Good day, and welcome to this WD-40 Company second quarter fiscal year 2015 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will conduct a question-and-answer session. To register a question at any time during this call, please press star one on your telephone keypad. Please make sure your mute function is turned off to allow your signal time to reach our equipment. If at any time during the conference you need to reach an operator, please press star zero on your telephone keypad. I would now like to turn the presentation over to your host for today's call, Ms. Wendy Kelley, Director of Investor Relations and Corporate Communications. Please proceed.
Thank you. Good afternoon and thanks to everyone for joining us today. On our call today are WD-40 Company's President and Chief Executive Officer, Garry Ridge, and Vice President and Chief Financial Officer, Jay Rembolt. Following their prepared remarks, the operator will come back on the line for the Q&A portion of the call. Before we get started, let me remind you that supporting materials for this call are available on our investor relations website at investor.wd40company.com. In addition to our traditional disclosures, the company has published 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 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 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 8th, 2015. The company disclaims any duty or obligation to update any forward-looking information, whether as a result of new information, future events, or otherwise. With that, I'd now like to turn the call over to Garry.
Thank you, Wendy. Good afternoon, everyone, and thanks for joining us for today's conference call. Today, we reported net sales of $97.3 million for the second quarter of fiscal year 2015, which is a 3% increase from the second quarter of last fiscal year. Year-to-date, net sales were $193.7 million, an increase of 2% over the prior year period. Net income for the second quarter was $11.3 million, compared to $10.3 million in the second quarter of last year. Year-to-date net income was $22.1 million, compared to $21.8 million in the prior year period. Diluted earnings per share for the second quarter were $0.76, compared to $0.67 last year. Year-to-date diluted earnings per share were $1.49 compared to $1.41 last year. Before I talk in more detail about our sales results, I'd like to take a moment to update you on our strategic initiatives.
Strategic Initiative Number One is to grow WD-40 Multi-Use Product. Our goal under this initiative is to take WD-40 Multi-Use Product to more places for more people with more uses. Global sales of Multi-Use Product were up nearly 3% in the second quarter and up 1% year-to-date. The growth came from our Asia Pacific segment, primarily within our Asia distributor markets in China, which was slightly offset by declines in the Americas and EMEA. I will discuss these fluctuations in more detail when I review the results by segment. Today, I'd also like to share with you an exciting new innovation for the WD-40 Multi-Use Product. Later this fiscal year, we expect to launch a new delivery system targeted at the high-volume users of WD-40 Multi-Use Product, which we believe will make the product even easier to use in workshops and factories.
The new delivery system will launch in the U.S. in the fourth quarter of this fiscal year. We are looking forward to updating you on the progress of this innovation in the future. Strategic Initiative Number Two is to grow the WD-40 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-40 Specialist product line continues to grow, and sales of the product line increased 8% in the second quarter and 17% year-to-date. Each market, country, and segment experiences different short-term trends relating to sales of the WD-40 Specialist. We continue to believe that WD-40 Specialist will be a substantial revenue and earnings growth engine for many years to come.
Strategic Initiative Number Three, 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-40 brand. In the second quarter, we launched a new 3-IN-ONE Lock Lube in the Americas region. We saw solid sales of our new GT85 brand in the U.K. In addition, our initial launch of WD-40 BIKE in Europe is off to a great start. We see a lot of future opportunity with these incremental MPMP products. We look forward to updating you in the future on their progress. Strategic Initiative Number Four is to attract, develop, and retain outstanding tribe members. We welcomed 11 new tribe members during the second 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 fourth 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 Five 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 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.
Let's move on to the details of our second quarter results, starting with sales. Consolidated net sales grew to $93.7 million in the second quarter and $193.7 million year to date. These numbers reflect growth of 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 four subsidiaries located outside of the United States that generate sales and do businesses in currencies other than the US 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 currency into US dollars. The recent strengthening of the US dollar deflates the net sales denominated in currencies other than US 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 EMA's net sales are generated outside of the U.K. and are transacted in euros and US dollars.
When these sales are converted into pound sterling, EMA's reported results can be impacted by the weakening or strengthening of these transaction currencies. In the second quarter, the average exchange rate for the euro against the pound sterling declined 7%, whereas the average exchange rate for the US dollar against the pound sterling increased by 6% when compared to the same period last year. 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 multi-purpose maintenance products. As a reminder, products under this group include WD-40 Multi-Use Product, our blue and yellow can, WD-40 Specialist 3-IN-ONE, WD-40 BIKE, and GT85. 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 second quarter. Consolidated MPMP sales were $86.6 million in the second quarter and $171.5 million year to date, up 3% and 2% respectively. By trade block, MPMP sales in the second quarter were down 1% in the Americas, up 1% in EMEA, and up 32% in Asia Pacific. Year to date, MPMP 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 MPMP 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 MPMP 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 MPMP sales in Asia Pacific was primarily due to increased sales of WD-40 Multi-Use Product throughout our Asian distributor markets and in China. Turning to the home care and cleaning products group. Sales were $10.7 million in the second quarter and $22.2 million year to date, up 3% and 1% respectively. The group accounted for 11% of net sales in the second quarter. Our home care and cleaning products include the brands Spot Shot, 2000 Flushes, Carpet Fresh, no vac, 1001, X-14, Lava, and the Solvol brands.
