Ladies and gentlemen, thank you for standing by. Good day, and welcome to the WD-forty Company Third Fiscal Quarter 2016 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in a listen only mode. At the end of the prepared remarks, we will conduct a question and answer session.
I would now like to turn the presentation over to the host for today's call, Ms. Wendy Kelly, 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-forty Company's President and Chief Executive Officer, Gary Ridge and Vice President and Chief Financial Officer, Jay Remboldt. 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, 2016. 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 expectation for the company's future performance.
Of course, actual results could differ materially. The company's expectations, beliefs and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further 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 7, 2016. The company disclaims any duty or obligation to update any forward looking information whether as a result of new information, future events or otherwise.
With that, I'd now like to turn the call over to Gary.
Thanks, Wendy. Good day and thanks for joining us on today's conference call. Today, we reported net sales of $96,400,000 the Q3 of fiscal 2016, which was an increase of 4% from Q3 of last fiscal year. Net income for the Q3 was $12,700,000 compared to $11,000,000 in Q3 last year, an increase of 16%. Diluted earnings per share for the Q3 were $0.88 compared to $0.75 for the same period last fiscal year.
As we review our results for the Q3, we will be doing so under the umbrella of our 50 Fivethirtytwenty 5 rule and our strategic and initiatives. So before we dive into the sales results, let me take a moment to review our strategic initiatives as well as our long term targets. Strategic initiative number 1 is to grow WD-forty Multi Use Product. Our most important strategic initiative is to take the blue and yellow cam with a little red top to more places for more people who will find more uses more frequently. We believe we can grow WD-forty Multi Use Product to approximately $600,000,000 globally in revenue over the next 10 years.
Global sales of multiuse product were up 7% this quarter compared to last year. This increase was due to solid sales growth of the multi use product in all three trading blocks. This growth was primarily attributed to successful promotional programs we ran in our Asian distributor markets, a change we made to our distribution model in our Germanix region and sales of WD-forty Easy Reach in the United States, which continues to exceed our original expectation. Strategic initiative number 2 is to grow the WD-forty Specialist product line. Our goal under this initiative is to leverage the power of the shield to develop new products and categories within identified geographies and platforms.
We believe we can grow WD-forty Specialist to approximately $125,000,000 in revenue over the next 10 years. In the Q3, sales of WD-forty Specialist were $5,600,000 which represents an 8% increase over the Q3 of last year. We are optimistic about the long term opportunities for WD-forty Specialist product line. However, there will be some volatility in sales levels along the way due to the timing of promotional programs, the launch of new product offerings and the building of new distribution. Strategic initiative number 3 is to broaden the product and revenue base.
Our goal under this initiative is to leverage the recognized strengths of WD-forty Company to derive revenue from new sources and brands. During the Q3, we continued to broaden the distribution of products like 3 in-one and WD-forty Bike and GT85, and we expect over time they will continue to contribute to our long term goals. We're excited about some new initiatives coming soon for the 3 IN ONE brand and we look forward to sharing those with you in future quarters. Strategic initiative number 4 is to attract, develop and retain outstanding tribe members. Our long term target under this initiative is to grow employee engagement to greater than 95%.
At the end of the Q3, we had 440 Tribe members globally. Recently, we made an important decision that we believe will help us reach our long term employee engagement goal. Let me take you back in time for a moment. 1973 was a big year for WD-forty Company. 2 things happened.
We completed our IPO and we moved into our current global headquarters in San Diego. Since that time, we've grown the San Diego corporate tribe from just a handful of people to roughly 20 employees. In addition to our corporate employees, our San Diego facility also houses about 100 tribe members from our Americas trading block. For 40 years, we've attempted to make our current facility work by adding on additional square footage and leasing extra office space nearby. This has resulted in a work environment that limits collaboration, has inadequate meeting spaces and quite frankly, is not the best work environment.
That's why we have decided it's time to invest in a new facility for both our corporate and Americas tribe members. We have identified a property in San Diego area, which we intend to purchase, and we expect to make a capital investment associated with the purchase of about $15,000,000 in the next year. We look forward to keeping you updated on this exciting project in the coming months. Strategic initiative number 5 is operational excellence. Our goal under this initiative is best summarized by one of our core values here at WD-forty Company, make it better than it is today.
