And ladies and gentlemen, thank you for standing by. Good day. And welcome to this WD-40 Company Second Quarter Fiscal Year 2015 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 to -- presentation over to your 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. Following their prepared remarks, the operator will come back on the line for the Q&A portion of the call. Before we get started, let me remind you that supporting materials for this call are available on our Investor Relations website at investor.wd40company.com. In addition to our traditional disclosures, the Company has published the supplemental slides, which can be downloaded from this website. We encourage investors to review this slides in conjunction with today’s prepared remarks. A replay of today’s webcast will also be made available at that location shortly after this call. As a reminder, today’s call includes forward-looking statements about our expectations for the Company’s future performance. Of course, actual results could differ materially. The Company’s expectations, beliefs and projections are expressed in good faith but there can be no assurance that they will be achieved or accomplished. Please refer to the Risk Factors detailed in our SEC filings for further discussion. Finally, for anyone listening to a taped or 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 8, 2015. 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 afternoon, everyone. And thanks for joining us for today’s conference call. Today, we reported net sales of $97.3 million for the second quarter of fiscal year 2015, which is a 3% increase from the second quarter of last fiscal year. Year-to-date, net sales were $193.7 million, an increase of 2% over the prior year period. Net income for the second quarter was $11.3 million, compared to $10.3 million in the second quarter of last year. Year-to-date, net income was $22.1 million, compared to $21.8 million in the prior year period. Diluted earnings per share for the second quarter were $0.76, compared to $0.67 last year. Year-to-date, diluted earnings per share were up $1.49, compared to $1.41 last year. Before I talk in more detail about our sales results, I’d like to take a moment to update you on our strategic initiatives. Strategic initiative number one is to grow WD-40 Multi-Use Product. Our goal under this initiative is to take WD-40 Multi-Use Product to more places for more people with more uses. Global sales of Multi-Use Product were up nearly 3% in the second quarter and up 1% year-to-date. The growth came from our Asia-Pacific segment, primarily within our Asia distributor markets in China, which was slightly offset by declines in the Americas and EMEA. I will discuss these fluctuations in more detail when I’ll review the results by segment. Today, I’d also like to share with you an exciting new innovation for the WD-40 Multi-Use Product. Later, this fiscal year, we expect to launch a new delivery system target at the high volume users of WD-40 Multi-Use Product, which we believe will make the product even easier to use in workshops and factories. The new delivery system will launch in the U.S. in the fourth quarter…

Garry, thank you. In addition to the information presented on this call, we suggest that you review our Form 10-Q for the quarter which we will file tomorrow. First, a look at our 50/30/20 rule, you may remember those are the measures we used to guide our business. As you recall 50 represents gross margin which we target to be above 50% 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 or below 30% of net sales. And then finally, the 20 represents EBITDA. For gross margin, it’s above 50% and our cost of doing business is 30% or less. Our EBITDA will be at or above the 20%. EBITDA is earnings before interest, taxes, depreciation, and amortization. The descriptions and reconciliations of these non-GAAP measures are available in our 10-Q, as well as our investor presentation, which is available on our Investor Relation website. Now on to our gross margin or the 50 -- in our 50/30/20 rule. Gross margin in the second quarter was 52.6%, compared to 51.6% in the prior fiscal year period. The increase in gross margin was primarily driven by decreased input costs and lower promotional discounts in all three segments along with select price increases primarily in Asia-Pacific. These favorable impacts were partially offset by the unfavorable impacts from foreign exchange rates in EMEA and changes in sales mix. A look at our input costs. We experienced a favorable impact of 130 basis points from our major input costs. This was driven by changes in the cost of petroleum-based specialty chemicals, as well as aerosol cans. As we explain during our first quarter earnings call, we expect to see net positive impacts on our gross margin…

Great. Thanks Jay. Our underlying business is performing well right now. In constant currency, our global sales rates were much higher than those reflected in our actual results for the second quarter and the year-to-date. Foreign currency exchange risk is a reality that every international business must navigate. Today it’s a headwind, tomorrow it may be tailwind although we can’t control most of its influences on our reported results. Today we try to provide you with a better understanding of its impacts on our reported sales and earnings. And other dynamic we are currently navigating is the falling crude oil prices. Crude oil cost going down is certainly a net positive for our business. However, we are still uncertain exactly how that will embed in our business over the longer term or where they’ll be in the future. We had a number of product increases planned this fiscal year to offset the cost of implementing certain new regulatory requirements, particularly in the Americas region. The recent declines in the cost of crude have allowed us to delay those planned price increases. We’ve updated our fiscal year 2015 guidance to reflect our current view of the business. This guidance does not include any future acquisitions or divestitures and is based on recent foreign currency exchange rates. We expect that our fiscal year net sales results to be in the range of $387 million to $400 million or a growth of between 1% and 4%. We project gross margin to be better than 52%. We expect that global advertising and promotional investment to be in the range of 6% and 7% in net sales. We expect net income of between $45.1 million and $46 million which would achieve diluted EPS of between $3.07 and $3.13 assuming 40.7 million weighted average shares outstanding.…

Thank you, sir. [Operator Instructions] And our first question comes from the line of Liam Burke with Wunderlich. Please proceed with your question.

