. Diluted weighted average shares outstanding decreased to 13.9 million shares from 14 million shares a year ago. Now, a word about our balance sheet and capital allocation. Due to the recent tax law changes in May, we decided we’ll repatriate a portion of our earnings generated abroad. As a result, you will see large fluctuations on our balance sheet between short-term investments and cash and cash equivalents for the current quarter. Since our plans are to use the proceeds to pay down a portion of our line of credit in the fourth quarter, we also reclassified $80 million of our line of credit balances from long term to short term as of May 2018. Though we are in the process of repatriating these earnings, our capital allocation strategy remains largely the same and includes a comprehensive approach to balance investing and long-term growth while providing strong returns to our stockholders. We typically target maintenance CapEx of between 1% and 2% of net sales, but as we previously disclosed, in addition to our normal maintenance CapEx, we have purchased and are in the early stages of renovating an office building to house our UK-based tribe members. In total, this capital expense will cost approximately US$13 million which will be incurred over fiscal years 2018 and 2019. We continue to return capital to our stockholders through regular dividends and share repurchases. On June 19, 2018, our Board of Directors approved a quarterly cash dividend of $0.54 per share, payable July 31 to stockholders of record at the close of business on July 20. And based on today's closing price of $153.05, the annual dividend yield is 1.4%. During the third quarter, we repurchased just over 48,000 shares of our stock at a total cost of $6.4 million under our current $75 million share repurchase plan, which was approved by the Board in June of 2016. At the end of the third quarter, we had $26.1 million remaining under the 2016 plan. In order for the company to continue its share repurchase activities, our Board of Directors approved a new share repurchase buyback plan on June 19, 2018 which authorizes the company to acquire up to $75 million of its outstanding shares following the expiration of the current plan and runs through August 31, 2020. So with that, let’s turn to the fiscal year 2018 guidance. We are updating our net sales, net income and EPS guidance today only to reflect the recent changes in foreign currency exchange rates. And with that, net sales growth is projected to be between 6% and 8% with net sales expected to be between $403 million and $411 million. Gross margin for the full year is expected to be near 55%. Advertising and promotion investment is projected to be near 6% of net sales. And net income is projected to be between $56.3 million and $57 million. And diluted earnings per share is expected to be between $4.05 and $4.10 based on an estimated 13.9 million weighted average shares outstanding. This guidance doesn’t include any future acquisitions or divestitures and assumes that foreign currency exchange rates and commodity prices will remain close to current levels for the remainder of fiscal 2018. Now that completes the financial overview. Now, I'll turn it back over to Garry.

Thanks, Jay. In summary, here’s some of what you heard on this call today. You heard that we had a 9% net sales growth on a reported basis and a 5% net sales growth on a constant currency basis. You heard that our global sales of WD-40 Multi-Use Product grew 10% during the quarter. You heard that global sales of WD-40 Specialist grew 16% during the quarter. You heard that we reported record EPS of $1.15. You heard that price increases that have been or will be implemented this year are expected to help our gross margin remain in line with our 55/30/25 business model. You heard that we decided in May we will repatriate some of our earnings generated abroad and use these proceeds to pay down a portion of our line of credit. You heard that we’ll continue to return capital to our stockholders through regular dividends and share repurchases. And you heard that we have updated our fiscal 2018 guidance to only reflect updated foreign currency exchange rates. So today, I’d like to share with you in closing a quote from Nelson Mandela, “Education is the most powerful weapon which you can use to change the world.” Thank you for joining us today. We will be pleased now to open the conference call for questions and we’ll go back to the operator.

[Operator Instructions]. Your first question comes from the line of Liam Burke from B. Riley FBR. Please go ahead.

Thank you. Good afternoon, Garry. Good afternoon, Jay.

Good afternoon, Liam.

Good afternoon, Liam.

Garry, you had strong Specialist sales overall. Understanding that sales are variable from quarter-to-quarter, you did have lower sales in the Americas in Specialist. Is there something related to that or is it just timing of promotion or what was behind that?

Again, Liam, it’s just a continuation of the process of expansion of Specialist. I’ve shared in the past that you’re going to see it vary from quarter-to-quarter. We are 26% up year-to-date. Specialist sales are now pushing in, I think for the year in the $27 million, $28 million mark. We want to take that to $100 million by 2025, so it’s a journey. And no there’s nothing that concerns us. We continue to build more of that business on a day-to-day basis.

Okay. And EZ-REACH in the U.S. was up 12%. You’ve launched that product in Europe, WD-40 Flexible. How has the progress been or is it too early to tell?

We’ve launched it in Europe only in Italy and France, and the initial launch was successful. We’re now ramping up our plans to take it further into Europe next year, which is really a plan around production. We have capacity. So we’re now going to be expanding that across a number of other markets in Europe as we roll out our plans in the following fiscal year. So far, very pleased with EZ-REACH everywhere including Australia and France and Italy and the US.

Great. And Jay you mentioned that you’re going to allocate some of your cash to reducing the short-term debt. Can you give us a sense as to how much you plan on reducing that percentage wise or any way here?

Yes, we think it’s about 80 million.

So you’ll reduce that by $80 million.

Yes, that’s our expectation.