We are continuously focused on optimizing resources, systems and processes as well as applying rigorous commitment to quality assurance, regulatory compliance and intellectual property protection. During the Q3, we successfully completed the transition of all 50 U. S. States to the lower VOC formula we launched in California in fiscal year 2014. We also made some distribution changes in our German market.
Historically, in this market, we had a large wholesale customer who distributed our products to many of the DIY retailers in the region. We've made a change in this market, which now enables us to sell to some of those retailers directly. The tribe in Germany is doing just a great job managing the transition and as a result has seen a 22% increase in sales this quarter. To complete the update on that completes the update on strategic initiatives. So let's move on to the details of our Q3 results starting with sales.
As I mentioned before, consolidated net sales were 96 $400,000 in the 3rd quarter, up $3,900,000 or 4% versus last year. As we focus all our time, talent, treasure and technology on growing our maintenance products. In the Q3, sales of maintenance products were nearly $87,000,000 which represents a 6% increase from last year. In the 3rd quarter, we generated approximately 38% of our sales in currencies other than U. S.
Dollar. Changing foreign currency exchange rates continue to be a headwind for us, albeit a smaller one in the current quarter. We were able to remove all foreign currency exchange impacts. Our consolidated revenue would have been $97,600,000 up 6% compared to the Q3 last year. Consolidated net sales were reduced by about $2,800,000 due to the impact of the strengthening of the U.
S. Dollar against functional currencies of our subsidiaries. This is what we refer to as relational related exposure or constant currency, and it impacts reported results from Canada, Australia, China and the EMEA segment. However, due to changing foreign currency exchange rates, our consolidated net sales were actually improved this quarter by about $1,600,000 in transaction related exposure. This currency exposure impacts reported results in our EMEA segment and was primarily due to the impact of the strengthening of the euro and the U.
S. Dollar against the pound sterling. Now let's take a closer look at what is happening in the individual segments. We will start with the Americas. Consolidated net sales in the Americas, which includes the United States, Latin America and Canada, remained relatively constant at $49,900,000 in the Q3.
Changes in foreign currency did not have a material impact on sales in the Americas from period to period. Sales of maintenance products increased by 3% in the Americas, primarily due to the strong sales in the U. S. Where maintenance product sales increased about 5%, benefiting from added distribution of WD-forty EZ Reach. These increases were partially offset by declines in maintenance product sales in Canada, which were down 16% during the quarter.
These declines were primarily due to lower sales associated with unstable market and economic conditions in Western Canada as a result of suppressed activity in the oil industry. Maintenance product sales in Latin America were flat compared to last year. Our maintenance products exclude our home care and cleaning products. We continue to consider our home care and cleaning products, particularly those in the U. S.
As Harvest Brands that continue to generate meaningful contributions and cash flows, but are generally expected to become a smaller part of the business over time. Sales of our home care and cleaning products in the Americas during the Q3 decreased about 13% from last year. Now over to EMEA. Consolidated net sales at EMEA, which includes Europe, the Middle East, Africa and India, increased to $32,900,000 in the 3rd quarter, up about 9% from last year. On a constant currency basis, sales in EMEA would have increased $4,800,000 or 16% compared to the prior year.
As you know, we sell into EMEA through a combination of direct operations as well as through marketing distributors. We reported consolidated sales in our EMEA direct markets, which accounted for 68% of the region sales, increased 9% during the quarter to 22,300,000 dollars However, it's also helpful to look at the results in local currencies in which we conduct transactions in the direct markets. In the United Kingdom, our pound sterling base market total sales increased 1% in the quarter. In local currencies, pound sterling based markets saw a 3% increase in sales of the maintenance products. However, these increases were almost entirely offset by a 6% decline in home care and cleaning products.
In euro based direct markets, sales in euros increased by 15% in the quarter. Now let's turn to our EMEA distributor markets, which account for 32% of EMEA sales during the quarter. Distributor market sales increased 7% in the 3rd quarter to 10,600,000 dollars primarily due to improved market conditions in Eastern Europe. Although market conditions have begun to stabilize in Russia, we'd like to remind investors that the political and economic instability in the region makes it difficult for us to predict what level of sales have in the near future. Now let's take a look at Asia Pacific.
Consolidated net sales in Asia Pacific, which includes Australia, China and other countries in the exchange rates had an unfavorable impact on sales. On a constant currency basis, sales in Asia Pacific would have been $14,100,000 an increase of 14% compared to last year. In Australia, net sales in U. S. Dollars were $4,300,000 in the 3rd quarter, flat compared to last year.
