Good day, and welcome to the WD-forty 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 I would now like to turn the presentation over to your 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 President and Chief Executive Officer, Gary Ridge and Vice President and Chief Financial Officer, Jay remarks, the operator will come back on the line for the Q and A portion of the call. Before we get started, let me remind you that supporting com. In addition to our traditional disclosures, the company has published some supplemental slides, which can be downloaded from this website.
We encourage investors to review these 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 that 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 Gary.
Thank you, Wendy. Good afternoon, everyone, and thanks for joining us for today's conference call. Today, we reported net sales of $97,300,000 for the Q2 of fiscal year 2015, which is a 3% increase from the Q2 of last fiscal year. Year to date, net sales were $193,700,000 an increase of 2% over the prior year period. Net income for the 2nd quarter was $11,300,000 compared to $10,300,000 in the Q2 of last year.
Year to date net income was $22,100,000 compared to $21,800,000 in the prior year period. Diluted earnings per share for the Q2 were $0.76 compared to $0.67 last year. Year to date, diluted earnings per share were $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 1 is to grow WD-forty Multi Use Product.
Our goal under this initiative is to take WD-forty Multi Use Product to more places for more people with more uses. Global sales of multiuse product were up nearly 3% in the 2nd 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 review the results by segment. Today, I'd also like to share with you an exciting new innovation for the WD-forty multiuse product.
Later this fiscal year, we expect to launch a new delivery system targeted at the high volume users of WD-forty multiuse 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 Q4 of this fiscal year, and we are looking forward to updating you on the progress of this innovation in the future. 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 defined geographic regions and geographies and platforms. The WD-forty Specialist product line continues to grow and sales of the product line increased 8% in the 2nd quarter and 17% year to date. We continue to launch new specialist categories in markets around the world. Although each market, country and segment experiences different short term trends relating to sales of the WD-forty Specialist, we continue to believe that WD-forty Specialist will be a substantial revenue and earnings growth engine for many years to come. Strategic initiative number 3, to broaden our revenue and product base.
Our goal under this initiative is to leverage the strengths within the company to derive revenue from new sources outside our flagship WD-forty brand. In the Q2, we launched a new 3 in-one lock lube in the Americas region, and we saw solid sales of our new GT85 brand in the U. K. In addition, our initial launch of WD-forty bike in Europe is off to a great start. We see a lot of future opportunity with these incremental MPMP products, and we look forward to updating you in the future on their progress.
Strategic initiative number 4 is to attract, develop and retain outstanding tribe members during the 2nd quarter, bringing our total to 37 for this fiscal year to date. Building our company's bench strength for our future success is a top priority. To support this initiative, we commenced our 4th year of Leadership Lab in February, a program which has been created to provide comprehensive training to develop all levels of tribe members who are interested in professional development. Retaining our tribe members is important to us as well. The skills and experience our tribe members have will help us succeed with our strategic initiatives.
In the U. S, our employee tenure has more than doubled the U. S. National average. Strategic initiative number 5 is operational excellence.
This initiative includes continuous improvement of resources, systems and processes in order to help offset rising costs and protect our operating margin. Operational excellence is important to meet our ever increasing customer and regulatory requirements and to efficiently manage our time, talent and treasure. We continue to make progress on the initiatives planned for fiscal year 2015. We've made great strides in the area of category management. Category management is a retailing and purchasing concept in which the range of products sold by a retailer is broken down into discrete groups by related products.
By partnering with our customers and implementing a category management strategy, we've helped our customers maximize their ROI and to really win at the shelf. In addition to this work, we continue to move forward with the transitioning of all states to the U. S. Into the lower VOC formula that we launched in California in fiscal 2014. We expect to have this transition completed by the end of the current fiscal year.
We look forward to providing you updates on these initiatives throughout the remainder of the fiscal year. That completes the broad update on our strategic initiatives. So let's move on to the details of our second quarter results, starting with sales. Consolidated net sales grew to $93,700,000 in the 2nd quarter and $193,700,000 year to date. These numbers reflect growth of 2 3% for the quarter and 2% year to date comparing to the prior year periods.
