Good afternoon. My name is Neil Smalley. And as usual, it's an honor to speak to you as the Non Executive Chairman of the Board of this outstanding company. And on behalf of the Board of Directors and our employees, I want to welcome you and our webcast audience to WD-forty Company's 2016 Annual Meeting of Stockholders. We will now officially start the meeting by presenting the Affidavit of mailing notice of the meeting.
Would the Secretary please present the affidavit of mailing notice of the meeting?
Thank you. I have a signed affidavit of mailing and I'm pleased to report that a proper notice has been given
for the meeting.
Thank you. It appears that notice of the meeting has been properly given. Would the Secretary please confirm the presence of a quorum?
I'm pleased to report that more than 90% of the shares are represented in person or by proxy constituting a quorum.
Thank you. I now call this meeting to order. Following my opening remarks, Gary Ridge, the company's CEO and Jay Rembold, the company's CFO, will discuss WD-forty Company's 2016 performance and the strategic outlook for your Company. Following these presentations, I will introduce the 4 matters to be acted upon by stockholder vote at today's meetings. The 4 matters for consideration are the election of directors, an advisory vote to approve executive compensation, approval of WD-forty Company's 2016 Stock Incentive Plan and the ratification of the selection of our independent auditors.
Before I introduce the current members of our Board of Directors, I would like to welcome and introduce you to Eric P. Etchart, our nominee for election to the Board at today's meeting. Eric served as Senior Vice President of the Manitowoc Company from 2007 until his retirement in January 2016. He was employed by the Manitowoc Company and predecessor companies in various sales, marketing and management roles for more than 30 years. Welcome.
Now I'm pleased to introduce the members of our Board of Directors and would each director please stand as I call your name. Giles H. Bateman. Mr. Bateman is one of the Co Founders of Price Club and served as Director and Chief Financial Officer until 1991.
Mr. Bateman is retiring as a Director after today's meeting, and we thank him very much for his service to the company over the past 13 years. Thank you, Charles. Peter D. Duhle served as Senior Vice President and General Counsel and Corporate Secretary of the Clorox Company from 1998 to 2,005.
He's been a Director since 2,005. He is the Chair of our Corporate Governance Committee. Daniel T. Carter served as Executive Vice President and Chief Financial Officer of BEVMO from 2,009 until June of 2016. He has been a Director since March of 2016 and he is Chair of our Audit Committee.
Melissa Claassen is Vice President, Business Unit Finance for Adidas, headquartered in Germany. Ms. Claassen joined us as a Director in 2015. Richard A. Colado is the former President and Chief Executive Officer of the YMCA of San Diego County.
Mr. Culado is also retiring as a Director after today's meeting, and we also thank him as well for his service to the company over the past 13 years. Mario L. Crivello has been a Director since 1994. His father, Sam Crivello, was Co Founder of the company.
Mr. Crivello is retired, having been the Managing Owner and Master of Tuna Purse Seiners. Linda A. Lang is the former Chairman and CEO of Jack in the Box Inc. She has been a Director since 2004, She is Chair of the Finance Committee.
Daniel Lee Pittard is the former President, CEO and Board member of Rubio's Restaurants. He has been a Director since June of 2016. Gregory A. Sandfort is President and Chief Executive Officer of Tractor Supply Company. He has been a Director since 2011, and he's Chair of our Compensation Committee.
Gary O. Ridge is the President and Chief Executive Officer of WD-forty Company. He has been employed by the company since 1987 and has been a Director since 1997. And so on behalf of the Board of Directors and all of the worldwide employees of the WD-forty Company, I'm pleased to report that in fiscal year 2016, the WD-forty Company tribe delivered another year of solid progress. The Board of Directors of WD-forty Company is dedicated to representing all of the shareholders as we continue to build a great company.
And as Chairman of the Board, it is once again my pleasure to again introduce our President and Chief Executive Officer, Gary Ridge, who will share with you the company's fiscal year 2016 performance and where the company is headed in 2017 with its strategic initiatives. Gary?
Thank you, everybody. I did draw your attention to the forward looking statement and make sure you review all of the current documents. So just a quick look at what we're about. Who are we? Well, we believe that a strong company has a simple and easy to understand business model, dominates within its industry, has superior returns on capital, has a substantial competitive advantage, significant cash from its operations, strong balance sheet, growth opportunities and a proven management team.