In its functional currency, the Australian dollar, sales increased 6% for the quarter. This growth was primarily due to a higher level of promotional programs. In China, net sales in U. S. Dollars were $3,400,000 in the 3rd quarter, down 5% compared to last year.
In its functional currency, the Chinese RMB sales were up 1% for the quarter. We remain optimistic about the long term opportunities in the China region, although we expect a lot of volatility along the way due to the timing of promotional programs, the building of distribution, shifting economic patterns and varying industrial activities. In our Asian distributor markets, net sales were $5,900,000 in the quarter, up 32% compared to last year. This increase in sales was driven by successful promotional programs for WD-forty Multi Use Product. However, the significant increase is also due to the fact that in the comparable period last year, we encountered a quality issue linked to a defective aerosol can component that required us to record an allowance of $900,000 during that quarter.
Our Asian distributor markets are not impacted by currency translation since we sell in U. S. Dollars in those markets. So I'm going to take a break. And now I'm going to hand over to Jay, who will continue the review of
the financials. Thanks Jay. Hey Gary, thank you. First, let's review our fifty fivethirtytwenty 5 rule. Those are the long term horizon targets that we use to guide our business.
As you may recall, the 55 represents gross margin, which we target to be at 55 percent of net sales. The 30 represents our cost of doing business, which is our total operating expenses, excluding depreciation and amortization. Our target is to be at 30% of net sales. Finally, the 25% represents EBITDA. Well, if our gross margin is at 55% and our cost of business is at 30%, our EBITDA will be awfully close to 25%.
First, the 55% or gross margin. In the Q3, our gross margin was 56.8% compared to 53.3% last year. Our gross margin was positively impacted by 200 basis points from major input costs and 160 basis points from various other items. Let's begin with the major input costs, which include our petroleum based specialty chemicals and aerosol cans. Crude oil is one of the primary feedstocks of our petroleum based chemicals.
Our gross margin this quarter reflects the lowest cost we've seen in well over a decade. As you may recall and we've shared with you in the past, it takes considerable time approximately 90 to 120 days for changing commodity prices to impact our cost of goods sold. The cost of crude declined sharply in the Q2 of this fiscal year and this significantly benefited our gross margin in our Q3. Since the beginning of Q3, however, the price of oil has risen by more than 60%. And as a result of this recent trend, we do not expect to realize the same level of benefit to gross margin in future quarters.
As a reminder, our long term gross margin target of 55% is not contingent upon oil staying at any particular price point. We cannot control global market dynamics such as the price of crude or fluctuating currencies, but we can continue to be focused and deliberate in managing the rest of our business so that we can maintain gross margin at a level close to our target over the long term. Well, let's briefly talk about some of the other items that impacted gross margin in the 3rd quarter. Advertising, promotional and other discounts that we give to our customers decreased compared to last year, positively affecting our gross margin by 100 basis points. Changes in foreign currency exchange rates positively impacted our gross margin by 60 basis points.
This is because in EMEA, our cost of goods are sourced primarily in pound sterling, while approximately 45% of our revenues are generated in euros with 30% in pound sterling and the remaining 25% in U. S. Dollars. The combined effect of the strengthening of both the euro and the U. S.
Dollar against pound sterling caused revenues in total to be worth more in pound sterling this quarter, thus improving our gross margin. These improvements to gross margin were partially offset by some sales mix changes and other miscellaneous costs, which combined had a negative impact on gross margin of 10 basis points. Now I'll address the 30 or our cost of doing business. In the 3rd quarter, our cost of doing business was approximately 36% compared to 34% last year. SG and A increased 10% compared to last year, which negatively impacted our cost of doing business percentage.
This increase is primarily attributable to higher employee related costs associated with higher accruals for earned incentive compensation compared to last year. While our target is to have our cost of doing business at 30% of net sales, we plan to continue to make investments in support of our 5th strategic initiative, operational excellence, and that includes investments in quality assurance, regulatory compliance and intellectual property protection in order to safeguard the blue and yellow can with a little red top. We expect to move closer to our long term target of 30% over time as revenues grow. For the Q3, 77% of our cost of doing business came from 3 areas: people costs or the investments we make in our tribe the investments we make in marketing, advertising and promotion as a percentage of our sales, our A and P expense investment this quarter was 6.4%. And finally, freight costs, the cost to get our products to our customers.