Although our underlying business is solid, we are currently experiencing some foreign currency exchange headwinds. Foreign currency exchange impact is a reality that every international business must navigate. Our business has both foreign currency transaction and translation exposure. While we can't avoid the impacts of these foreign currency exchange exposures, we would like to provide a little more detail on how these exposures can affect our results. We currently have 4 subsidiaries located outside of the United States that generate sales and do businesses in currencies other than the U.
S. Dollar. They are located in the United Kingdom, Canada, Australia and China. The main currency with each of our subsidiaries conducts its business is called the functional currency. We have a foreign currency translation exposure when we translate the results of our foreign subsidiaries from their functional into U.
S. Dollars. The recent strengthening of the U. S. Dollar deflates the net sales denominated in currencies other than U.
S. Dollar and thus has a negative effect on our consolidated results. In addition to this translation exposure, our U. K. Subsidiary also experiences foreign currency transaction exposure because it conducts business in currencies other than its functional currency, the pound sterling.
A significant portion of EMEA's net sales are generated outside of the U. K. And are transacted in euros and U. S. Dollars.
When these sales are converted into pound sterling, EMEA's reported results can be impacted by the weakening or strengthening of these transaction currencies. In the Q2, the average exchange rate for the euro against the pound sterling declined 7%, whereas the average exchange rate for the U. S. Dollar against the pound sterling increased by 6% when compared to the same period last year. So keeping the present currency environment in mind, I will now discuss our sales results in greater detail.
If we take a closer look at our net sales by product group, we continue to be well positioned for sustainable growth of our multipurpose maintenance products. As a reminder, products under this group include WD-forty multiuse product, our blue and yellow can WD-forty Specialist, 3 in-one, WD-forty Bike and GT-eighty five. We frequently refer to this group as MPMP. We focus our time, talent and treasure on this product group as it accounted for 89% of our global sales in the 2nd quarter. Consolidated MP MP sales were 86 $600,000 in the 2nd quarter and $171,500,000 year to date, up 3% and 2%, respectively.
By trade block, MPMP sales in the 2nd quarter were down 1% in the Americas, up 1% in EMEA and up 32% in Asia Pacific. Year to date, MPM P sales were up 1% in the Americas, down 2% in EMEA and up 21% in Asia Pacific. If we take a closer look at the current quarter sales, the decrease in MP MP sales in the Americas was driven primarily by lower sales in Latin America and the United States due to the timing of promotional activities. Although the increase in MP MP sales in EMEA in the second quarter was only 1%, The unfavorable impact of foreign currency exchange rates masks a much bigger and higher organic growth rate in this trade block from period to period. The significant increase in MP MP sales in Asia Pacific was primarily due to increased sales of WD-forty Multi Use Product throughout our Asian distributor markets and in China.
Turning to the Home Care and Cleaning Products Group. Sales were $10,700,000 in the 2nd quarter and $22,200,000 year to date, up 3% and 1%, respectively. The group accounted for 11% of net sales in the 2nd quarter. Our home care and cleaning products include the brands Spot Shot, 2,000 Flushes, Carpet Fresh, Novak, 1,000 and 1 X14 Lava and the Solvoil brands. By trading block, sales of our home care and cleaning products in the 2nd quarter were flat in the Americas, up 8% in EMEA and up 11% in Asia Pacific.
Sales year to date were down 1% in the Americas, up 1% in EMEA and up 12% in Asia Pacific. As a reminder, our home care and cleaning products, particularly those in the U. S, are considered harvest brands that continue to generate positive cash flows but are generally expected to become a smaller part of the business as net sales of our multipurpose maintenance products grow with the execution of our strategic initiatives. Now on to our results by segment, and let's start with the Americas. Net sales in the Americas, which include the United States, Canada and Latin America, decreased to $44,700,000 in the 2nd quarter, down 1% versus last year.
Year to date net sales in the Americas increased slightly to $89,500,000 as compared to $89,300,000 last year. In the Q2, the segment accounted for 46% of global sales versus 48% in the prior year period. Total U. S. Sales were down 1% in both the Q2 year to date.
The decrease in sales in the U. S. Was driven primarily by lower sales of WD-forty multiuse product due to the timing of promotional activities. However, in the U. S, we experienced double digit growth of the WD-forty Specialist product line in both the second quarter and year to date.
