What changed in this filing

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Item 1. Financial Statements

2021-01-07 compared with 2020-07-09 · 125 added, 239 removed, 363 unchanged (50% of the section changed)

Financial Statements

WD-40 C OMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

WD-40 COMPANY

CONDENSED CONSOLIDA TED BALANCE SHEETS

(Unaudited and in thousands, except share and per share amounts)

2 unchanged sentences

Trade accounts receivable, less allowance for doubtful

accounts of $ 399 and $ 300 at May 31, 2020

accounts of $ 490 and $ 362 at November 30, 2020

and August 31, 2020, respectively

21 unchanged sentences

Common stock ― authorized 36,000,000 shares, $ 0.001 par value;

19,812,685 and 19,773,977 shares issued at May 31, 2020 and

19,836,102 and 19,812,685 shares issued at November 30, 2020 and

August 31, 2020, respectively;

and 13,688,203 and 13,664,786 shares

outstanding at May 31, 2020 and August 31, 2019, respectively

outstanding at November 30, 2020 and August 31, 2020, respectively

Additional paid-in capital

2 unchanged sentences

Common stock held in treasury, at cost ― 6,147,899 and 6,147,899

shares at May 31, 2020 and August 31, 2019, respectively

shares at November 30, 2020 and August 31, 2020, respectively

Total shareholders'

2 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STA TEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Cost of products sold

17 unchanged sentences

(Unaudited and in thousands)

Three Months Ended May 31,

Nine Months Ended May 31,

Other comprehensive (loss) income:

Three Months Ended November 30,

Other comprehensive income (loss):

Foreign currency translation adjustment

2 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED STA TEMENT OF SHAREHOLDERS'

CONDENSED CONSOLIDATED STATE MENTS OF SHAREHOLDERS'

(Unaudited and in thousands, except share and per share amounts)

8 unchanged sentences

Cash dividends ($ 0.67 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at November 30, 2020

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

Stock-based compensation

Cash dividends ($ 0.67 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at February 29, 2020

Stock-based compensation

Cash dividends ($ 0.67 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at May 31, 2020

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS'

(Unaudited and in thousands, except share and per share amounts)

Comprehensive

9 unchanged sentences

Foreign currency translation adjustment

Cumulative effect of change in accounting principle

Balance at November 30, 2019

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

Stock-based compensation

Cash dividends ($ 0.61 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at February 28, 2019

Stock-based compensation

Cash dividends ($ 0.61 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Cumulative effect of change in accounting principle

Balance at May 31, 2019

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED ST ATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

Nine Months Ended May 31,

Three Months Ended November 30,

Operating activities:

5 unchanged sentences

Stock-based compensation

Unrealized foreign currency exchange losses (gains)

Unrealized foreign currency exchange losses

Provision for bad debts

9 unchanged sentences

Proceeds from sales of property and equipment

Maturities of short-term investments

Net cash used in investing activities

2 unchanged sentences

Dividends paid

Proceeds from issuance of long-term senior notes

Repayments of long-term senior notes

Net proceeds of revolving credit facility

Net (repayments) proceeds of revolving credit facility

Shares withheld to cover taxes upon conversions of equity awards

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

6 unchanged sentences

WD-40 Company (“the Company”), based in San Diego, California, is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world.

The Company markets its maintenance products and its homecare and cleaning products under the following well-known brands:

The Company markets a wide range of maintenance products and homecare and cleaning products under the following well-known brands:

WD-40®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and Solvol®.

Currently included in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-40 BIKE® product lines .

The Company’s brands are sold in various locations around the world.

The Company’s products are sold in various locations around the world.

Maintenance products are sold worldwide in markets throughout North, Central and South America, Asia, Australia, Europe, the Middle East and Africa.

Homecare and cleaning products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia.

The Company’s products are sold primarily through mass retail and home center stores, warehouse club stores, grocery stores, hardware stores, automotive parts outlets, sports retailers, independent bike dealers, online retailers and industrial distributors and suppliers.