By trading block, sales of our home care and cleaning products in the second 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. On to our results by segment, let's start with the Americas. Net sales in the Americas, which include the United States, Canada, and Latin America, decreased to $44.7 million in the second quarter, down 1% versus last year.
Year to date, net sales in the Americas increased slightly to $89.5 million as compared to $89.3 million last year. In the second quarter, 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 second quarter and year to date. The decrease in sales in the U.S. was driven primarily by lower sales of WD-40 Multi-Use Product due to the timing of promotional activities. However, in the U.S., we experienced double-digit growth of the WD-40 Specialist product line in both the second quarter and year to date. Sales in Canada were down 1% in the second quarter and down 7% year to date. The decrease was driven primarily by lower sales of home care and cleaning products in both the second quarter and year to date.
Total Latin American sales were down 6% in the second quarter, but were up 7% year-to-date. The decrease in sales in the second quarter 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-40 Multi-Use Product 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 $38.7 million in the second quarter, up 1% versus last year. Year-to-date sales decreased 2% to $73.7 million in the second 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.
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 second 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 second quarter sales and 58% of sales year-to-date. Direct market net sales declined 3% in the second 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 the 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. Distributor markets net sales increased 9% in the second 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-40 Multi-Use Product, particularly in Northern Europe and the Middle East. This increase in sales was partially offset by lower sales in Eastern Europe, primarily due to the economic conditions and political unrest in 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 $13.9 million in the second quarter, up 28% versus last year. Year-to-date sales increased 20% to $30.9 million. The segment accounted for 14% of global sales, compared to 12% in the second quarter 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 second quarter and 22% year-to-date. In Australia, net sales declined 2% in the second 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 second quarter 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 57% in the second 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 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-40 Multi-Use Product throughout most of our distributor markets, including those of South Korea, Indonesia, and the Philippines. That's it for the sales update.
Over to Jay, who will continue the review with the financials.
Garry, thank you. In addition to the information presented on this call, we suggest that you review our Form 10-Q for the quarter, which we'll file tomorrow. First, a look at our 50/30/20 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. 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. On to our gross margin or the 50 in our 50/30/20 rule. Gross margin in the second quarter was 52.6% compared to 51.6% in the prior fiscal year period. The increase in gross margin was primarily driven by decreased input costs and lower promotional discounts in all three segments, along with select price increases, primarily in Asia Pacific. These favorable impacts were partially offset by the unfavorable impacts from foreign 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 first quarter earnings call, we expect to see net positive impacts on our gross margin when crude oil prices fall. 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-40 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. 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. Garry 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 GBP, while approximately 45% of our revenues are generated in EUR, 30% in GBP, and the remaining 25% in USD.
The dollar had strengthened against the GBP, the value of the EUR deteriorated more significantly versus the GBP in the second quarter. This caused revenues in total to be worth less in GBP, thus decreasing our gross margin. In the second quarter, 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 second quarter 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. These favorable impacts were partially offset by the unfavorable impacts from foreign currency exchange rates in EMEA and changes in our sales mix. 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 deliberate in managing the rest of our business for maximum growth in our gross margin. On to the 30, or our cost of doing business. In both the second quarter 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% over time as revenues grow. Year to date, 76% of the total cost of doing business came from three areas. Number one, our people costs, or the investments we make in our tribe. Also, investments we make in marketing, advertising, and promotion. 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. First, SG&A expenses.
In both the second quarter and year to date, SG&A expense increased by 3% compared to the prior year period to $27.4 million and $54.8 million, respectively. In the second quarter, SG&A expense decreased to 28.1% 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 first quarter. 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&A expense increased to 28.3% of net sales compared to the 28.1% in the prior year. Year to date, employee-related expenses increased by $1.1 million compared to the prior year period. These increases, again, were primarily due to increased headcounts, annual merit increases implemented in the first quarter, and were also partially offset by lower incentive compensation accruals. Also contributing to the increase in SG&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 renovation by investing $1.7 million in the second quarter and $3.3 million year to date in R&D activities, up from $1.4 million and $2.9 million in the same periods last year. The majority of this investment is associated with our multipurpose maintenance products, and therefore, directly supports our strategic initiatives. Our R&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 second quarter to $5.5 million compared to the prior year quarter. As a % of sales, A&P investment decreased to 5.6% in the second quarter, compared to 6.4% in the prior year period. The decrease in the advertising sales expense during the second quarter was primarily due to 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 second quarter. Year to date, our advertising and sales promotion expense decreased by 2% to $11.4 million compared to the prior year period. As a percent of sales, A&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 second quarter of this year. Year to date, such expenses increased by $300,000 to $1.5 million for the year-to-date period.
