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WD-40 Company (NASDAQ:WDFC)
Q3 2018 Earnings Conference Call
July 10, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, ladies and gentlemen. Thank you for standing by. Good day and welcome to the WD-40 Company third quarter Fiscal Year 2018 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 to ask a question at any time during this call, please press *1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. If at any time during the conference you need to reach an operator, please press *0 on your telephone keypad. I would now like to turn the call over the host for today's call, Miss Wendy Kelley, Director of Investor Relations and Corporate Communications. Please proceed.

Wendy Kelley -- Director, Investor Relations and Corporate Communications

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. In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release, and form 10-Q for the period ending May 31st, 2018. These documents are available on our investor relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available at that location shortly after this call.

On today's call, we will discuss certain non-GAAP measures, the descriptions and reconciliations of these non-GAAP measures are available in our SEC filings as well as our earnings presentation. As a reminder, today's call includes forward-looking statements about our expectations of 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 no assurance they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussion.

Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, July 10th, 2018. 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.

Garry Ridge -- President and Chief Executive Officer

Thanks, Wendy. Good day, everyone, and thanks for joining us for today's conference call. Today, we reported net sales of $107 million for the third quarter of Fiscal 2018 compared to $98.2 million in the third period last year. This reflects an increase of 9% year over year. Foreign currency exchange rates favorably impacted our sales in the third quarter. On a constant currency basis, we grew net sales by 5% year over year.

Net income for the third quarter was $16.1 million compared to $14.4 million in the third quarter of last fiscal year, an increase of 12% period over period, and diluted earnings per share for the third quarter were $1.15 compared to $1.02 for the same period last fiscal year.

Now, let's start our discussions about our strategic initiatives. As most of you will recall, our long-term revenue target is to drive consolidated net sales to approximately $700 million in revenue by the end of Fiscal Year 2025 and to do so while following our 55-30-25 business model. We'd like to remind investors that those long-term targets are guideposts, not guidance. We acknowledge that our anticipated 2025 targets are aspirational, but we continue to believe if we keep our focus in the right places, we can be successful in moving toward these targets.

Our strategic driver number one is to grow WD-40 multi-use product. Our most important strategic driver is to take the blue and yellow can with the little red top to more places for more people who will find more uses more frequently. In order to achieve our target of $530 million of multipurpose product revenue, we need to continue our steady building of the multipurpose product across all markets through both geographic expansion as well as through innovation.

In the third quarter, global sales of WD-40 Multi-Use Product were $82.5 million, reflecting an increase of 10% compared to the third quarter of last year. Year to date, net sales of WD-40 Multi-Use Product were up 8% compared to last year.

In our developed markets, we continue to drive revenue growth through innovation of our flagship product, which includes premiumization. As part of our premiumization strategy, we continue to successfully convert WD-40 Multi-Use Product end users to our more innovation Smart Straw and EZ-REACH delivery system.

In developing in emerging markets, we continue to build brand awareness through end users through product sampling, specifically targeted end user groups in countries identified as key growth opportunities. As we've shared with investors before, we're investing an additional $1 million in brand building this fiscal year to support initiatives like these.

Our strategic driver number two is to grow the WD-40 specialist product line. Our target under this initiative is to grow the WD-40 Specialist product line through continued geographic expansion as well as by developing new products and product categories. Our focus is on building market awareness and distribution of WD-40 specialists in order to achieve our stated goal of $100 million in revenue by the end of 2025.

In the third quarter, global sales of WD-40 Specialist were $8.5 million, up 16% compared to the third quarter of last year. Year to date, net sales of Specialist were $23.4 million, up 26% compared to last year. We are optimistic about the long-term opportunities for WD-40 Specialist. However, there may be some volatility in sales levels along the way due to the timing of promotional programs as we build our distribution and various other factors that come with building a new product line.

Strategic initiative number three is to broaden our product and revenue base. Our goal under this initiative is to leverage the recognized strengths of WD-40 Company, to derive revenue from existing brands as well as from new sources and products. Strategic initiative number three includes maintenance products of 3-IN-ONE, WD-40 BIKE, and GT85, but also includes home care and cleaning product brands like Spot Shot, Lava in the Americas, 1001 in EMEA, and No Vac and Solvol in Asia Pacific.