So that brings us to EBITDA, the last of our 50 five-thirty-twenty five measures. EBITDA was 20% of net sales for the Q3 compared to 19% in the Q3 last year. This increase was primarily driven by the improvements to gross margin I discussed earlier. Now that concludes our discussion of our fifty fivethirtytwenty five business model for the current quarter. I'll now discuss a couple of other items worth noting.
The provision for income taxes was 28.1% in the 3rd quarter compared to 30.2% last year. The lower tax rate was driven by increased taxable earnings generated from foreign operations, which are being taxed at lower rates. Net income for the 3rd quarter was $12,700,000 versus $11,000,000 in the prior year. Changes in foreign currency exchange rates had an unfavorable impact of about $300,000 on the translation of our consolidated results this quarter. Diluted earnings per common share were 0.88 dollars in the quarter compared to $0.75 for the same period last year.
Diluted weighted shares outstanding decreased to 14 point 3,000,000 shares from 14,600,000 shares a year ago. Now a word about capital allocation. Our capital allocation strategy includes a comprehensive approach to balancing both investing in long term growth and providing strong returns to our shareholders. We target maintenance CapEx of between 1% and 2% of net sales for the fiscal year. However, as Gary discussed earlier, we are planning to buy a new office building to house our San Diego based tribe members.
Therefore, in addition to our maintenance CapEx, we anticipate making a one time investment of approximately $15,000,000 next fiscal year. On a personal note, I'm very excited about this project. It will enable us to put an additional $10,000,000 in long term debt on our balance sheet and it is an investment we are making in the future of our drive. In addition, we continue to return capital to our shareholders through regular dividends and share repurchases. On June 21, our Board of Directors approved a regular quarterly dividend of $0.42 per share payable July 29 to stockholders of record at the close of business on July 15.
Based on today's closing price of $115.89 the annualized dividend yield is 1.45%. During the Q3, we repurchased nearly 91,000 shares of our stock at a total cost of approximately $9,600,000 under our share repurchase plan. Our March 2015 repurchase plan provides authorization to acquire up to $75,000,000 of the company's outstanding shares through the plan's expiration date of August 31, 2016. As of the end of the third quarter, we had $34,600,000 remaining under the plan. In order for the company to continue our share repurchase activities, our Board of Directors approved a new share buyback plan on June 21, 2016, which authorizes the company to acquire up to $75,000,000 of its outstanding shares following the expiration of the current plan and through an end date of August 31, 2018.
Now let's briefly talk about our current affairs in the United Kingdom. As a U. S.-based company generated approximately 38% of our revenue in currencies other than the U. S. Dollar, dramatic shifts in foreign currency exchange rates can have a significant impact on our reported results.
Clearly, the vote in Britain last month has put a lot of uncertainty into the markets. We don't know what the future holds, but we will share with you in a moment how we think shifting currency exchange rates, in particular, a significantly lower pound sterling will impact our fiscal year 2016 guidance. Aside from volatility in the foreign currency exchange rates, there are so many moving pieces and unknowns and so much that has to happen in order for Britain to exit the European Union. The good news is that we have a very geographically diverse business. We have weathered a variety of economic crisis over the last 60 years and we've always come out fine, Brexit is another event for us to navigate through.
So with that, let's turn to fiscal year 2016 guidance. We've updated some of our guidance to reflect our current view of the business. As a reminder, this guidance does not include any future acquisitions or divestitures and assumes that crude oil prices will remain close to current levels for the remainder of the year. The assumptions used in this guidance have been adjusted as it relates to foreign currency exchange rates to accommodate the current events in the U. K.
Net sales are projected to be slightly above fiscal 2015 or between $378,000,000 $383,000,000 Gross margin for the full fiscal year is expected to be above 55%. Advertising and promotional investments are projected to be near 6%. Net income is projected to be between $49,000,000 $50,000,000 and diluted earnings per share is expected to be between $3.40 $3.47 based on an estimated 14,400,000 weighted average shares outstanding. Now that completes the financial overview. I'll turn it back to Gary.
Thanks, Jay. Let me sum up with what we hope you heard on the call today. You heard that foreign currency exchange rates continue to be a headwind, albeit a weaker one, and they reduced our net sales by about $1,200,000 in the 3rd quarter. You heard that globally, maintenance product sales grew 6% this quarter. You heard that the Americas segment is performing well and in line with our expectations with a 3% growth of maintenance product sales this quarter.