Total operating expenses in the second quarter were $33.6 million versus $33.3 million in the second quarter of last year. Operating income in the second quarter was $17.6 million compared to $15.3 million in the prior year quarter. Year to date, total operating expenses were $67.7 million compared to the $66.2 million in the same period of last year. This resulted in year-to-date operating income of $33.2 million versus the $32 million last fiscal year. EBITDA, the last of our 50/30/20 measures, was 18% of net sales in both the second 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&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.
That completes the discussion of the operating items for the second quarter and 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 second quarter and year-to-date periods compared to the prior year. Other expenses increased by $1.2 million in the second quarter and $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 second quarter and 30.1% year to date versus 31% and 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 second quarter was $11.3 million versus $10.3 million 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've been $11.8 million in the second quarter. Diluted earnings per common share were $0.76 in the second quarter, compared to $0.67 in the prior year quarter. Diluted shares outstanding decreased to 14.7 million shares from 15.3 million shares. Year-to-date, our net income was $22.1 million compared to the $21.8 million 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 $22.6 million 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 14.7 million shares from 15.3 million shares. Let's take a look at our balance sheet as of February 28, 2015. Our balance sheet and liquidity continue to remain solid. At the end of the second quarter, our cash balance was $43.7 million, and we had $42.1 million in short-term investments, which consist of term and time deposits held in money center banks. During the quarter, we borrowed an additional $5 million on our revolving line of credit. As a result, our debt outstanding was $103 million at the end of the second quarter. The $5 million increase in the line of credit balance during the second quarter 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 24th, the board of directors declared a quarterly cash dividend of $0.38 per share, payable April 30th, 2015, to stockholders of record at the close of business on April 16th, 2015. Based on today's closing price of $87.14, the annualized dividend yield would be 1.7%. During the second quarter, we acquired approximately 57,000 shares of our stock at a total cost of $4.7 million. Between August of 2013 and February 2015, we repurchased roughly 849,000 shares of our stock at a total cost of $60 million. As a result, we've exhausted our $60 million share buyback program. Our new plan, which the board approved in October of 2014, became effective once the $60 million plan was exhausted.
It provides authorization to acquire up to $75 million of the company's outstanding shares through the plan's end date of August 2016. Through February 28th, 2015, no repurchases had been made under the $75 million plan. We've started to execute repurchases under this plan in the third quarter. Well, that completes the financial overview. Again, more information will be available in our Form 10-Q, which we'll be filing tomorrow. Thank you so much. Now back to Garry.
Great. Thanks, Jay. Our underlying business is performing well right now. In constant currency, our global sales rates were much higher than those reflected in our actual results for the second quarter and the year-to-date. Foreign currency exchange risk is a reality that every international business must navigate. Today, it's a headwind. Tomorrow, it may be 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 they 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 million-$400 million, or a growth of between 1% and 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% and 7% of net sales.
We expect net income of between $45.1 million and $46 million, which would achieve a diluted EPS of between $3.07 and $3.13, assuming 14.7 million 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. 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 second quarter and year-to-date.
You heard that the WD-40 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-40 Multi-Use 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 million share buyback program during the second quarter, and that we began executing the repurchases under our new $75 million plan during the third quarter.
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. 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.
Thank you, sir. Ladies and gentlemen, if you wish to register a question, please press *1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal time to reach our equipment. If your question has been answered and you would like to withdraw your registration, please press *2 on your telephone keypad. One moment, please, for the first question. Our first question comes from the line of Liam Burke with Wunderlich. Please proceed with your question.
Thank you. Good afternoon, Garry. Good afternoon, Jay.
Hey, Liam.
Hi, Liam.
Garry, you had double-digit growth in the U.S. on the WD-40 Specialist line, 8% overall worldwide. Does the quarter-to-quarter growth rates in WD-40 Specialist sort of mirror WD-40, the ebb and flow with promotional activities?
Not so much promotion, Liam, more so in new distribution. Certainly, we did run our first promotion with WD-40 Specialist earlier this year, 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 WD-40 Specialist in distribution in those stores and many others. Year to date, our WD-40 Specialist growth is 17%, 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, and obviously, you're subject to the ebb and flow. 12% 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?