And let's look at some of the history as you know, WD-forty started here in San Diego in 1953 and was the result of a challenge. I often say I'm glad they didn't stop at 39 formulas. They went to the 40th formula, which was the most successful, 176 countries around the world in 62 trade channels. We say the sun never sets on WD-forty. And one of the things that's most exciting in somewhere like China today, someone met our blue and yellow Cam with a red top for the very first time.
So we're happy there are a lot of squeaks in China. Our brands are made up of 2 product groups. The major part of them is our what we call our multipurpose maintenance products, which are the blue and yellow cans 3 in 1 brand WD-forty Specialist, which is a product line that we launched about 5 years ago, and WD-forty Bike and then an acquisition we made called GT85 a couple of years ago in Europe. That makes up about 90% of our business. The other part of our business is our household products business.
That business is a business that we call Harvest Brands. They still contribute significantly to the company's profitability, but are not part of our long term growth strategy. We have a simple thinking about our businesses. Four things we believe you need to be successful in a business. The number one is people.
We're nothing without our people. And to all our tribe members, wherever you are around the world today, you really make the difference at WD-forty Company. You have to have products, products that deliver positive lasting memories. We're in the memories business. You have to have a passion for what you want to do, and you have to be purpose driven.
We do that by having a clear vision, a clear set of values and by adopting a philosophy of we don't make mistakes, we have learning moments. Three words that we know at WD-forty very well is we don't know, and we're happy to find out. And right in the middle is our dedication to our people. We wake up every day not to mark their paper, but to help them get an A, to help them step into the best version of their personal self. In our annual report this year, if you've read it, we focused on some of the work that Simon Sinek has done.
I met Simon about 2 years ago. We sat on a panel together about purpose driven organizations. And he often says most companies or all companies know what they do. Some know how they do it, but very few know why. And I'm very it was very clear to us that our why was very aligned with our vision and our why as we exist to create positive lasting memories in everything we do.
We solve problems, we make things work more smoothly and we create opportunities. And how we do it is by having an energized and learning based workforce that live our company values every day. You know what we do. We sell these wonderful products all around the world. Our values are things that drive and help us make decisions and they're hierarchical.
Our number one value is we value doing the right thing. So every decision we make in the company, we're able to put through the filter of our values. And if our values don't support our actions and what we do, then we don't do it. Values are something that sets that gives our people freedom. They set people free to work within a framework of trust.
They build trust within the tribe. Our circle of competence, I love a quote of Warren Buffett's where he said, you have to stick within what he calls the circle of competence and you have to know what and understand what you don't understand. It's not terribly important how big or small that circle is. It's just how you know what it is. We have a clear circle of competence.
It starts with our brand in the middle and then that's the competence we have around building successful cultures of being a truly global organization of having a very clear understanding of our end users and having a very unique distribution system, all based on the power of the shield, the blue and yellow cam with little red top where it all started so many years ago. Important to us, of course, is employee engagement. One of the things that I get disappointed about is I know that around the world, 70% of people who got up today went to work to either work against or not aligned with the purpose of their company. And whose fault is that? That's our fault as leaders.
For 18 years, we've worked hard at making sure that we build a culture where people get up every day, go to work, feel safe, feel secure, contribute to something bigger than themselves and hopefully go home happy. And we're proud of our bigger than themselves and hopefully go home happy. And we're proud of our tribe with an employee engagement number of somewhere near 94%. Some of the key drivers of that are 99% of our people feel that their values their opinions and values are a good fit. My favorite one here is the one that says, I love to tell people that I work at WD-forty company, not like, but I love.
98% of people love to tell people they work at our company. So I'll submit to you if you think you're being heard, you understand what the clear goals are of the company, you enjoy what you do, you're excited about the future, some wonderful things can actually happen. Here is our global infrastructure across multiple trade channels. There are many, many places where you can buy WD-forty as you know across multiple trade channels. And that's one of the key strengths of the organization.
Most companies have a bunch of products they sell through 1 trade channel. We have a brand that we sell through multiple trade channels. We want to make it easy for our customers to buy. We call that physical awareness. The first thing is mental awareness.
Do you know me? The second one is physical awareness. Can you easily buy me? We understand our end users very well. Many of you may have a can of WD-forty that sits under your sink and you replace it every 5 to 7 years.