You heard that 3rd quarter global sales of WD-forty You heard that most of our EMEA direct markets reported solid double digit sales growth and that we are seeing some on gross margin in the coming quarters. You heard that we'll be making a capital investment of approximately $15,000,000 in order to purchase a new office building for our San Diego based tribe members to call home. You heard that our Board of Directors approved a new share buyback plan that authorizes the company to acquire up to 75,000,000 of its shares outstanding shares through 2018. You heard that there's a lot of uncertainty around the British exit from the EU. Despite some currency related headwinds that we're likely to encounter, the underlying business will endure because we still see that there are squeaks in the United Kingdom and in other countries in the European Union.
You heard that we have revised our fiscal year 2000 guidance to reflect our current view of market conditions in the business. In closing, I'd like to share a quote with you from a famous San Diego, Doctor. Seuss. Sometimes you'll never know the value of a moment until it becomes a memory. Let's wish the memory of the U.
K. A good one. Thanks for joining us on the call today. And being an Aussie, I could say, God save the Queen. We'll now be pleased to open the conference for questions.
Our first question comes from the line of Liam Burke from Wunderlich. Please proceed with your question.
Thank you. Good afternoon, Gary.
Good afternoon, Liam.
Gary, could you give us a sense how the emerging markets are doing, particularly China? You talked a bit about Asia Pacific. You talked about currency, but how is the generally, how is the market doing in China?
We continue to build distribution in China. In fact, Liam, after this call today, I'm headed to LA and I'll be on a flight to Shanghai and I'll have a fresh view. But we are still comfortable and confident that we will build a business in China over time that's going to be worth about $100,000,000 as we see it today. We don't see anything that would tell us it's any different other than events that we're unaware of. So China to us continues to be a focused growth market.
And the thing that gives me goosebumps is this morning, someone in China woke up and met WD-forty for the first time. And if that continues to happen, we'll be fine.
Great. And in terms of the new product innovation is a big push for your incremental revenue growth. How is the new product pipeline looking? I mean, without being specific, but I mean, a lot of these things you'd like to wait till last minute before announcing, but how does pipeline look?
It looks very solid. I just attended our 12 month rolling planning meeting a week ago and was witness to some of the very exciting products that are getting ready for launch later this year early next year. So the pipeline is solid and we're optimistic. The other thing that we're really happy about, Liam, is even with all the noise and everything that's going on in the world, our multipurpose maintenance products year to date are up 4% globally. And that takes into account all these other events that have happened when you strip out the impact of currency.
So our strategy is to drive our focus of time, talent and treasure and technology on activity that we see to be the most opportunity and that's growing the blue and yellow can and then using the power of the shield to grow specialist. And we know what our circle of competence is, and we're not going to get outside that. So we feel good in the world. We'll deal with events as they come.
Great. Thank you, Gary.
Our next question comes from the line of Linda Bolton Weiser with B. Riley. Please proceed with your question.
Hi, how are you? Great. So in terms of the U. K. And the devaluation of the British pound, I know that that has a couple of different effects on your income statement, top line effects as well as I think it's going to be a positive, a favorable gross margin effect because of the cost side.
Can you maybe just go over what those effects are, just so we're all clear on the nature of those impacts?
I'll let Jai handle that.
Well, you're exactly right that as the pound weakens against the dollar and the euro, what happens is the results the sterling results, which the all of our European businesses denominated in sterling results, they get translated over at lower rates. So that affects top line, middle line and bottom line. However, in sterling, you're right that the lower or the weakened sterling results in higher sales in non sterling currencies in that market and that does impact and benefit gross margin. So there is a little offset.
So net net, is the British pound devaluation a positive or a negative to net income for your company?
It would be a net net negative, but although a small one.
Okay. Got you. And then, of course, we don't know what's going to happen with after effects and the economy in Europe. But is it safe to say that if the economy were to soften that your product, I mean it's an industrial type product, I mean your business would be somewhat impacted by that if that were to happen. Is that the way to think about it?
We don't know Linda. I mean he who runs business by the crystal ball learns to eat glass. I would say we've been through different economic and whatever periods over time. I think it's a shambolic condition in Europe right now. And we don't I'm not smart enough to predict it.
Right now, early indications are we're not seeing evidence of that. But who knows? Time will tell. We'll know more in a few a little time. We've grown in past years through most financial crises that there are.