We believe we will continue to nurture and grow the products included under this initiative and expect their combined revenue to reach approximately $70 million by the end of Fiscal Year 2025.

In the third quarter, global sales of products included under this initiative were $12.1 million, reflecting an increase of 11% compared to the third quarter of last year. Year to date, net sales of products included under this initiative were up 6% compared to last year.

WD-40 BIKE had a particularly strong third quarter with solid sales growth across all three trading blocks. Much of the success we've seen with BIKE has been achieved through our growing digital presence. As I mentioned a few moments ago, we're investing an additional million dollars in brand building this fiscal year and a sizable portion of that investment is being used to support and enhance our growing digital presence where products like WD-40 BIKE and other specialist products thrive.

Strategic driver number four is to attract, develop, and retain outstanding tribe members. Our goal under this initiative is to attract, develop, and retain talented tribe members to grow our tribe member engagement to greater than 95%. At the end of the third quarter, we had 467 tribe members around the globe. To support our tribe's culture, we launched our Leadership Lab program back in 2011 to develop our tribe, sharpen skills, and ultimately build our company's bench strength.

Today, our leadership lab is present in all three trading blocks and over 920 attendees have engaged in more than 21,000 hours of learning under this program. We recently announced our next generation approach to leadership lab, a learning laboratory that is a global program for people development. These learning tools delivered by our tribe for our tribe are excellent examples of our continued commitment to our thriving global workforce.

Additionally, I'm happy to share with you that we continue to make progress on our plans for renovating our new building to house our UK-based tribe members and we expect to move the tribe to this new building in the second half of Fiscal 2019.

Finally, our fifth strategic initiative is operational excellence. Our goal under this initiative is best summarized by one of our core values here at WD-40 Company, making it better than it is today. We measure ourselves against the operational excellence initiative by executing against our 55-30-25 business model and by making improvements to processes and systems while safeguarding our brands.

Volatile commodity prices, particularly those for crude oil, have negatively impacted our gross margins recently, but over the long-term, our 55-30-25 business model guides our business decisions. Accordingly, we have recently made some proactive price increases to ensure our gross margin will remain within our target ranges over the long-term. Although some of these price rises were in effect prior to the third quarter, in the Americas, the price increases just went into effect in June. As a result, we expect we will begin to see the effect of these price increases reflected in our gross margin in the fourth quarter.

That completes our update on the strategic initiatives. So, let's move on to the little more details around our third quarter results starting with sales. As I mentioned earlier, consolidated net sales were $107 million in the third quarter, up 9% versus the third quarter last year. Translation of our foreign subsidiary results from their functional currencies to the US dollar had a favorable impact on sales.

On a constant currency basis, total net sales would have been $102.6 million, an increase of 5% compared to last year. This is what we refer to as translation-related impacts and it affects reported results from Canada, Australia, China, and the EMEA segment. In addition, we experienced about a $330,000 unfavorable transaction-related impact at EMEA, which slightly offset the impacts of translation. So, in total, changes in foreign currency exchange rates increased our net sales by about $4.1 million in the third quarter.

Now, we'll take a closer look at the individual segments and we'll start with the Americas. Net sales in the Americas, which includes the United States, Latin America, and Canada, increased to $53 million in the third quarter, up about 8% from last year. Year to date, sales in the Americas were up 5% compared to last year.

Sales of maintenance products increased 12% or $5 million in the America, largely due to higher sales of maintenance products in the US, Latin America, and Canada. Maintenance products sales in the United States increased 6% in the third quarter, primarily due to the timing of customers' orders as well as a 12% increase in the sales of WD-40 EZ-REACH.

In addition, maintenance product sales were up 34% in Latin America and 39% in Canada, especially due to the timing of customer orders and the successful promotional programs that continue in both regions.