You'd be down the end here, drinking your glass of beer on a Sunday. You spend about $0.41 a year with WD-forty. But as you move across that scale and get to the other side, the guys and girls in many countries around the world today that are repairing motor vehicles, working in constructions and trades, working in farming, in manufacturing and repair and maintenance, they could be using up to $75 worth of WD-forty a day. Why is that important to us? We need to know where to put out our investment around innovation and where to put our investment around marketing.
Time, talent, treasure and technology is all we have and none of them are abundant. So we have to be very deliberate the way we use it. Our strategic initiatives, these are the things that we think about every day. This is what guides us in how we deliver the work that we do. Number 1 is make the blue and yellow can available to more people in more places around the world.
Number 2 is to grow our W-forty Specialist Live. We're immensely proud of the Specialist Live. We've grown it from 0 to over $22,000,000 in just 4 years. We believe that's going to be $125,000,000 opportunity over time. Our teams in our innovation development groups are focused in on end user problems and opportunities, and we've got some great exciting things coming forward as we take that brand of the world.
Got to broaden our revenue base. We haven't given up or stopped thinking about like the 3 in-one brand. Just this year, we launched a range of 3 in-one products aimed at the recreational vehicle people. So there's special lubricants for recreational vehicles. We're going to continue to attract, retain and develop magnificent talent, people who come to work every day with that passion.
And then of course, operational excellence is about making sure that we are conscious of regulatory requirements around the world that our quality teams are working to ensure that we are delivering our promise to our end users. So this is what we think about every day. Premiumization is something that also is important to us over time. It started with our Smart Straw product. We went from the classic can to Smart Straw and just a year or so ago we released WD-forty EZ Reach, which is flexible straw.
This is a product that helps those people that are working under cars or wanting to get our product to a tight place to be able to get it there easily has had amazingly successful acceptance by our heavy end users. Category leadership, one of the things that we spend a lot of time on is helping understand the behaviors of our end users in retail stores or where they go to shop. So we can use the data and the research to go to our customers and to help them maximize the return they get on their shelf space in the stores because that's where it really matters. Retailers are in the real estate business and they want to make sure that they're getting the maximum return they can from the real estate. So we partner with our retailer customers to help them understand what the customer is looking through or through insightful research and help them manage that shelf to the best it can.
Our model is very simple, grow the core, understand where we're needed and then grow into categories as I've already shared with you. And here are just some examples of how WD-forty Specialist has grown. We started with the general maintenance products. We moved into motorcycle and motorbike in the U. K.
And are bringing that to the U. S. We have our lawn and garden products down in Australia. And just this month, we started to ship our new line of WD-forty greases. And then later in January next year, we'll start to ship our new line of WD-forty Degrees.
All of these products come under those platforms that our end users told us they had the most amount of trust in us. So where can all this take us? Well, we've gone from $191,000,000 in 2,006 to 2.95 in 2016 and our goal is to have revenues by 2025 of $725,000,000 by making the blue and yellow can available to more people in more places, expanding specialists, growing 3 in 1, growing lava, attracting great people and paying attention to our operational excellence. And with that, I'll pass over to my partner Jay here.
Gary, thank you so much. Thank you. I have the pleasure of being able to review our performance or the performance of your investment in the WD-forty company. So this slide compares the total shareholder return of the WD-forty company with that of the S and P 500 and the Russell 2,000. Your investment in WD-forty is represented by the blue line.
And you can see that $100 invested August of 2011 would have grown in value to just about $3.19 today. So we've certainly had a phenomenal run of growth. What drives that performance? Well, for us it boils down to a couple of things. The key really is around our forecasted, our future earnings, what can we expect.
The key to that are solid financial foundation, one that provides resources for us to be able to execute on our strategy. And then a very efficient business model that allows us to focus those resources on the key areas that really will drive value and drive growth. And then our efficient business model also allows us to have very high returns on invested capital, which ensure that any growth gets translated into value. And then finally, our platform of brands that provide us the opportunity to grow in the future are really the foundation of our future growth. The financial foundation is really built on 2 things, our strong balance sheet, we have our cash is at the end of the year was on par, nearly on par with our debt.