We've got initiatives around sourcing of raw materials, which we've seen benefits of over time. As we've received benefits from expanding our supply chain around cans, for example, is one. In EMEA, we've added a new filler in Continental Europe that puts us closer to our customers. We did that in China as well a couple of years ago. There's a variety of things that we can and are continuing to look at as we move forward.
Great. Thanks very much.
Thanks, Liam.
Ladies and gentlemen, as a reminder, to register to ask a question, please press star one on your telephone keypad. We move next to Linda Bolton-Weiser with B. Riley.
Hi, how are you?
Hi, Linda. Great.
Yeah, your constant currency sales growth in the quarter of 7% was very impressive, especially since I think you had some hard comparisons in the EMEA and Americas region. Yet, in your gross margin discussion, you said that lower or less promos and discounts actually helped your gross margin. If there was kind of less promotion and discount, how did you produce such good sales growth? 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. Of course, we had the increasing distribution in our distributor markets. You may remember also that the shift of sales out of one 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. It's really a shame that the currency is kind of shadowing the good work that they're doing over there. 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. 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. Underlying, we're very comfortable and very pleased with the great work the tribe are doing.
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.
What lowered our guidance from the 4%-8%, which we'd had in our initial guidance forward, is really currency impacts.
Okay. Then, you alluded to this new delivery system, Garry, in the U.S. I think you said it was launching in the fourth fiscal quarter. Is this something that will help you garner more shelf space, or are you losing some SKUs somewhere else? Is it a higher margin product, or does it have a higher average selling price?
Yes. No. Yes, yes. No, we won't lose 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 and trade. We're very excited about it.
Okay. 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. 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 four years to develop this. One of the components of it is particularly intricate in its manufacturing process. It's really about 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. You know what we're like. We like to do some pilot, try it, make sure we got it right. We think we have. We'll take it to the appropriate markets around the world.
How easy do you think it will be for competition to copy the delivery method?
If they got a few multiple millions of dollars and a lot of research and development, they probably could. It's like our Smart Straw. It's taken a long time for anybody to copy that. 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 billion worth of Smart Straw. 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. 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. 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. We'll continue it down there. It's a matter of prioritization, and we believe that what we're doing with Specialist 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 piece of meat first, and we think that's it. Lawn and garden is definitely not off our agenda in the U.S. 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.
We need to pace ourselves and be deliberate.
Right. Just on the whole currency, and thank you for the thorough currency explanation. That's very helpful. I'm just curious if in some markets where there's big currency devaluations, are you able to take pricing? 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?
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 US dollars, so our distributors are therefore making the adjustments to pricing, which a lot of them have made. 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. We'll see how it settles down. Russia is probably the biggest one.
Okay. Just with the declines of crude oil, 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. It's been harder in general to take the pricing? Can you give a little more color on the competitive actions regarding what's going on right now?
I'm not sure I understand, but I think you said that our WD-40 competitors are doing stuff with pricing?
No.
Yeah?
Yeah. Are they reacting to low crude-
No
by somehow being more aggressive on promotion or cutting 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. 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, hundreds of hours trying to get our arms around what happens, and it's really helped us understand it a lot better for the future. 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. That's an interesting learning moment that we'll be carrying forward in our experiences when prices start to rise again.
Right. Gotcha. Okay, thank you very much.
Thanks, Linda.
Our next question comes from Jeffrey Zekauskas with JPMorgan Chase.
Hello, this is Ben Richardson sitting in for Jeff.
Hey, Ben.
Hello. I looked at the diagram here of the makeup of the cost of a can of WD-40, and it's clear that the petroleum component is coming down, at least on the trailing six-month run rate. Can you talk a little bit about the various raws from steel can negotiations to plastics to the petroleum-based components and the 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 to plastic. The cost of our plastic Smart Straw mechanism has much more of a manufacturing cost associated with it. Those don't seem to change that much with the raw inputs. 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. We have been seeing some benefit from certainly the cost of some of the chemicals that are specifically indexed to crude oil.
Those would be things in some of our mineral spirits, 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. As a result, we've seen some moderation, but not at the same level. Hopefully that
Okay
addressed the areas you were thinking about.
Yeah, that's great. Just giving your, I guess, jumping back quickly to revenues, but given your expectation of a stronger back half here, is that largely seasonal? 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. It depends which half of the world you're in, because half of the world we live in, spring is one time and spring is another time in the other half of the world. It's just basically, you've often seen, or most times you 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. When those shelves are empty after that period of time, of course, we can move in. I think it's nothing in particular. It's just our general business overall.
Okay. Thank you very much.
Ladies and gentlemen, that does conclude our allotted time for questions. We do thank you for your participation on today's conference call, and we ask that you now please disconnect your line.