Sales Canada were down 1% in the 2nd quarter and down 7% year to date. The decrease was driven primarily by lower sales of home care and cleaning products in both the Q2 year to date. Total sales in total Latin American sales were down 6% in the Q2 but were up 7% year to date. The decrease in sales in the Q2 was driven primarily by lower sales of multipurpose maintenance products due to the timing of promotional activities. Year to date, the increase in sales was mainly driven by higher sales of WD-forty multipurpose maintenance products throughout the region, including Mexico and Chile.
Now on to our EMEA segment. Net sales in the EMEA segment, which includes Europe, the Middle East, Africa and India, increased to 38 point $7,000,000 in the 2nd quarter, up 1% versus last year. Year to date sales decreased 2% to $73,700,000 in the 2nd quarter. The segment accounted for 40% of global sales, which is flat compared to last year. As we discussed in detail earlier, our results fluctuate due to the change in foreign currency exchange rates.
Therefore, we also discuss our sales in what we call constant currency. For that, we translate the current period results from our foreign subsidiaries' functional currencies into U. S. Dollars at the prior period's exchange rates. On a constant currency basis, sales in the EMEA segment would have increased 8% in the 2nd quarter and 1% year to date.
We sell into EMEA through a combination of direct operations as well as through exclusive marketing distributors. Direct markets sales accounted for 61% of EMEA's total 2nd quarter sales and 58% of sales year to date. Direct market net sales declined 3% in the 2nd quarter and 5% year over year when compared to the prior year period. These sales declines were primarily due to the general weakening of the euro, the currency in which a significant portion of the EMEA direct market sales are generated. Also contributing to the decrease in sales was timing of customers' orders compared to the prior year period.
Our distributor markets accounted for 39% of EMEA's total second quarter sales and 42% of its sales year to date. Distributormarkets net sales increased 9% in the 2nd quarter and 2% year to date, primarily due to the strengthening of the U. S. Dollar, the currency in which a significant portion of EMEA distributor market sales are generated. Also contributing to the growth was the higher sales of promotional activities associated with the WD-forty multiuse product, particularly in Northern Europe and the Middle East.
This increase in sales was partially offset by lower sales in the Eastern Europe, primarily due to the economic conditions and political unrest in the Ukraine and Russia. Now on to the Asia Pacific segment. Net sales in the Asia Pacific segment, which includes Australia, China and other countries in the region, increased to $13,900,000 in the second quarter, up 28% versus last year. Year to date sales increased 20% to $30,900,000 dollars The segment accounted for 40% of global sales compared to 12% in the Q2 of last year. Changes in foreign currency exchange rates had an unfavorable impact on sales.
On a constant currency basis, sales in the Asia Pacific segment would have increased 32% in the 2nd quarter and 22% year to date. In Australia, net sales declined 2% in the 2nd quarter and 1% year to date. Changes in foreign currency exchange rates had a negative impact on sales results in Australia. On a constant currency basis, sales in Australia would have increased 7% in the Q2 and 4% year to date. This increase in sales was primarily due to the increased distribution and successful promotional activities in the period.
Sales in China increased 50 7% in the 2nd quarter and 12% year over year, primarily due to new distribution and increased promotional activities in the region. The momentum we are seeing in China right now is very exciting, and we continue to be optimistic about the long term opportunities in this country. Although we expect a lot of volatility along the way due to the timing of promotional programs, the beetle building of distribution, shifting economic patterns and the varying industrial activities. Sales in the rest of the Asian region increased 44% in the second quarter and 39% year to date. These increases were driven by improved sales of WD-forty multiuse product throughout most of our distributor markets, including those of South Korea, Indonesia and the Philippines.
So that's it for the sales update. And now over to Jay, who will continue the review with the financials.
Cary, 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'll file tomorrow. First, a look at our fifty-thirty-twenty rule. You may remember those are the measures we use 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. If our gross margin is 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 Relations website. Now on to our gross margin or the 50 in our fifty-thirty-twenty rule. Gross margin in the 2nd 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 currency 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 explained during our Q1 earnings call, we expect to see net positive impacts on our gross margin when crude oil prices fall and we did see this in our gross margin in this quarter. As a reminder, although approximately 35% of the input costs associated with a can of our WD-forty multi use product are made up of petroleum based specialty chemicals, only a small portion of these costs are directly indexed to the cost of crude oil. Also impacting gross margin this quarter were lower promotional discounts which had a favorable impact on gross margin of 50 basis points, primarily in the Americas and EMEA segments.