We estimate that sales of maintenance products in the Americas were up approximately $2 million in the current quarter due to certain customers buying extra product in advance of the price increase, which went into effect in June. As a reminder, our maintenance products exclude our home care and cleaning programs. Sales of our home care and cleaning products in the Americas decreased 18% in the third quarter compared to the prior year, largely due to lower sales of 2000 Flushes, Spot Shot, and Carpet Fresh.

Now, we'll move over to EMEA. Net sales in EMEA, which includes Europe, the Middle East, Africa, and India increased to $39.6 million in the third quarter, up 15% from last year. Year to date, net sales in EMEA were up 13% compared to last year. EMEA reported results in the third quarter positively impacted by currency exchange rates on a constant currency basis. Sales in EMEA increased by 4% compared to last year.

As you know, we sell into EMEA through a combination of direct operations as well as through marketing distributors. Net sales in EMEA direct markets, which accounted for 66% of the reach in sales, increased 19% during the quarter to $26.1 million in US dollars. This increase was a result of increased sales and maintenance products in the region and due to foreign currency exchange rates, new distribution, and higher levels of promotional activity.

Net sales in EMEA distributor markets, which account up to 34% of the region's sales increased 9% during the quarter to $13.5 million in US dollars. This increase is primarily due to the timing of customer orders of WD-40 Multi-Use Product in Northern Europe.

Partially offset of these increases was a 7% decline in sales in Russia due to the continued instability in the region. Russian sales during the quarter were also impacted due to restrictions that were placed on shipments of certain products in Russia during the World Cup. These continued challenges in Russia are preventing the distributor market from realizing even higher levels of growth year over year.

Now, we'll go down to Asia-Pacific. Consolidated net sales in Asia-Pacific, which includes Australia, China, and other countries in the region, decreased to $14.4 million in the third quarter down 2% from last year. Year to date net sales in Asia-Pacific were up 3% compared to last year.

Asia-Pacific's reported results in the third quarter were positively impacted by foreign currency exchange rates. On a constant currency basis, sales in Asia-Pacific decreased by 5% compared to last year.

In Australia, net sales in US dollars were $4.7 million in the third quarter up 5% compared to last year. Changes in foreign currency exchange rates did not have a significant impact on sales for Australia in the period. This increase in sales was driven primarily by successful promotional activities and the expanded distribution of WD-40 Specialist product line in Australia.

In our Asia distributor markets, net sales were $5.5 million in the quarter, down 17% compared to last year. Our marketing distributor business in Asia-Pacific has been negatively impacted due to the transitioning of three major marketing distributor partners in the region. This transition has caused a disruption in the region, but we believe that we are through the worst part of that transition and that the region will return to growth in the fourth quarter.

Our Asian distributor markets are not impacted by currency since we sell our products in US dollars in the region. In China, net sales in US dollars were $4.2 million in the third quarter, up 17% compared to last year. Changes in foreign currency exchange rates had a positive impact on these sales. On a constant currency basis, sales would have increased 8% period to period. The increase in sales was primarily due to successful promotional programs that are ongoing and conducted during the third quarter of this year.

We remain optimistic about our long-term opportunities in China, although we do expect volatility along the way due to the timing of promotional programs, the building of distribution, shifting of economic patterns, and varying industrial activities.

Now, that's it for me. I'm gonna pass it over to Jay, who will continue the review of the financials.

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

Thanks, Garry. First, let's review the 55-30-25 business model. These are the long-term targets we use to guide our business. As you may recall, the 55 represents gross margin, which we target to be 55% of net sales. The 30 represents our cost of doing business, which is our total operating expenses, excluding depreciation and amortization. Our goal is to drive our cost of doing business over time toward 30% of net sales. Finally, the 25, which represents EBITDA.

Well, now, let's look at the 55 or our gross margin. In the first quarter, our gross margin was 54.8% compared to 55.3% last year. This represents a decline of 50 basis points and for the first time in a few years that our gross margin has dipped below our long-term target of 55%. Changes in major input costs, which include petroleum-based specialty chemicals and aerosol cans, were the primary driver of this decline and negatively impacted our margin by 140 basis points.