The Company’s products are sold primarily through warehouse club stores, hardware stores, automotive parts outlets, industrial distributors and suppliers, mass retail and home center stores, value retailers, grocery stores, online retailers, farm supply, sport retailers, and independent bike dealers

Basis of Presentation and Summary of Significant Accounting Policies

13 unchanged sentences

Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

COVID-19 Considerations

The COVID-19 pandemic has adversely impacted global economic conditions and has contributed to significant volatility in financial markets beginning in early calendar year 2020, as described in the “ Significant Developments ” section included in Part I – Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Although the Company’s current estimates contemplate current conditions, the inputs into certain of the Company’s significant and critical accounting estimates include judgments and assumptions about the economic implications of the COVID-19 pandemic and how management expects them to change in the future, as appropriate.

It is reasonably possible that actual results experienced

may differ materially from the Company’s estimates in future periods, which could materially affect our results of operations and financial condition.

Foreign Currency Forward Contracts

In the normal course of business, the Company employs established policies and procedures to manage its exposure to fluctuations in foreign currency exchange rates.

The Company’s U.K.

subsidiary, whose functional currency is Pound Sterling, utilizes foreign currency forward contracts to limit its exposure to net asset balances held in non-functional currencies.

The Company utilizes foreign currency forward contracts to limit its exposure to net asset balances held in non-functional currencies, primarily at its U.K.

The Company regularly monitors its foreign currency exchange rate exposures to ensure the overall effectiveness of its foreign currency hedge positions.

3 unchanged sentences

Foreign currency forward contracts in an asset position at the end of the reporting period are included in other current assets, while foreign currency forward contracts in a liability position at the end of the reporting period are included in accrued liabilities in the Company’s consolidated balance sheets .

At May 31, 2020, the Company had a notional amount of $ 8.7 million outstanding in foreign currency forward contracts, which matured on June 29, 2020 .

Unrealized net gains and losses related to foreign currency forward contracts were no t significant at May 31, 2020 and May 31, 2019 .

Realized net gains and losses related to foreign currency forward contracts were no t significant for both the three months ended May 31, 2020 and May 31, 2019.

Realized net gains and losses related to foreign currency forward contracts were no t significant for both the nine months ended May 31, 2020 and May 31, 2019.

At November 30, 2020, the Company had a notional amount of $ 13.7 million outstanding in foreign currency forward contracts, which will mature on January 28, 2021 .

Unrealized net gains and losses related to foreign currency forward contracts were no t significant at November 30, 2020 and August 31, 2020 .

Realized net gains and losses related to foreign currency forward contracts were no t significant for both the three months ended November 30, 2020 and 2019.

Both unrealized and realized net gains and losses are recorded in other income (expense), net on the Company’s condensed consolidated statements of operations.

6 unchanged sentences

Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

As of May 31, 2020, the Company had no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, with the exception of the foreign currency forward contracts, which are classified as Level 2 within the fair value hierarchy.

As of November 30, 2020, the Company had no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, with the exception of the foreign currency forward contracts, which are classified as Level 2 within the fair value hierarchy.

The carrying values of cash equivalents and short-term borrowings are recorded at cost, which approximates their fair values, primarily due to their short-term nature.

In addition, the carrying value of borrowings held under the Company’s revolving credit facility approximates fair value, based on Level 2 inputs, due to the variable nature of underlying interest rates, which generally reflect market conditions.

The Company’s fixed rate long-term borrowings consist of senior notes which are recorded at carrying value.

The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 20.8 million as of May 31, 2020, which was determined based on a discounted cash flow analysis using current market interest rates for instruments with similar terms, compared to its carrying value of $ 18.0 million .

During the nine months ended May 31, 2020, the Company did no t record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “ Leases ” under ASC 842, which supersedes lease accounting and disclosure requirements in ASC 840.

The new standard establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for leases with fixed payment obligations and terms longer than twelve months.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period.

The Company adopted this new guidance on September 1, 2019 following the optional transition method described in ASU No.

2018-11, “ Leases – Targeted Improvements ” which was issued in July 2018, rather than the original modified retrospective approach that requires entities to apply the guidance at the beginning of the earliest period presented in the financial statements.

Under the optional transition method, entities shall recognize the cumulative effect of initially applying the guidance as an adjustment to the opening balance of retained earnings on September 1, 2019.

Therefore, the requirements of this guidance only apply for periods presented that are after the date of adoption and does not affect comparative periods.