Cost of promotional activities such as sales incentives, trade promotions, cash discounts that we give to our customers are recorded as a reduction to sales and the timing and magnitude of these activities can cause fluctuations in gross margin from period to period. In addition, our gross margin improved by 20 basis points as a result of price increases implemented in the last 12 months, largely in Asia Pacific. Gary discussed in detail how our changes in foreign currency exchange rates have an impact on net sales. In addition to the impact they have on sales, they can also impact our gross margin. This is because in EMEA, our cost of goods are sourced almost entirely in pound sterling, while approximately 45% of our revenues are generated in euros, 30% in pound sterling and the remaining 25% in U.
S. Dollars. Although the dollar has strengthened against the pound sterling, the value of the euro deteriorated more significantly versus the sterling in the second quarter. This caused revenues in total to be worth less in pound sterling, thus decreasing our gross margin. In the Q2, changes in foreign currency exchange rates within our EMEA segment negatively impacted our gross margin by 20 basis points.
Gross margin was also negatively impacted by 80 basis points due to sales mix changes and other miscellaneous costs, which increased from the Q2 of the prior year. The themes discussed for the quarter for gross margin also apply to year to date results. Gross margin year to date was 52.1% compared to the 51.8% in the prior fiscal year. The increase of 30 basis points in gross margin was driven primarily by the decrease in input costs across all trading blocks along with price increases in Asia Pacific and these favorable impacts were partially offset by the unfavorable impacts from foreign currency exchange rates in EMEA and changes in our sales mix. So we cannot avoid the impact of global market dynamics on items such as foreign currency or the price of crude oil, we continue to be focused and delivered in managing the rest of our business for maximum growth in our gross margin.
Now on to the 30 or our cost of doing business. In both the Q2 and year to date, our cost of doing business was 34%, flat compared to similar periods last year. While our goal is to have our cost of doing business be at or below 30% of net sales, we plan to continue our investments in new product development, brand protection, regulatory and quality assurance. As a result, we expect our cost of doing business to remain near current levels throughout the remainder of the fiscal year. We expect to move closer to our target of 30 percent over time as revenues grow.
Year to date, 76% of the total cost of doing business came from 3 areas. Number 1, our people costs or the investments we make in our tribe. Also investments we make in marketing, advertising and promotion. And finally, freight costs, the cost to get our products to our customers. Now let's take a closer look at the expense items that lead into our final EBITDA measure.
1st, SG and A expenses. In both the Q2 year to date, SG and A expense increased by 3% compared to the prior year period to $27,400,000 $54,800,000 respectively. In the 2nd quarter, SG and A expense decreased to 28.1 percent of net sales, down slightly from the 28.3% in the prior year period. Employee related expenses increased by $800,000 compared to the prior year period. These increases were primarily due to increased headcount as well as annual merit increases, which were implemented in the Q1.
These additional costs were partially offset by lower earned incentive compensation accruals. Professional services increased $200,000 over the prior year. This increase is associated with our continued investment in intellectual property protection along with higher legal fees associated with litigation. Finally, other miscellaneous expenses, which include travel and meeting expense, depreciation expense, general office overhead, other costs increased $400,000 compared to the prior year. These increases were partially offset by a $700,000 favorable impact due to foreign currency exchange rates.
Year to date, SG and A expense increased to 28.3 percent of net sales compared to the 28.1% in the prior year. Year to date employee related expenses increased by $1,100,000 compared to the prior year period. These increases again were primarily due to increased headcount, annual merit increases implemented in the Q1 and were also partially offset by lower incentive compensation accruals. Also contributing to the increase in SG and A was travel and meeting expenses in support of our strategic initiatives, which increased $400,000 when compared to the prior year. Finally, depreciation expense increased $300,000 compared to last year, primarily due to our continued investment in our systems.