As you know, crude oil is one of the primary feedstocks of our petroleum-based specialty chemicals. Recently, we've experienced rising oil costs, which have put pressure on our cost of goods in all three of our trading blocks. Rising petroleum-based specialty chemical costs negatively impacted our gross margin by 100 basis points in the quarter. Also contributing negatively to our gross margin by 40 basis points was the increased costs of aerosol cans.

In addition, gross margin was also negatively impacted by 40 basis points due to higher warehousing and inbound freight costs, mostly in the Americas segment and primarily due to the freight market in the US. Promotion and other discounts that we give our customers also negatively impacted gross margin by 30 basis points.

Then finally, we had changes in foreign currency exchange rates negatively impacted gross margin by 20 points due to fluctuations in the exchange rates for the euro and the US dollar against the pound sterling in our EMEA segment. This is because in EMEA, our cost of goods are sourced primarily in pounds sterling, while approximately 70% of our revenues are generated in currencies other than the pounds sterling.

These negative impacts to gross margin were partially offset by the combined effects of favorable sales exchanges and decreases in other miscellaneous costs, primarily in the Americas and EMEA segments, which positively impacted gross margin by 130 basis points. In addition, sales price increases, which we implemented in EMEA and Asia-Pacific over the last 12 months, positively impact to gross margin by 50 basis points.

Continually rising input costs have made it necessary for us to review our pricing structure and implement price increases in each of our trade blocks. The price increases in the Americas will take effect in the fourth quarter of this year and will begin to be reflected in our gross margin in coming quarters.

In the near term, we expect with these price increases in place, we can manage gross margin at a level that is near our target of 55%. Unfortunately, due to the recent volatility and the price of crude oil, it is uncertain the level to which our gross margin will be impacted over the short-term. However, we will continue to be focused and deliberate in managing our business so that we can maintain our gross margin at a level that is above our target at a level above our target of 55% over the long-term.

Now, I'll address the 30 or our cost of doing business. In the third quarter, our cost of doing business was approximately 32% compared to 33% last year. Revenue growth is the most important factor in achieving our long-term target of 30%. In the third quarter of this year, our reported revenue increase positively affected our cost of doing business percentage.

And for the third quarter, 72% of our cost of doing business came from three areas -- people costs, or the investments we make in our tribe, the investments we make in marketing, advertising, and promotion -- as a percent of sales, our A&P investment was 5.1% in the third quarter -- and finally, freight costs, the cost to get our products to our customers.

In the third quarter, our cost of doing business increased $2.4 million compared to last year, primarily due to $1.2 million in unfavorable impacts from changes in foreign currency exchange rates. Various other items also contributed also contributed to the increase in our cost of doing business, including increased travel and meeting expenses, along with general overhead costs.

Increased investment in research and development also impacted the cost of doing business in the third quarter. These increases were slightly offset by lower employee-related costs due to lower earned incentive compensation. While our long-term objective is to have our cost of doing business closer to our target of 30% of net sales, we'll continue to make the necessary investments in support of our strategic initiative, that of operational excellence.

That brings us to EBITDA, the last of our 55-30-25 measures. EBITDA was 23% of net sales in the quarter. That completes our discussion of the 55-30-25 business model for the current quarter. I'll never discuss a couple of other items worth noting.

First, our provision for income tax was 24.3% in the third quarter compared to 28.8% last year. The decrease in the effective income tax rate was primarily due to the favorable impact from the tax cuts and jobs act in the US, which became effective for us in the second quarter of this year. Based on our initial analysis of the US tax reform, but subject to revisions of our provisional amounts, we expect that our effective tax rate for the full fiscal year of 2018 would be in the 22% to 23% range.

Net income for the third quarter was $16.1 million versus $14.4 million in the prior year, reflecting an increase of 12%. Changes in foreign currency exchange rates had a favorable impact of about $800,000.00 on the translation of our consolidated results this quarter. On a constant currency basis, net income would have increased by 6% compared to last year.

Diluted earnings per common share were $1.15 in the third quarter compared to $1.02 for the same period last year. Diluted weighted average shares outstanding decreased to 13.9 million shares from 14 million shares a year ago.