Upon adoption, the Company elected practical expedients to:

(i) not separate lease components from nonlease components for real estate – office buildings, machinery and equipment, lab equipment, office equipment, furniture and fixtures, and IT equipment;

and (ii) exclude leases with an initial term of 12 months or less from the consolidated balance sheets and will recognize related lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term.

The Company did not elect the hindsight practical expedient and also did not elect the package of practical expedients that would allow the Company to retain its conclusions under prior guidance for lease classification and initial direct costs for leases that commenced before the September 1, 2019 implementation date.

During the implementation of this new standard, management was focused principally on, but not limited to, developing a complete inventory of the Company’s lease contracts and the terms and conditions contained within these contracts to appropriately account for them under the new lease model.

Additionally, the Company has implemented updates to its accounting policies, business processes, systems and internal controls in support of adopting this new standard.

Upon adoption on September 1, 2019, the Company’s total assets increased by $ 9.0 million and total liabilities increased by $ 9.2 million in the Company’s condensed consolidated balance sheets.

The standard did not have a material impact on the condensed consolidated statements of operations or cash flows.

Upon adoption, the cumulative effect of initially applying the guidance was insignificant and therefore no adjustment to the opening balance of retained earnings was made on September 1, 2019.

See Note 6 – Leases for additional information and incremental disclosures related to the adoption of this standard.

In March 2020, the FASB issued ASU No.

2020-04, “ Reference Rate Reform ” under ASC 848, intended to provide temporary optional expedients and exceptions to U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

This guidance is effective beginning on March 12, 2020, and the Company may apply the amendments prospectively to contract modifications made or relationships entered into or evaluated through December 31, 2022.

The adoption of this guidance did not have an impact on the Company’s consolidated financial statements in the current period, but we will continue to evaluate the impacts of this guidance on future contract modifications.

The Company’s fixed rate long-term borrowings consist of senior notes and are recorded at carrying value.

The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 70.2 million as of November 30, 2020, which was determined based on a discounted cash flow analysis using current market interest rates for instruments with similar terms, compared to their carrying value of $ 69.6 million .

During the three months ended November 30, 2020, the Company did no t record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition

Recently Issued Accounting Standards

1 unchanged sentence

2019-12, “ Simplifying the Accounting for Income Taxes ” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year.

This guidance is effective for fiscal years beginning after

December 15, 2021, including interim periods within that fiscal year.

Early adoption is permitted.

15 unchanged sentences

accumulated depreciation and amortization

At August 31, 2019, capital in progress on the balance sheet included £ 9.0 million Pound Sterling ($ 10.9 million in U.S.

Dollars as converted at exchange rates as of August 31, 2019) associated with capital costs related to the purchase of the Company’s new office building and related land in Milton Keynes, England.

Upon completion of the buildout and relocation of employees based in the United Kingdom to this new office building in the first quarter of fiscal year 2020, the Company placed these assets into service and reclassified the amounts recorded in capital in progress to the respective fixed asset categories, which includes amounts attributable to the land.

Since all assets associated with this new office building are denominated in Pound Sterling, amounts will fluctuate in U.S.

Dollars from period to period due to changes in foreign currency exchange rates.

Goodwill and Other Intangible Assets

2 unchanged sentences

Translation adjustments

Balance as of May 31, 2020

Balance as of November 30, 2020

There were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its goodwill subsequent to December 1, 2019, the date of its most recent annual goodwill impairment test, which was conducted during the second quarter of fiscal year 2020.

Based on the results of the annual goodwill impairment test, the estimated fair value of each of the Company’s reporting units exceeded their respective carrying values so significantly that an impairment charge to the Company’s goodwill balances is remote, even in the event that the impacts of the novel coronavirus (“COVID-19”) pandemic significantly lower results in future periods.

coronavirus (“COVID-19”) pandemic significantly lower results in future periods.

To date, there have been no impairment losses identified and recorded related to the Company’s goodwill.

Definite-lived Intangible Assets

The Company’s definite-lived intangible assets, which include the 2000 Flushes, Spot Shot, Carpet Fresh, 1001, EZ REACH and GT85 trade names, the Belgium customer list, the GT85 customer relationships and the GT85 technology are included in other intangible assets, net in the Company’s condensed consolidated balance sheets.