These increases were partially offset by a $500,000 favorable impact due to foreign currency exchange rates. We continued our investment in innovation and renovation by investing $1,700,000 in the 2nd quarter and $3,300,000 year to date in R and D activities, up from $1,400,000 $2,900,000 in the same period last year. The majority of this investment is associated with our multipurpose maintenance products and therefore directly supports our strategic initiatives. Our R and D tribe members engage in consumer research, new product development, product improvement and testing activities. Advertising and sales promotion expense decreased by 9% in the 2nd quarter to $5,500,000 compared to the prior year quarter.
As a percent of sales, A and P investments decreased to 5.6% in the 2nd quarter compared to 6.4% in the prior year period. The decrease in the advertising and sales expense during the Q2 was primarily due to lower promotional lower levels of promotional programs and marketing investments, primarily focused in the Americas segment. The decreased expense was partially offset by increased investment in our Asia Pacific segment. Changes in foreign currency exchange rate had a favorable impact of $200,000 in the 2nd quarter. Year to date, our advertising and sales promotion expense decreased by 2% to $11,400,000 compared to the prior year period.
As a percent of sales, A and P investment decreased to 5.9% compared to 6.1% in the prior year period. The themes discussed for the quarter for advertising and sales expense also apply to our year to date results. As a reminder, it is common for advertising and sales promotion expense to fluctuate from period to period based on the types of marketing activities and or promotional activities we employ within any given period. Amortization of intangible assets increased $100,000 to $800,000 in the Q2 of this year. Year to date such expenses increased by $300,000 to $1,500,000 for the year to date period.
Total operating expenses in the Q2 were $33,600,000 versus $33,300,000 in the Q2 of last year. Operating income in the 2nd quarter was $17,600,000 compared to 15 point $3,000,000 in the prior year quarter. Year to date, total operating expenses were $67,700,000 compared to the $66,200,000 in the same period of last year. This resulted in year to date operating income of $33,200,000 versus the $32,000,000 last fiscal year. EBITDA, the last of our fifty-thirty-twenty measures, was 18% of net sales in both the 2nd quarter and year to date periods, both of which were the same as the prior year periods.
We target our EBITDA of 20% of net sales, but expect variations from time to time as sales, A and P investment and other expenses fluctuate with the timing of our activities. Our EBITDA percentage is also affected by investments we make for future growth. Well, that completes the discussion of the operating items for the Q2 year to date. I'll quickly review our other non operating items. Interest income and interest expense in total remained relatively constant in both the Q2 year to date periods compared to the prior year.
Other expenses increased by $1,200,000 in the 2nd quarter $900,000 year to date compared to the prior year periods. This increase was due to the higher foreign currency exchange losses as a result of the significant fluctuations in the exchange rates for the euro against the pound sterling. The provision for income taxes was 29.6% in the 2nd quarter and 30.1% year to date versus 31% 30.6% in the prior year periods, respectively. The lower tax rate was driven by an increase in the company's earnings coming from foreign operations. Net income in the 2nd quarter was $11,300,000 versus $10,300,000 in the prior year quarter.
Changes in currency exchange rates had an unfavorable impact of $500,000 on the translation of our consolidated results this quarter. On a constant currency basis, net income would have been $11,800,000 in the 2nd quarter. Diluted earnings per common share were $0.76 in the 2nd quarter compared to $0.67 in the prior year quarter. Diluted shares outstanding decreased to 14,700,000 shares from 15,300,000 shares. And year to date, our net income was $22,100,000 compared to the $21,800,000 in the prior year period.
Changes in foreign currency exchange rates had an unfavorable impact of $400,000 on translation of our year to date consolidated results. On a constant currency basis, net income would have been $22,600,000 in the year to date period. Diluted earnings per common share were $1.49 year to date compared to $1.41 in the prior year period. Diluted shares outstanding decreased to 14,700,000 shares from 15,300,000 shares. Let's take a look at our balance sheet at February 28, 2015.
Our balance sheet and liquidity continued to remain solid. At the end of the Q2, our cash balance was $43,700,000 and we had $42,100,000 in short term investments, which consist of term and time deposits held in money center banks. During the quarter, we borrowed an additional $5,000,000 on our revolving line of credit. As a result, our debt outstanding was $103,000,000 at the end of the second quarter. The $5,000,000 increase in the line of credit balance during the Q2 was used primarily for share repurchases.