Now, a word about our balance sheets and capital allocation. Due to the recent tax law changes, in May, we decided we'll repatriate a portion of our earnings generated abroad. As a result, you will see large fluctuation on our balance sheet between short-term investments and cash and cash equivalence for the current quarter. Since our plans are to use the proceeds to pay down a portion of our line of credit, in the fourth quarter, we also reclassified $80 million of our line of credit balances from long-term to short-term as of May 2018.

Though we are in the process of repatriating these earnings, our capital allocation strategy remains largely the same and includes a comprehensive approach to balance investing in long-term growth while providing strong returns to our stockholders. We typically target maintenance CapEx of between 1% and 2% of net sales, but as we've previously disclosed, in addition to our normal maintenance CapEx, we have purchased and are in the early stages of renovating an office building to house our UK-based tribe members.

In total, this capital expense will cost approximately $13 million US dollars, which will be incurred over Fiscal Years 2018 and 2019. We continued to return capital to our stockholders through regular dividends and share repurchases. On June 19th, 2018, our board of directors approved a quarterly cash dividend of $0.54 per share, payable July 31st to stockholders of record at the close of business on July 20th. Based on today's closing price of $153.05, the annual dividend yield is 1.4%.

During the third quarter, we repurchased just over 48,000 shares of our stock at a total cost of $6.4 million under our current $75 million share repurchase plan, which was approved by the board in June of 2016. At the end of the third quarter, we had $26.1 million remaining under the 2016 plan. In order for the company to continue its share repurchase activities, our board of directors approved a new share repurchase buyback plan on June 19th, 2018, which authorizes the company to acquire up to $75 million of its outstanding shares following the expiration of the current plan and runs through August 31st, 2020.

So, with that, let's turn to the Fiscal Year 2018 guidance. We are updating our net sales, net income, and EPS guidance today only to reflect the recent changes in foreign currency exchange rates. With that, net sales growth is projected to be between 6% and 8% with net sales expected to be between $403 million and $411 million.

Gross margin for the full year is expected to be near 55%. Advertising and promotion investment is projected to be near 6% of net sales. Net income is projected to be between $56.3 million and $57 million. Diluted earnings per share is expected to be between $4.05 and $4.10 based on an estimated 13.9 million weighted average shares outstanding.

This guidance doesn't include any future acquisitions or divestitures and assumes that foreign currency exchange rates in commodity prices will remain close to current levels for the remainder of Fiscal 2018. That completes the financial overview. Now, I'll turn it back to Garry.

Garry Ridge -- President and Chief Executive Officer

Thanks, Jay. In summary, here's some of what you heard on this call today. You heard that we had a 9% net sales growth on reported basis and a 5% net sales growth on a constant currency basis. You heard that our global sales of WD-40 Multi-Use Product grew 10% during the quarter. You heard that global sales of WD-40 Specialist grew 16% during the quarter. You heard that we recorded record EPS of $1.15.

You heard that price increases that have been or will be implemented this year are expected to help our gross margin remain in line with our 55-30-25 business model. You heard that we decided in May we will repatriate some of our earnings generate abroad and use these proceeds to pay down a portion of our line of credit.

You heard that we'll continue to return capital to our stockholders through regular dividends and share repurchases and you heard that we have updated our Fiscal 2018 guidance to only reflect updated foreign currency exchange rates.

So, today, I'd like to share with you in closing a quote from Nelson Mandela, "Education is the most powerful weapon which you can use to change the world."

Thank you for joining us today. We would pleased now to open the conference call for questions and we'll go back to the operator.

Questions and Answers:

Operator

Ladies and gentlemen, if you would like to register a question, please press *1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. If your question has been answered and you would like to withdraw your registration, please press the # key. One moment please for the first question.

Your first question comes from the line of Liam Burke from B. Riley FBR. Please go ahead.

Liam Burke -- B. Riley FBR -- Analyst

Thank you. Good afternoon, Garry. Good afternoon, Jay. Garry, you had strong Specialist sales overall. Understanding that sales are variable from quarter to quarter, you did have lower sales in the Americas in Specialist. Is there something related to that or is it just timing and promotion? What was behind that?