Thank you. Good afternoon, Gary. Good afternoon, Jay.

Hey Liam.

Hi Liam.

Gary, you had double-digit growth in the U.S. on the specialist line about 8% overall worldwide. Does the quarter-to-quarter growth rates in specialist sort of narrowed WD-40, they ebb and flow with promotional activities?

Not to say much promotion, Liam, more so in new distribution. Certainly, we did run our first promotion with specialist earlier this year. But it’s a matter of building distribution and getting more of the product on shelf. In fact, if you were to go in a low store now you would see that come March, we actually have, I think up to eight U.S. co-use of specialist in distribution in those stores and many others. So year-to-date, our specialist growth is 17% and we are happy with where we are going with it.

Great. Jay, in your breakdown of cost of goods, majority of it raw materials and obviously it’s subject to the ebb and flow. 12% is non raw materials related. You’ve done a lot of things in terms of manufacturing processes and redoing distribution. Do you see anything else you can do in that area?

Well, we’ve got initiatives around sourcing of raw materials, which we’ve seen benefits of over time as we see benefit from expanding our supply chain around cans for example is one. In EMEA, we’ve added a new filler in Continental Europe that puts us closer to our customers. We did that in China as well a couple of years ago. So there is a variety of things that we can and are continuing to look at as we move forward.

Great. Thanks very much.

Thanks, Liam.

[Operator Instructions] And we move next to Linda Bolton-Weiser with B. Riley.

Hi. How are you?

Hi, Linda.

Hey.

So, yeah, your constant currency sales growth in the quarter of 7% was very impressive, especially since I think you had some hard comparisons in the EMEA and Americas region and yet in your gross margin discussion you said that lower or less promos and discounts actually helped your gross margins. So if there was kind of less promotion and discount, how did you produced such good sales growth and is this something that is kind of -- we should expect a little bit more robust growth going forward, or is this really truly a strange situation in the quarter and why was that?

I think you’ll find that particularly we had a solid sales growth down in Asia-Pacific. China performed very well. And of course, we had increasing distribution in our distributor markets. We had you may remember also that the shift of sales out of one quarter into another because of the Long Beach shipping to Bakkal may have also had some impact. In EMEA, we are seeing continued growth of specialists. We are seeing motorbike products continue to take lift. We just started distribution of bike over there. So it’s really a shame that the currency is kind of shadowing the good work that they are doing over there. But overall, we would like to think that in normal times we can grow ourselves between 4% and 8% and this quarter was at the upper end of what our normal guidance is. So I think overall nothing extremely special. Obviously, we are expecting a reasonably solid second half of the year as well. It’s just really now which way the currencies go but underlying we are very comfortable and very pleased with the great work tribe are doing.

So remind to understand correctly that all of the reduction in the reported sales growth guidance is due to currency. You cut basically on the local currency -- you cut that expectation the same.

All of the -- what’s lowered our guidance from the 4% to 8% which we had in our initial guidance is really currency impact.

Okay. And then you alluded to this new delivery system Garry in the U.S. I think you said it was launching in the fourth fiscal quarter. Is this something that will help you garner more shelf space? Or are you losing some SKUs somewhere else? And is it higher margin products that have a higher average selling price?

Yes -- no, yes, yes. No, we weren’t use shelf space. Yes, it is a highest selling product. It’s a new version of our Smart Straw that’s aimed at the heavy end uses, the industrial and tribe and we are very excited about it.

Okay. And so you are just starting in the U.S. and then perhaps more globally, or are there plans for global launch already in place or…?

Well, challenge is making enough of it in the early stages. And when you see it and you will know within the next few months, you will think this is a pretty easy deal, but it’s taken us four years to develop this and one of the components of it is particularly intricate in its manufacturing process. So it’s really about getting ramping up production obvious to be able to take it globally. It will go globally eventually. I would say we will just see it in the U.S. probably for the next year as we betted in. And you know what we like, we like to do some pilot, try it, make sure we got it right, we think we have and then we will take it to the appropriate markets around the world.

How easy do you think it will be for competition to copy the delivery method?

I got a few multiple millions of dollars and a lot of right research and development. They probably could, but it’s like our Smart Straw, it’s taken a long time for anybody to copy that. And even though that has copied it, the product is inferior. Nobody has that volume. Since we thought of selling Smart Straw, I think we sold about $1 billion worth of Smart Straw and it’s our volume that allows us to cost effectively manufacture it where most of our competitors have no way near as you know the volume we have which really puts a lot of this innovation either prohibitive or severely impacting negatively their margins.