We have borrowing capacity under our line of credit. We also generate about over $50,000,000,000 of free cash flow annually that we really don't need for operations. We've historically given that back to our shareholders and I think our shareholders have rewarded us for it. With our clean balance sheet, we clearly have the resources we need to execute on our strategy. And then if we look at our business model, with that, we are able to focus all of our energy on 2 key things, building our brands and growing our markets.
And how we're able to do that is because we outsource all of our manufacturing and distribution. We partner with 3rd party manufacturers and 3rd party logistics providers to be able to build and ship our products. And that leaves the rest of us to do our brand building. So of the 445 Tribe members, every day the majority of them are working in markets around the world, introducing new users to our products, generating new uses. And as a result, we do what the marketers say, build physical awareness and build mental awareness.
Now look, Gary did a great job of outlining the growth, our expected growth and the growth of the future. Here's just a look back at the last 10 years. And you can see that we've continued to grow and perform even in the most challenging of times. We've been through the global economic crisis. We've had instability in the Eurozone.
We continue to have regular sustained growth, nearly doubled growth in the last 10 years. This takes a look at our growth and breaks it down by trading block. You can see the Americas represented by the blue line has grown from $110,000,000 10 years ago to $163,000,000 and Europe represented by the yellow has grown has doubled from $63,000,000 to nearly $130,000,000 while Asia has gone from $18,000,000 to nearly $50,000,000 so fairly consistent growth over the past years. Now our opportunity is to execute. And in execution, we really use our 50 five, 30, 25 model.
And that allows us to focus on a few key things that help us guide our business, help us determine when we're on course and when we're off course and may need correction. It's quite simple. It stands for the 55 stands for our gross margin. We target our gross margin to be 55%. The 30 stands for cost of doing business, which is really everything else.
The result of that is a 25% target for our EBITDA. Looking a little closer at our 55% margin last year, we were able to achieve our target and surpass it. Our margin last year was 56%. We certainly got a benefit from oil. Oil gave us a benefit of nearly 200 basis points.
So our opportunity is to continue to grow gross margin just in case or when oil decides to shift the other way. If we look at our business, we see the 55 is possible over the long term no matter what well, should oil return to its prior levels. And how will we do that? Well, there's 4 levers that we use. New product innovation, which allows us to produce some of the products Gary shared with you before.
And each of those products and with the expectation that they will carry a higher margin than our current product offering. In addition, we see the opportunity to increase efficiencies both operationally and through manufacturing efficiencies. And then the other one is product mix and Gary referenced premiumization. As we shift from users from our WD-forty MUP up to our more high value offerings at the WD-forty Flexi Straw, we are able to continue to offer more value and increase our margin. Now, we do have used price adjustments.
Those are used as a last resort. We've had them periodically over the years, but only when we've had cost increases that we needed to offset. Now, here's a look at what makes up a typical can of Smart Straw in the U. S. You can see that 30% is in the can, 31% is in the materials that are in the can, the petroleum based specialty chemicals.
And that 31% is down from 34% last year, and it's really reflective of the changes in the price of oil. Now our 30% through our cost of doing business, 75% of our cost of doing business is in 3 areas, our people, the investments we make in our tribe, the investments we make in marketing, helping to make and build physical and mental awareness, And then finally, the cost of freight to get our products to our customers. We do have and we have been investing in additional investments in research and development, product quality, brand protection are just some of the investments we're making today that will help benefit us in the future as well. We target our range at 30% and of late we've been running from 33% to 35%. This last year our cost of business was 36%.
2 of those percentage points came from incentive compensation that was earned by our tribe for a fantastic job this last year. But our target is 30% and we'll get there over time as revenues grow and outpace our operational costs. Well, how have we done? Well, as you can see, we've moved it from where it's been, but there's still a lot of work to do. You can see that we've made steady progress.
And if you really think back, our EBITDA margin in FY fiscal year 2012 was a low of 16%. So we've made fairly steady progress over the period, but there's still more work to do. Now look at how we think about capital allocation. What is our approach? Our first focus is identifying our long term growth targets and our return on capital requirements.
Then we look at the liquidity and debt and cash requirements. Historically, we've had a cash neutral position and we've had enough liquidity with our line of credit that we really have a lot of available cash for investment. Then we look at the other needed uses of cash and that would be our dividends and our capital expenditures for capital equipment, capital improvements. We've historically been quite low in that area, 1% to 2% of sales, leaving us with an excess of capital available for investment. Now once we get there, we have 3 choices.