Garry Ridge -- President and Chief Executive Officer

Again, Liam, it's just the continuation of the process of expansion of Specialist. I've said in the past that you're going to see it vary from quarter to quarter. We are 26% year to date. Specialist sales are now pushing in for the year in the $27 million, $28 million mark. We want to take that to $100 million by 2025. So, it's a journey. No, there's nothing that concerns us. We continued to build more of that business on a day to day basis.

Liam Burke -- B. Riley FBR -- Analyst

Okay. EZ-REACH in the US was up 12%. You've launched that product in Europe, WD-40 Flexible. How has the progress been or is it too early to tell?

Garry Ridge -- President and Chief Executive Officer

We've launched in Europe only in Italy and France. The initial launch was successful. We're now ramping up our plans to take it further into Europe next year, which is really a plan around production. We have capacity. So, we're now going to be expanding that across a number of other markets in Europe as we roll out our plans in the following fiscal year. So far, very pleased with EZ-REACH everywhere, including Australia and France and Italy and the US.

Liam Burke -- B. Riley FBR -- Analyst

Great. Jay, you mentioned that you're going to allocate some of your cash to reducing some of the short-term debt. Can you give us a sense as to how much you plan on reducing that, percentage-wise or any way?

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

Yeah. We think it's about $80 million.

Liam Burke -- B. Riley FBR -- Analyst

You'll reduce that by $80 million?

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

Yeah, that's our expectation.

Liam Burke -- B. Riley FBR -- Analyst

Great. That's it for me. Thank you.

Operator

Your next question comes from the line of Daniel Rizzo from Jefferies. Please go ahead.

Daniel Rizzo -- Jefferies -- Analyst

Hi, guys. How are you?

Garry Ridge -- President and Chief Executive Officer

Good, Daniel. How are you?

Daniel Rizzo -- Jefferies -- Analyst

Doing well. What's the range for petroleum prices before you would feel the need to raise your own prices again? Do you have a range in mind for that?

Garry Ridge -- President and Chief Executive Officer

We're currently kind of at the top end of where we think oil was going to be when we raised our prices. I think that we'll be watching it closely. I would suggest that anywhere in the mid-80s is something that would be impactful. We'd need to wait until we see the flow through and the mix of what we've already done. I think oil is currently sitting around the $73.00, $74.00 mark. We'll see how the price rise is impacted as they flow through. We would think as it got closer to $85.00, we might have to do something differently.

Daniel Rizzo -- Jefferies -- Analyst

Okay. You adjusted guidance to account for FX changes or swings. I was wondering what your assumptions are for FX for the remainder of the year?

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

Essentially that FX rates would remain the same as they are. If we see much variance from where they are today, that would have an impact.

Daniel Rizzo -- Jefferies -- Analyst

Okay. Finally, you indicated you're expanding your online presence for WD-40 and doing your digital efforts. Does that include working with retailers such as Amazon?

Garry Ridge -- President and Chief Executive Officer

Oh, yeah. Amazon has been a customer, is a customer with us globally, as is eBay, Taobao, and most of the new digital players as well as the great work that we're doing and getting support from our regular customers that are having expanded digital presence.

Our investment in digital is to maximize is to maximize search engine optimization to continue to have digital content that's driving consumption through education and new uses. We're very excited about the investment this year and next year and the year after. We have a true determined goal to own digital globally in our category. The reason we can do that is we're the only true global brand. We're excited about it and we're pleased to be investing against it.

Daniel Rizzo -- Jefferies -- Analyst

I'm sorry, I've just got one more. You mentioned that I think there's some disruption with three major marketing distributors in China or in Asia, anyway. Does that just mean you're changing distributors, changing them out with somebody different? I was wondering if that's true, how often that happens.

Garry Ridge -- President and Chief Executive Officer

To answer the first part of the question, no, it's not China. It was in Singapore, Malaysia, and Indonesia. We already made the change a number of months ago. But when we changed marketing distributors, there's a period of time where inventory transfers from the old distributor to the new distributor. While the new distributor settles in to distribution, we tend to have a hiatus in order flow.