The Company’s definite-lived intangible assets, which include the Spot Shot, Carpet Fresh, 1001, EZ REACH and GT85 trade names, are included in other intangible assets, net in the Company’s condensed consolidated balance sheets.

The following table summarizes the definite-lived intangible assets and the related accumulated amortization (in thousands):

2 unchanged sentences

Net carrying amount

There has been no impairment charge for the nine months ended May 31, 2020 and there were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its existing definite-lived intangible assets.

There has been no impairment charge for the three months ended November 30, 2020 and there were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its existing definite-lived intangible assets.

The Company’s review of events and circumstances included consideration of the ongoing COVID-19 pandemic.

Changes in the carrying amounts of definite-lived intangible assets by segment for the nine months ended May 31, 2020 are summarized below (in thousands):

Changes in the carrying amounts of definite-lived intangible assets by segment for the three months ended November 30, 2020 are summarized below (in thousands):

Balance as of August 31, 2020

1 unchanged sentence

Translation adjustments

Balance as of May 31, 2020

Balance as of November 30, 2020

The estimated amortization expense for the Company’s definite-lived intangible assets in future fiscal years is as follows (in thousands):

16 unchanged sentences

The Company uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate in the currency of the lease.

As of May 31, 2020, finance leases were not significant and all leases recorded on the Company’s consolidated balances sheets were operating leases.

As of November 30, 2020, finance leases were not significant and all leases recorded on the Company’s consolidated balances sheets were operating leases.

Residual value guarantees, restrictions, covenants, sublease income, net gains or losses from sale and leaseback transactions, and transactions with related parties associated with leases are also not significant.

2 unchanged sentences

and (ii) exclude leases with an initial term of 12 months or less (“short-term” leases) from the consolidated balance sheets and will recognize related lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

However, the Company had no significant short-term leases as of May 31, 2020.

Upon adoption of ASC 842 on September 1, 2019, the Company’s total assets increased by $ 9.0 million and total liabilities increased $ 9.2 million in the Company’s consolidated balance sheets.

The adoption of this standard did not have a material impact on retained earnings, the consolidated statements of operations or cash flows.

The Company obtained no significant additional right-of-use assets in exchange for lease obligations during the nine months ended May 31, 2020.

The Company recorded $ 0.5 million and $ 1.5 million in lease expense during the three and nine months ended May 31, 2020, respectively.

However, the Company had no significant short-term leases as of November 30, 2020.

The Company obtained additional right-of-use assets of $ 1.0 million in exchange for lease obligations during the three months ended November 30, 2020.

The Company recorded $ 0.5 million in lease expense during both the three months ended November 30, 2020 and 2019.

This lease expense was included in selling, general and administrative expenses.

An insignificant amount of lease expense was classified within cost of products sold for both the three and nine months ended May 31, 2020.

During the three and nine months ended May 31, 2020, the Company paid cash of $ 0.5 million and $ 1.5 million related to lease liabilities, respectively.

Variable lease expense under the Company’s lease agreements were not significant for both the three and nine months ended May 31, 2020.

As of May 31, 2020, the weighted-average remaining lease term was 7.2 years and the weighted-average discount rate was 3.1 % for the Company’s operating leases.

There were no leases that had not yet commenced as of May 31, 2020 that will create additional significant rights and obligations for the Company.

An insignificant amount of lease expense was classified within cost of products sold for both the three months ended November 30, 2020 and 2019.

During both the three months ended November 30, 2020 and 2019, the Company paid cash of $ 0.5 million related to lease liabilities.

Variable lease expense under the Company’s lease agreements were no t significant for both the three months ended both November 30, 2020 and 2019.

As of November 30, 2020, the weighted-average remaining lease term was 6.5 years and the weighted-average discount rate was 3.0 % for the Company’s operating leases.

There were no leases that had not yet commenced as of November 30, 2020 that will create additional significant rights and obligations for the Company.