What do we do? Or we can invest in other organic growth initiatives, acquisitions, share repurchases, and we've done all 3. As we move into 2017, one of the investments we'll be making is in our new facility to house the San Diego tribe. A look at what we do with our cash. This is a historical look at the cash returns to shareholders over the last 5 years.
And as you can see that we've returned cash not only through the regular dividends, but from periodic share repurchases. Our dividend has been increased on a regular basis and I'm happy to announce that today, when declaring the Q1 dividend, the Board of Directors once again raised the dividend. So the dividend of $0.42 that we had last has now been increased to $0.49 a 17% increase in the dividend. Thank you. On to our share repurchases.
We've also continued to repurchase shares. We've repurchased over $176,000,000 worth of shares in the last 5 years. And if you combine the share repurchases and our dividends, over the last 5 years, we've returned over $275,000,000 worth of cash to our shareholders. Look at our financial results for last year. Here's a high level look and you can see that top line sales were somewhat challenged.
That was really due to the impacts of foreign currency exchange rates. Had foreign currency exchange rates been similar to those that we experienced the prior year in 2015, we would have had $12,000,000 more on revenue than we reported. Interestingly, the foreign exchange rates affect not just the revenue side of the balance or side of the income statement, but other lines as well. And so even though we had a negative impact from revenue, we did have a non operating gain of that amounted to nearly $0.12 a share from foreign exchange. So we are affected by foreign currency and last year was a year that we experienced it on the top line as well as on the bottom line.
However, it's really important for us to remember that the underlying business is solid. And then if you look, the revenue in local currencies, the currencies of the markets that we sell in throughout the company last year in all but just a few of our markets showed solid growth. Now just a quick look back at what Gary started with. It's from the words that we've had here today, it certainly seems like the WD-forty is a good business. Simple, easy to understand business model, dominant in its industry, superior returns on capital, a sustainable competitive advantage, strong balance sheet, many growth opportunities and a proven management team.
So in closing, I'd like to thank our San Diego tribe and the tribe around the world for another fantastic year of great results. A job well done. And now I'll turn it back to our Chairman, Neil. Thank you.
Thanks, Jade. As I noted, there are 4 matters to be voted on at today's meeting as presented in the proxy statement delivered stockholders with the notice of annual meeting. If there is anyone present who has not had the opportunity to vote or who wishes to change their vote, you may execute a ballot at the registration table at this time. There are 10 seats to be filled for the election of directors. The nominees for election as directors were nominated in accordance with Article 2, Section 15 of the company's bylaws.
The nominees consisting of 9 incumbent members of the Board of Directors and 1 additional nominee are identified in the proxy statement. Would the Secretary please confirm that the nominees for election as Directors have been elected?
I'm pleased to report that all of the nominees received a majority of the votes cast and they have been elected to serve as directors until their successors are elected and qualified.
Thank you. The stockholders have been asked to cast an advisory vote to approve the compensation of the company's named executive officers identified in the Compensation and Discussion Analysis section of the proxy statement. This vote is commonly referred to as a say on pay vote. Would the secretary please confirm that the stockholders have approved this advisory vote to approve executive compensation?
I'm pleased to announce that a majority of the votes represented at the meeting have been voted for the advisory vote on executive compensation.
The stockholders have been asked to approve the WD-forty company's 2016 stock incentive plan.
Would the Secretary please confirm that the 2016 Stock Incentive Plan has been approved? I'm pleased to announce that a majority of the shares represented at the meeting have been voted for approval of the WD-forty Company 2016 Stock Incentive Plan.
The stockholders have been asked to ratify the Audit Committee's selection of PricewaterhouseCoopers LLP as the company's independent accountants for the next fiscal year. Steve Embry of PricewaterhouseCoopers is present and has been offered the opportunity to make a statement and can respond to appropriate questions if there are any. Thank you. Would the secretary please confirm that the selection of PricewaterhouseCoopers has been ratified?
I'm pleased to announce that a majority of the shares represented at the meeting that were voted for ratification of the selection of PricewaterhouseCoopers LLP as the company's independent accountants for the current fiscal year.
Thank
you. This concludes the formal business portion of our meeting, and this will also conclude our webcast for the Annual Meeting.