Let's turn to capital allocation. We continue to return capital to shareholders through regular dividends and share repurchases. On March 24, the Board of Directors declared a quarterly cash dividend of $0.38 per share payable April 30, 2015 to stockholders of record at the close of business on April 16, 2015. Based on today's closing price of $87.14 the annualized dividend yield would be 1.7%. During the Q2, we acquired approximately 57,000 shares of our stock at a total cost of $4,700,000 Between August of 2013 February 2015, we repurchased roughly 849,000 shares of our stock at a total cost of $60,000,000 And as a result, we've exhausted our 60,000,000 dollars share buyback program.
Our new plan, which was approved which the Board approved on in October of 2014 became effective once the $60,000,000 plan was exhausted. It provides authorization to acquire up to $75,000,000 of the company's outstanding shares through the plan's end date of August 2016. Through February 28, 2015, no repurchases had been made under the 75 $1,000,000 plan, but we've started to execute repurchases under this plan in the Q3. Well, that completes the financial overview. Again, more information will be available in our Form 10 Q, which we'll be filing tomorrow.
And thank you so much. And now back to Gary.
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 Q2 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 a 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. Another dynamic we are currently navigating is the falling crude oil prices. Crude oil costs going down are 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 price increases planned this fiscal year to offset the costs 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 our fiscal year net sales results to be in the range of $387,000,000 $1,000,000 to $400,000,000 or a growth of between 1% 4%. We project gross margin to be better than 52%. We expect our global advertising and promotional investment to be in the range of 6% 7% of net sales. We expect net income of between $45,100,000 $46,000,000 which would achieve a diluted EPS of between $3.07 $3.13 $1.3 assuming 14,700,000 weighted average shares outstanding. Despite the uncertainty that foreign currency and crude oil are causing in both our top and bottom line results, our underlying business is performing as we expected it would this fiscal year and in a way which we believe will enable us to continue delivering strong returns to our stockholders over the longer term.
So in summary, what did you hear from us on this call today? You heard that our business is performing well right now and that in constant currency, our global sales growth rates were much higher than those reflected in our actual results for the Q2 year to date. You heard that the WD-forty Specialist product line continues to perform well with global rate of sale increase of 17% year to date. You heard that crude oil costs going down continues to be a tailwind. However, we are still uncertain exactly how their impact will embed in our business over the longer term.
You heard that later this fiscal year, we expect to launch a new delivery system targeted at high volume end users of the WD-forty multiuse product that we believe will make the product even easier to use in workshops and factories. You heard that we continue to return capital to our stockholders and that we completed our repurchase under our $60,000,000 share buyback program during the second quarter and that we began executing the repurchases under our new $75,000,000 plan during the Q3. You heard that our underlying business is performing as we expected it would this fiscal year and in a way which we believe will enable us to continue delivering strong returns to our stockholders over the longer term. And as I do, in closing, I'd like to share a quote with you from Sue Grafton. Ideas are easy.
It's the execution of ideas that really separates the sheep from the goats. Thank you for joining us today. We'd be pleased now to open the conference call to your questions. Back to the operator.
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 specialist line, but 8% overall worldwide. Does the quarter to quarter growth rates in specialists sort of mirror WD-forty, they ebb and flow with promotional activities?
Well, not so much promotion, Liam, more so in new distribution. Certainly, we did run our 1st promotion with specialists 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 into a Lowe's store now, you would see that come March, we actually have I think up to 8 new SKUs of specialists in distribution in those stores and many others. So year to date, our specialist growth is 70% and we're happy with where we're going with it.
Great. Jay, on your breakdown of cost of goods, majority of it are raw materials, Obviously, you can it's you're subject to the ebb and flow. 12% is non are 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 1. 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's a variety of things that we can and are continuing to look at as we move forward.
Great. Thanks very much.
Thanks,
And we move next to Linda Bolton Weiser with B. Riley.
So, yes, 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 margin. So if there was kind of less promotion and discount, how did you produce 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, Linda. And of course, we had the increasing distribution in our distributor markets. You may remember also that the shift of sales out of 1 quarter into another because of the Long Beach shipping debacle may have also had some impact. In EMEA, we're seeing continued growth of specialists.