Right-of-use assets and lease liabilities consisted of the following (in thousands):

12 unchanged sentences

Present value of lease liabilities

Future fiscal year minimum payments under non-cancelable operating leases in accordance with ASC 840 as of August 31, 2019 were as follows (in thousands):

Fiscal year 2020

Fiscal year 2021

Fiscal year 2022

Fiscal year 2023

Fiscal year 2024

Total undiscounted future cash flows

Accrued and Other Liabilities

3 unchanged sentences

Accrued sales taxes and other taxes

Current operating lease liabilities

Short-term operating lease liability

Accrued payroll and related expenses consisted of the following (in thousands):

3 unchanged sentences

Accrued payroll taxes

As of May 31, 2020, the Company held borrowings under two separate agreements as detailed below.

As of November 30, 2020, the Company held borrowings under two separate agreements as detailed below.

Note Purchase and Private Shelf Agreement

On November 15, 2017, the Company entered into the Note Purchase and Private Shelf Agreement (the “Note Agreement”) by and among the Company, PGIM, Inc.

(“Prudential”), and certain affiliates and managed accounts of Prudential (the “Note Purchasers”), pursuant to which the Company agreed to sell $ 20.0 million aggregate principal amount of senior notes (the “Series A Notes”) to certain of the Note Purchasers.

Since November 15, 2017, this note agreement has been amended two times, most recently on March 16, 2020 (the “Second Amendment”).

The Second Amendment amended the Note Agreement to permit the Company (inclusive of its subsidiaries) to enter into an amended and restated credit agreement with Bank of America N.A.

(“Bank of America”) .

In addition, the Second Amendment includes certain conforming amendments to the Note Agreement consistent with the Company’s credit agreement with Bank of America, including a schedule of permitted consolidated capital expenditures and related carryforward provisions for unused portions each fiscal year.

The Series A Notes bear interest at 3.39 % per annum and will mature on November 15, 2032 , unless earlier paid by the Company.

Principal payments are required semi-annually in May and November of each year in equal installments of $ 0.4 million through May 15, 2032 , and the remaining outstanding principal in the amount of $ 8.4 million will become due on November 15, 2032 .

Interest is also payable semi-annually in May and November of each year.

During the nine months ended May 31, 2020, the Company repaid $ 0.8 million in principal on the Series A Notes pursuant to its semi-annual principal payment requirements.

Pursuant to the Note Agreement, the Company may from time to time offer for sale, in one or a series of transactions, additional senior notes of the Company (the “Shelf Notes”) in an aggregate principal amount of up to $ 105.0 million.

The Shelf Notes will have a maturity date of no more than 15.5 years after the date of original issuance and may be issued no later than November 15, 2020 .

The Shelf Notes, if issued, would bear interest at a rate per annum as agreed upon amongst the Company and the purchasing parties and would have such other particular terms, as would be set forth in a confirmation of acceptance executed by the purchasing parties prior to the closing of each purchase and sale transaction.

To date, the Company has issued no Shelf Notes.

Pursuant to the Note Agreement, the Series A Notes and any Shelf Notes (collectively, the "Notes") can be prepaid at the Company’s sole discretion, in whole at any time or in part from time to time, at 100% of the principal amount of the Notes being prepaid, together with accrued and unpaid interest thereon as well as an additional make-whole payment with respect to such Notes.

The Company holds borrowings under its Note Purchase and Private Shelf Agreement (the “Note Agreement”) by and among the Company, PGIM, Inc.

(“Prudential”), and certain affiliates and managed accounts of Prudential (the “Note Purchasers”).

The note agreement has been amended three times, most recently on September 30, 2020 (the “Third Amendment”).

The Third Amendment permitted the Company to enter into the first amendment of its existing amended and restated revolving credit agreement with Bank of America and also included certain conforming amendments to the credit agreement, including the revision of financial and restrictive covenants.

Credit Agreement

On March 16, 2020, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America.

The Credit Agreement modified the Company’s previously existing agreement dated June 17, 2011 (as amended on January 7, 2013, May 13, 2015, November 16, 2015, September 1, 2016, November 15, 2017, February 23, 2018 and January 22, 2019).

The Credit Agreement increased the revolving commitment from $ 100.0 million to $ 150.0 million and increased the sublimit for the revolving commitment for borrowing by WD-40 Company Limited, a wholly owned operating subsidiary of the Company for Europe, the Middle East, Africa and India, from $ 50.0 million to $ 100.0 million.

In addition to other non-material and technical amendments, the Credit Agreement also modified certain restrictive covenants.