And it's because of our global diversity and the diversity of our business across multiple trade channels. Sure, industrial is a big part of our business, but DIY is a huge part of our business, so is automotive, so is marine, so is farming. So we feel blessed to have that shield, if you will. Excuse the pun, but we'll see what happens.
Okay. And then just in terms of the gross margin pressure that you mentioned in your press release that we shouldn't expect this high level to continue. So when you talk about pressure, I assume you mean coming down off this high gross margin level. But that doesn't that mean though you still could be up year over year a couple more quarters? I'm picturing first half twenty seventeen maybe up, but then second half down year over year.
Is that am I thinking of that correctly?
Yes. Certainly, we could be up for another couple of quarters on a year over year basis and we would expect that given the current cost in the current market. What we saw, however, though, in our Q3 was some very unusually low prices that we that were in the market in the in our 2nd quarter. And when that's flowed into our cost of goods this quarter, We don't see those likely repeating. However, if we do see oil fall back to that point, we would see similar opportunities in the future.
Yes. There was a period of time, Linda, as you may remember, in the January, February, March time when oil was in the high-20s, low-30s. It's now up around 40 to 50 or the high-40s to 50s. So we did see some of that impact in this quarter.
Okay. And then you had mentioned that you adopted a new model or something in the Germanics. I didn't quite catch what that was. I mean, that's you're not using distributors there, I don't think. Can you explain if that strong growth was like a one time channel, Phil?
Or is that strong growth going to continue, do you think?
Basically, it's an evolution of the market. In the Germanics and it's happened elsewhere, as we build markets, for some time, we use wholesalers to sell into major retail chains. So we it's a direct market, but we would sell to a feeder or a wholesaler who would then sell into a retail chain. The reason being, you have to have a certain velocity within a retail chain for it to be economical for us to service that retail chain directly. And in some cases, they didn't have their own internal distribution that was aligned to the way we sell.
So in the DIY trade channel in Germany, we are converting to direct supply to people like Bauhaus and OB and whatever. And in doing that, we get closer to the customer. We're able to expand the product offering and take in more sizes and more product like specialist and bike. And we've been in the early stages of doing that all this year. So we're going to continue we think to see some pretty good growth in that channel in Germany for a while to come.
And it's part of our strategy and that we've identified for a while now that Germany is the 2nd biggest DIY market in the world and we're only about 65% of our potential in that trade channel. So this was a strategic move to start to accelerate our expansion in that trade channel.
Okay. Thanks. That sounds good. And then just the Canada weakness, I mean, you kind of mentioned that again. I guess, that's related to the oil industry weakness.
Does the trend there, is it looking like it's getting worse or better? Or just what are you
Canada has been a basket case this year and I feel for our tribe members up there. They've done a lot of hard work and they've fought a hard battle where we see it kind of stabilizing. But is the oil going to regenerate activity in the West? I don't know. But we're going to lap a bad year.
So hopefully, it won't look so bad next year. But it's been a tough year for our folks up in Canada and we're hopeful that we'll get through this and next year will be better.
Right. Okay. And then, I guess the distributor markets in the EMEA, like the Russia and all that, that was up about, what, mid single digit in the quarter. Is that do you consider that then a recovered level of business activity, so we could see modest growth in going forward, you think?
Well, as far as Russia is concerned, I don't think Russia is out of the out of where it should be now. The sales remain depressed. The economic sanctions and lower oil prices have led Russia into a deep recession. Some experts believe the economy in Russia will start to grow in calendar year 2017, but even with the growth rate being relatively low, maybe 1% to 2%, In the Q3, our sales were up nearly 31% in Russia over the last year, but this was less to do with the Russian market improving dramatically, Linda, and more to do with the fact that we've been experiencing in our Russian distributor markets from Q3 2015 because that's when the economic crisis began. So we I think it will take us a while to get back to where we were in Russia.
I think it's we've seen over 2 quarters now a flattening out of the downtrend, if you will. So hopefully, we'll just have to take it step by step as that economy gets better over time.
Okay. And then just lastly, you made it clear that you'll have this $15,000,000 CapEx investment next year for the new headquarters and you're adding some debt. So does that imply that your usual share repurchase level could be expected to remain as expected? You wouldn't change it just because of
that? That would be our expectation. We see the activity that's taken place over the last 5 years to continue. And we see
the and our dividend policy is unchanged. And as Jay said, he's personally happy with this because he can put a bit of long term debt on the balance sheet and put the balance sheet to work for a good
purpose. Okay. That's all for me. Thank you very much.
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.