How often does it happen? When it needs to happen. If you look at our distributor markets globally, we have many that have been with us for many years, but if we feel that a market needs further development, we analyze that market, we determine whether we should be direct in that market or whether we need to find a new partner that has broader distribution and we make those changes.

In Asia-Pacific, a number of years ago, we changed one of our distributors and that was probably the only time for a while. But it's not something that we do that regularly, but we do it when we need to, when we feel that we need to increase the presence in the market.

Daniel Rizzo -- Jefferies -- Analyst

Thank you very much.

Operator

Your next question comes from the line of Rosemarie Morbelli from Gabelli & Company. Please proceed with your question.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Good afternoon, everyone.

Garry Ridge -- President and Chief Executive Officer

Hi, nice to hear you.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Just following up on the last question -- what was the reason that you had to change? Were they too small distributors in order to be effective given how you are pushing your new products in the region or were they just not efficient?

Garry Ridge -- President and Chief Executive Officer

It certainly wasn't the second part. As we look at our 2025 goals, we review the capabilities not only internally of our own organization and where we need to make changes, but externally. So, in one market, it was because we believed that we needed to have a different partner to get us to that position in 2025.

The second one was because the prior distributor was acquired by a new company. We, as the acquisition was closed, we didn't feel that together that our future was one that would deliver the growth, so we decided to make a change.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

I see. It is not that at the onset, when you get started in one particular region, you first go with a small distributor in order to get your feel around the need in that particular region then?

Garry Ridge -- President and Chief Executive Officer

No, not at all.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Okay. Then if we look at the pricing you have instituted and some that are coming up, are those catching up with the 2017 inflation rate and how much more inflation have you seen so far year to date and what are you expecting for the full year, if you have a feel for that?

Garry Ridge -- President and Chief Executive Officer

The only area we're seeing any movement in cost certainly are cans. We've shared the impact of that. The other variable, really, is oil and who knows? Most of the other input costs have been reasonably stable, right, Jay?

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

It depends on the market. So, we've seen some price inflation in the European segments, a while back. But most of it's already baked in.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Okay. And you gave us the effects impact on overall revenues and you may have given us that impact on Maintenance and on Specialist, but of the 10% topline growth on Maintenance products and the 16% topline growth on Specialist products, what was the FX contribution?

Garry Ridge -- President and Chief Executive Officer

I don't know. We've got that broken out.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

So, I did not miss it.

Garry Ridge -- President and Chief Executive Officer

You did not miss it.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Are you willing to share it so we get a feel?

Garry Ridge -- President and Chief Executive Officer

We don't have it with us right now. I would suggest that the ratio would be the same across all of the product lines.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Okay. Just a little less than half then, right? And lastly, if I may, what was the -- still on the FX side -- what was the impact on EPS?

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

Well, I think we gave it on income, I believe, it was. I think we said that -- I apologize. So, our net income was without currency and the constant currency was up 6% versus the 12% reported.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Okay. And then one last one, if I may -- the tax rates of this year will be for the full year 22% to 23%. Do you have an estimate for 2019 and beyond, assuming everything stays the same?

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

We think it will be a couple of percentage points lower.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

So, around 20%?

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

20%-ish is a number we can... We haven't fully tied it down, but that's a number that's in the range.

Rosemarie Morbelli -- Gabelli & Company -- Analyst

Okay. Great. Thank you. Congratulations.

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

Thank you.

Operator

Ladies and gentlemen, that does conclude our allotted time for questions. We thank you for your participation on today's conference call and ask that you please disconnect your line.

Duration: 45 minutes

Call participants:

Wendy Kelley -- Director, Investor Relations and Corporate Communications

Garry Ridge -- President and Chief Executive Officer

Jay Rembolt -- Chief Financial Officer, Treasurer, and Vice President of Finance

Liam Burke -- B. Riley FBR -- Analyst

Daniel Rizzo -- Jefferies -- Analyst

Rosemarie Morbelli -- Gabelli & Company -- Analyst

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