The Credit Agreement also includes a new schedule of permitted consolidated capital expenditures to permit the Company to make contemplated capital investments in the current and future fiscal years of up to $ 30.5 million in fiscal year 2020, $ 19.0 million in fiscal year 2021, and $ 15.0 million for fiscal years 2022, 2023, 2024 and 2025.

The Credit Agreement also increased the carryforward from one fiscal year to the next fiscal year of unused Permitted Consolidated Capital Expenditures from $ 2.5 million to $ 5.0 million.

The new maturity date for the revolving credit facility per the Credit Agreement is March 16, 2025 .

Per the terms of the Credit Agreement, the aggregate amount of the Company’s capital stock that it may repurchase may not exceed $ 150.0 million during the period from January 22, 2019 to the maturity date of the agreement so long as no default exists immediately prior and after giving effect thereto.

In addition, the Company may not declare or pay cash dividends in the current fiscal quarter that, when added to dividends paid in the prior three fiscal quarters, will exceed 75 % of the Company’s consolidated net income for the then most recently ended four quarters for which financial statements are delivered to Bank of America as required by the Credit Agreement (the “Dividend Covenant”).

The Company’s Note Agreement with Prudential also has a conforming dividend covenant with identical terms.

On April 8, 2020, the Company signed letters from Bank and America and Prudential acknowledging an agreement between the Company and both lenders to permit the Company to add back to its net income for the quarter ended August 31, 2019 a one-time, non-cash charge for an uncertain tax position associated with the Tax Cuts and Jobs Act “toll tax” in the amount of $ 8.7 million solely for the purpose of the Dividend Covenant.

The Credit Agreement also features an autoborrow agreement providing for the automatic advance of revolving loans in U.S.

Dollars to the Company’s designated account at Bank of America.

Per the terms of the Credit Agreement, the Company’s outstanding balance on the autoborrow agreement cannot exceed an aggregate amount of $ 30.0 million.

Since the autoborrow feature provides for borrowings to be made and repaid by the Company on a daily basis, any such borrowings made under an active autoborrow agreement are classified as short-term on the Company’s consolidated balance sheets.

The Company had no outstanding balance under the autoborrow agreement as of May 31, 2020.

The Company assesses its ability and intent to refinance the outstanding draws on the line of credit at the end of each reporting period in order to determine the proper balance sheet classification for amounts outstanding on the line of credit.

The Company has the ability to refinance any draw under the line of credit with successive short-term borrowings through the March 16, 2025 maturity date.

The Company’s Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America consists of a revolving commitment for borrowing by the Company up to $ 150.0 million with a sublimit of $ 100.0 million for WD-40 Company Limited, a wholly owned operating subsidiary of the Company for Europe, the Middle East, Africa and India.

On September 30, 2020, the Company entered into a First Amendment to Credit Agreement (the “First Amendment to Credit Agreement”) with Bank of America.

In addition to other non-material and technical amendments to the Credit Agreement, the First Amendment to Credit Agreement extended the maturity date from March 16, 2025 to September 30, 2025 , revised certain financial and restrictive covenants, increased the limitation amounts on other unsecured Indebtedness and Investments and adjusted the interest rates on subsequent borrowings under the Credit Agreement using a three-tier pricing approach tied to the Company’s Consolidated Leverage Ratio.

Capitalized terms not otherwise defined in this report have the meaning given to such terms in the Credit Agreement.

Short-term and long-term borrowings under the Company’s Credit Agreement and Note Agreement consisted of the following (in thousands):

(calendar year)

Credit Agreement - revolving credit facility (1)(3)

Note Agreement

Series A Notes - 3.39 % fixed rate (2)

Series B Notes - 2.50 % fixed rate (3)

Series C Notes - 2.69 % fixed rate (3)

Total borrowings

Short-term portion of borrowings

Total long-term borrowings

(1) The Company has the ability to refinance any draw under the line of credit with successive short-term borrowings through the maturity date.

Outstanding draws for which management has both the ability and intent to refinance with successive short-term borrowings for a period of at least twelve months are classified as long-term.

During the nine months ended May 31, 2020, the Company repaid $ 5.0 million in short-term borrowings outstanding under the line of credit and drew an additional $ 90.0 million in U.S.

Dollars, which included an $ 80.0 million draw in U.S.