Great. That’s it for me. Thank you.

Thank you.

Your next question comes from the line of Daniel Rizzo from Jefferies. Please go ahead.

Hi, guys. How are you?

Good, Daniel. How are you?

Doing well. So what’s the range for petroleum prices before you would kind of feel the need to raise your own prices again? Do you have a goal or a range in mind for that?

We’re currently kind of at the top end of where we think oil was going to be when we raised our prices. So I think that we’ll be watching it closely. I would suggest that anywhere in the mid-80s is something that would be impactful. We’d need to wait until we see the flow through and the mix of what we’ve already done. I think oil is currently sitting around the $73, $74 mark, so we’ll see how the price rise is impacted as they flow through, but we would think that if it got closer to 85, we might have to do something differently.

Okay. And then you’ve kept adjusted guidance to account for FX changes or swings. I was just wondering what your assumptions are for FX for the remainder of the year.

Essentially that FX rates would remain the same as they are. So if we see much variance from where they are today that would have an impact.

Okay. And then finally, you indicated you’re expanding your online presence for WD-40 BIKE and doing your digital efforts, and I may [indiscernible] forward, does that include like working with retailers such as Amazon?

Yes. Amazon has been a customer, is a customer with us globally as is eBay, Taobao and most of the new digital players as well as the great work that we’re doing and getting support from our regular customers who are having expanded digital presence. So our investment in digital is to maximize search engine optimization to continue to have digital content that’s driving consumption through education and new uses. We’re very excited about the investment this year and next year and the year after. We have a true determined goal to own digital globally in our category. And the reason we can do that is we’re the only true global brand. So we’re excited about it and we’re pleased to be investing against it.

Okay. I’m sorry, just got one more. So you mentioned that – I think there was some disruption with three major marketing distributors I think in China or in Asia anyway. Does that just mean you’re shifting – you’re changing distributors, like you’re changing them out with somebody different, and I was wondering if that’s true, how often that happens?

Okay. To answer the first part of the question, no, it’s not China. It was in Singapore, Malaysia, and Indonesia. We already made the change a number of months ago. But when we changed marketing distributors, there’s a period of time where inventory transfers from the old distributor to the new distributor, and while the new distributor settles into distribution, we tend to have a hiatus in order flow. How often does it happen? When it needs to happen. If you look at our distributor markets globally, we have many, many, many that have been with us for many years, but if we feel that a market needs further development, we analyze that market, we determine whether we should be direct in that market or whether we need to find a new partner that has broader distribution and we make those changes. In Asia-Pacific, a number of years ago we changed out one of our distributors, and that was probably the only time for a while. But it’s not something that we do that regularly but we do it when we need to, when we feel that we need to increase the presence in the market.

Okay. Thank you very much.

You’re welcome.

Your next question comes from the line of Rosemarie Morbelli from Gabelli & Company. Please proceed with your question.

Good afternoon, everyone.

Hi. Nice to hear you.

Just following up on the last question, what was the reason that you had to change? Were they too small distributors in order to be effective given how you are pushing your new products in the region or were they just not efficient?

It certainly wasn’t the second part. As we look at our 2025 goals we review the capabilities not only internally of our own organization and where we need to make changes but externally. So in one market it was because we believe that we needed to have a different partner to get us to that position in 2025. The second one was because the prior distributor was acquired by a new company. As the acquisition was closed, we didn’t feel that together that our future was one that would deliver the growth, so we decided to make a change.

I see. So it is not that at the onset when you get started in one particular region you first go with a small distributor in order to get your feel around the need in that particular region then?

No, not at all.

Okay. And then if we look at the pricing you have instituted and some that are coming up, are those catching up with 2017 inflation rate and how much more inflations have you seen so far here to-date and what are you expecting for the full year if you have a feel for that?

The only area we’re certainly seeing any movement in costs certainly are cans and we’ve shared the impact of that. The other variable really is oil and who knows. Most of the other input costs have been reasonably stable. Right, Jay?

Yes, it depends on the market and we’ve seen some price inflation in the European segments a while back, but most of it is already baked in.

Okay. And you gave us the FX impact on overall revenues and you may have given us that impact on maintenance and on Specialist, but I did not catch it. So of the 10% top line growth in maintenance products and the 16% top line growth on Specialist products, what was the FX contribution?

I don’t know we’ve got that broken out.

So I did not miss it.

You did not miss it.

Are you willing to share it so we get a feel?

We don’t have it with us right now, but I would suggest that the ratio would be the same across all of the product lines.

Okay, so just a little less than half then, right?

Yes.

And lastly, if I may, what was – still on the FX side, what was the impact on EPS?

I think we gave it on income I believe it was and I think we said that – I apologize. So our net income without currency – on a constant currency was up 6% versus the 12% reported.

Okay. And then one last one if I may. The tax rate for this year will be for the full year 22% to 23%. Do you have an estimate for 2019 and beyond assuming everything stays the same?

Yes, we think it will be a couple of percentage points lower.

So around 20?

20-ish is probably a number we can – we haven’t really fully tied it down, but that’s a number that’s in the range for the moment.

Okay, great. Thank you and congratulations.

Thank you.

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.