We're seeing our 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're doing over there. But overall, we would like to think that in normal times we can grow our sales between 4% 8% and this quarter was at the upper end of what our normal guidance is. So I think overall nothing extremely special.
Obviously, we're expecting a reasonably solid second half of the year as well. It's just really now which way the currencies go. But underlying, we're very comfortable and very Tribe is doing.
So am I to understand correctly that all of the reduction in the reported sales growth guidance is due to currency. You kept basically on a local currency, you kept that expectation the same?
All of the yes, what lowered our guidance from the 4% to 8% the 4% to 8%, which we had in our initial guidance is really currency impacts.
Okay. And then you alluded to this new delivery system, Gary, in the U. S. I think you said it was launching in the 4th fiscal quarter. Is this something that will help you garner more shelf space?
Or are you losing some SKUs somewhere else? And is it a higher margin product? Or does it have an higher average selling price?
Yes. No, yes, yes. No, we won't use loose shelf space, yes. It is a higher selling product. It's a new version of our smart straw that's aimed at the heavy end users, the industrial trade.
And it's we're very excited about it.
Okay. And so you're just starting in the U. S. And then perhaps more globally or are there plans for global launch already in place or?
Well, our challenge is making enough of it in the early stages. And when you see it and you will within the next few months, you'll think this is a pretty easy deal. But it's taken us 4 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 of this to be able to take it globally.
It will go globally eventually. I would say we'll just see it in the U. S. Probably for the next year as we bed it in. And then you know what we like, we like to do some pilot trials, make sure we got it right.
We think we have and then we'll take it it to the appropriate markets around the world.
How easy do you think it will be for competition to copy the delivery method?
They got a few multiple 1,000,000 of dollars and a lot of rate 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 those that have copied it, the product is inferior.
Nobody has our volume. Since we started selling Smart Straw, I think we've sold about $1,000,000,000 worth of Smart Straw. And it's our volume that allows us to cost effectively manufacture it where most of our competitors have nowhere near, as you know, the volume we have, which really puts a lot of this innovation either prohibitive or severely impacting negatively their margin.
Right. And then, I know that you've mentioned that the lawn and garden is actually a smaller kind of potential sales effect than this new delivery system. But is the lawn and garden going to be launched in the U. S? Or are you still deciding on that or?
We're still deciding. We certainly are comfortable with the results in Australia. In fact, after this call today, I get on a plane and I'm traveling down there and we'll be reviewing it, but we'll continue it down there. But it's a matter of prioritization and we believe that what we're 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 a blind dog in a meat house. We've got to take the juiciest pizza meat first and we think that's it. But lawn and garden is definitely not off our agenda in the U. S. But it's what we're 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 executional 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's 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 ruble devalued at its top point around 60%. It's down to around 40 now. We sell into that market in U. S.
Dollars. So our distributors are therefore making the adjustments to pricing, which a lot of them have made. And we are in the same boat as 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 it's I mean it just sounds like your competitors are reacting a little bit and there's just 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-forty competitors are doing stuff with pricing?
No, no, no. I mean, you can't yes, I mean, are they reacting to low crude by somehow being more aggressive on promotion or cut 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 hours trying to get our arms around what happens.
And it's really helped us understand it a lot better for the future. But what we do know is that when oil goes up, our prices from our suppliers 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 JPMorgan.
Hello. This is Ben Richardson sitting in for Jeff.
Hey, Ben.
Hello. So I just want to I looked at the diagram here of the makeup of the cost of can of WD-forty and it's clear that the petroleum component is coming down at least on the trailing 6 month run rate. And 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 piece of plastic. The cost of our plastic smart straw mechanism is really has a much more of a manufacturing 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 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're not seeing a significant increase or decrease going forward in our can pricing. And we have been seeing kind of some benefit 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 a 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, but given your expectation of a stronger back half here. Is that largely seasonal? And I guess what are the different components of any pickup you would expect in the back half?
Well, as with most of our years, they depend on when certain promotional activities fall. We see a larger portion of our promotional activities come through the spring into the summertime. But that depends which half of the world you're 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 see that our second half is normally a little 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 barbecue 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 our general business overall.
And ladies and gentlemen, that does conclude our allotted time for questions. We do thank you for your participation on today's conference call. We ask that you now please disconnect your line.