Dollars in March 2020 in response to the COVID-19 pandemic.

Although the Company does not have any presently anticipated need for this additional liquidity, the Company decided to draw this additional amount to ensure future liquidity given the recent significant impact on global financial markets and the economy as a result of the COVID-19 pandemic.

The Company maintains a balance of outstanding draws in U.S.

Dollars in the Americas segment, as well as in Euros and Pound Sterling in the EMEA segment.

As of November 30, 2020, the entire balance on this facility is classified as long-term and only contains amounts denominated in Euros and Pound Sterling.

Euro and Pound Sterling denominated draws will fluctuate in U.S.

Dollars from period to period due to changes in foreign currency exchange rates.

As of May 31, 2020, the Company had a balance of $ 147.4 million of outstanding draws on the line of credit.

Based on the Company’s ability and intent assessment, $ 77.4 million of this $ 147.4 million was classified as long-term and the remaining $ 70.0 million as short-term as of May 31, 2020.

Short-term and long-term borrowings consisted of the following (in thousands):

Short-term borrowings:

Revolving credit facility, short-term

Revolving credit facility, autoborrow feature

Series A Notes, current portion of long-term debt

Total short-term borrowings

Long-term borrowings:

Revolving credit facility

Series A Notes

Total long-term borrowings

(2) Principal payments are required semi-annually in May and November of each year in equal installments of $ 0.4 million through May 15, 2032 .

The remaining outstanding principal in the amount of $ 8.4 million will become due on November 15, 2032 .

(3) On September 30, 2020, the Company refinanced $ 50.0 million of existing draws under its Credit Agreement in the United States through the issuance of two new $ 26.0 million notes (“Series B Notes” and “Series C Notes”, respectively) under its Note Agreement.

Interest on these new notes is payable semi-annually in May and November of each year with no principle due until the maturity date.

The first interest payment on both the Series B and Series C Notes is due in May 2021 .

Both the Note Agreement and the Credit Agreement contain representations, warranties, events of default and remedies, as well as affirmative, negative and other financial covenants customary for these types of agreements.

These covenants include, among other things, certain limitations on the ability of the Company and its subsidiaries to incur indebtedness, create liens, dispose of assets, make investments, declare, make or incur obligations to make certain restricted payments, including the payment of dividends and payments for the repurchase shares of the Company’s capital stock and enter into certain merger or consolidation transactions.

The Credit Agreement includes, among other limitations on indebtedness, a $ 35.0 million limit on other unsecured indebtedness, including indebtedness incurred under the Series A Notes and any Shelf Notes to be offered for sale under the Note Agreement.

Each agreement also includes a most favored lender provision which requires that any time any other lender has the benefit of one or more financial or operational covenants that is different than, or similar to, but more restrictive than those contained in its own agreement, those covenants shall be immediately and automatically incorporated by reference to the other lender’s agreement.

These covenants include, among other things, certain limitations on the ability of the Company and its subsidiaries to incur indebtedness, create liens, dispose of assets, make investments, declare, make or incur obligations to make certain restricted payments, including the payment of dividends and payments for the repurchase of the Company’s capital stock and enter into certain merger or consolidation transactions.

The Credit Agreement includes, among other limitations on indebtedness, a $ 125.0 million limit on other unsecured indebtedness.

Both the Note Agreement and the Credit Agreement require the Company to adhere to the same financial covenants.

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The terms of the financial covenants are as follows:

 The consolidated leverage ratio cannot be greater than three to one.

 The consolidated leverage ratio cannot be greater than three and a half to one.

The consolidated leverage ratio means, as of any date of determination, the ratio of (a) consolidated funded indebtedness as of such date to (b) consolidated EBITDA for the most recently completed four fiscal quarters.

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The consolidated interest coverage ratio means, as of any date of determination, the ratio of (a) consolidated EBITDA for the most recently completed four fiscal quarters to (b) consolidated interest charges for the most recently completed four fiscal quarters

As of May 31, 2020, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

As of November 30, 2020, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

Share Repurchase Plan

On June 19, 201 8 , the Company’s Board of Directors approved a share buy-back plan.

Under the plan, which became effective on September 1, 2018 and will remain in effect through August 31, 2020, the Company is authorized to acquire up to $ 75.0 million of its outstanding shares.