Right. And then I know that you have mentioned that the Lawn & Garden is actually a smaller kind of potential sales effect than this new delivery system, but is the Lawn & Garden going to be launched in the U.S. or are you still deciding on that or…?

We are still deciding. We certainly are comfortable with the results in Australia or in fact after this call today, I get on the plane and I am traveling down there and we will be reviewing it, but we will continue it down there. But it’s a matter of productization and we believe that what we are doing with specialists in the U.S. in the new extensions that we put out this year, coupled with this new delivery system that we’re developing. We can’t be like the blind dog in a meat house. We got to take the juiciest piece of meat first and we think that’s it. But lawn and garden is definitely not off our agenda in the U.S. But we are concentrating on what we think are the biggest opportunities first. We can’t do everything and we’ve got more opportunities now than we have execution power. So we need to pace ourselves and be deliberate.

Right. And then just on the whole currency and thank you for the thorough currency explanation. That’s very helpful. But I’m just curious if in some markets where there is big currency devaluations, are you able to take pricing but I guess, I’m trying to think these are your distributor markets in EMEA. So, I’m not sure, does that mean you can’t or can take pricing, or how does that work in terms of trying to offset that effect?

Well, let me talk about one that’s probably on your mind, which is Russia. The rubles devalued at its top point around 60%, is down to around 40% now. We sell into that market in U.S. dollars. So our distributors are therefore making adjustments to pricing, which a lot of them have made. And we are in the same boat with a lot of other products, that has slowed down the market somewhat, not because of price but because of instability. There is now product at many different price levels. So we’re waiting for that to flush through and then we’ll see how it settles down. But Russia is probably the biggest one.

Okay. And then just with the declines of crude oil and are you finding that -- I mean, it just sounds like your competitors are reacting a little bit and there is some reaction. So it’s been harder in general to take the pricing. Can you give a little more color on the competitive actions regarding what’s going on right now?

I’m not sure I understand. But I think you said that our WD-40 competitors are doing stuff with pricing?

No, no. I mean you -- I mean, are they reacting to low crude price, some are being more aggressive on promotion or current prices I guess?

Not that we’ve seen. They’re in the same boat as us. They really don’t understand the impact right now. And you just can’t link one to the other. I think one of the learning moments that we’ve had from this oil change is we’ve spent thousands of the hundreds of hours trying to get our arms around what happens and it’s really helped us understand a lot better into the future. What we do know is that when oil goes up, our prices from our supplier seem to go up a lot quicker than when oil goes down and that’s an interesting learning moment that we’ll be carrying forward in our experiences when prices start to rise again.

Right. Got you. Okay. Thank you very much.

Thanks, Linda.

And our next question comes from Jeffrey Zekauskas with J.P. Morgan.

Hello. This is Ben Richardson sitting in for Jeff.

Hey, Ben.

Hey. So, I just want to -- I look at the diagram here of the make up of the cost of can of WD-40. And it’s clear that the petroleum component is coming down at least on a trailing six months run rate. Can you talk a little bit about the various raws and from steel can negotiations to plastics to the petroleum-based components and sort of rate at which those flow through your COGS?

Well, we can start with plastics because that’s the one that has had really minimal impact at this point in time, even though there is a petroleum to plastic. The cost of our plastic Smart Straw mechanism is really -- has much more of a manufacturing, both cost associated with it, so those don’t seem to change that much with the raw inputs. So, we haven’t seen much change in our plastics. The cans have essentially remained somewhat at stable. We saw some overall can price decreases that we were able to achieve last year and then in through this year. As we look forward, we are not seeing a significant increase or decrease going forward in our can pricing. And we have been seeing kind of some benefits from certainly the cost of our some of the chemicals that are specifically indexed to crude oil. Those would be things for -- in some of our mineral spirits are directly -- we have some direct linkage to the cost of oil. The other petroleum-based chemicals have variety of market dynamics that are just not as clear and connected. And as a result, we’ve seen some moderation but not at the same level. Hopefully that addressed the areas you’re thinking about.

Yes. That’s great. And just given your -- I guess jumping back quickly to revenues. Given your expectation of a stronger back half here, is that lot like seasonal? And I guess one of the different comments of any pickup you would expect in the back half?

Well, as with most of that years they depend on when certain promotional activities fall. We see a larger portion of that promotional activities come through the spring into the summer time, but that depends which half of the world you are in because half of the world we live in springs one time and springs another time in the other half of the world. So it’s just basically -- we’ve often -- you’ve often seen or most times you see that our second half is normally a little heavily weight -- heavier weighted than the first half of the year. We don’t have a big Christmas season anywhere. We don’t mix very well with Barbie dolls and barbeque sets, but when those shelves are empty after that period of time of course we can move in. So I think it’s nothing in particular, it’s just a general business overall.

Okay. Thank you very much.

And ladies and gentlemen, that does conclude our allotted time for questions. We do thank you for your participation on today’s conference call. And we ask that you now please disconnect your lines.