The timing and amount of repurchases are based on terms and conditions as may be acceptable to the Company’s Chief Executive Officer and Chief Financial Officer and in compliance with all laws and regulations applicable thereto.

During the period from September 1, 2018 through May 31, 2020, the Company repurchased 268,538 shares at a total cost of $ 46.4 million under this $ 75.0 million plan.

During the nine months ended May 31, 2020, the Company repurchased 92,583 shares at an average price of $ 181.71 per share, for a total cost of $ 16.8 million under this $ 75.0 million plan.

On April 8, 2020, the Company elected to temporarily suspend repurchases under its current share buy-back plan.

The Company has elected this suspension in order to preserve cash while it monitors the impacts of the COVID-19 pandemic as it continues to unfold.

On April 8, 2020, the Company elected to suspend repurchases under its previously approved share buy-back plan, which subsequently expired on August 31, 2020.

The Company made this election in order to preserve cash while it continues to monitor the long-term impacts of the COVID-19 pandemic.

Management does not expect to seek Board approval for a new share buy-back plan until it starts to see a reduced level of uncertainty regarding the pandemic’s impact on the economy and the Company’s business.

Therefore, no repurchase transactions were made during the first quarter of fiscal year 2021.

Earnings per Common Share

The table below reconciles net income to net income available to common shareholders (in thousands):

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Net income allocated to

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The table below summarizes the weighted-average number of common shares outstanding included in the calculation of basic and diluted EPS (in thousands):

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Weighted-average common

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shares outstanding, diluted

For the three months ended May 31, 2020, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 9,479 were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive.

There were no anti-dilutive stock-based equity awards outstanding for the three months ended May 31, 2019.

For the nine months ended May 31, 2020 and May 31, 2019, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 8,229 and 1,443 , respectively, were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive.

For the three months ended November 30, 2020, there were no anti-dilutive stock-based equity awards outstanding.

For the three months ended November 30, 2019, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 5,729 were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive.

Revenue Recognition

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In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment related to variable consideration to determine the net consideration to which the Company expects to be entitled.

The Company records estimates of variable consideration, which primarily includes rebates (cooperative marketing programs and volume-based discounts), coupon offers, cash discount allowances, and sales returns, as a reduction of sales in its consolidated statements of operations.

The Company records estimates of variable consideration, which primarily includes rebates/other discounts (cooperative marketing programs, volume-based discounts, shelf price reductions and allowances for shelf space, charges from customers for services they provided to us related to the sale and penalties/fines charged to us by customers associated with failing to adhere to contractual obligations), coupon offers, cash discount allowances, and sales returns, as a reduction of sales in its consolidated statements of operations.

These estimates are based on the expected value method considering all reasonably available information, including current and past trade promotion spending patterns, status of trade promotion activities, the interpretation of historical spending trends by customer and category, customer agreements and/or currently known factors that arise in the normal course of business.

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These programs include cooperative marketing, volume-based discounts, shelf price reductions, consideration and allowances given to retailers for shelf space and/or favorable display positions in their stores and other promotional activities.

Other discounts include items such as charges from customers for services they provide related to the sale of WD-40 Company

products and penalties/fees associated with WD-40 Company failing to adhere to contractual obligations (e.g., errors on purchase orders, errors on shipment, late deliveries, etc.).

Other discounts include items such as charges from customers for services they provide related to the sale of WD-40 Company products and penalties/fees associated with WD-40 Company failing to adhere to contractual obligations (e.g., errors on purchase orders, errors on shipment, late deliveries, etc.).

Costs related to rebates, cooperative advertising and other promotional activities and other discounts are recorded as a reduction to sales upon delivery of the Company ’ s products to its customers.

As of May 31, 2020 and August 31, 2019, the Company had a $ 6.6 million and $ 7.5 million balance in rebate/other discounts liabilities, respectively, included in accrued liabilities on the Company ’ s condensed consolidated balance sheets.

The Company recorded approximately $ 5.2 million and $ 14.6 million in rebates/other discounts as a reduction to sales during the three and nine months ended May 31, 2020, respectively.

Rebates/other discounts as a reduction to sales during the three and nine months ended May 31, 2019 were approximately $ 4.6 million and $ 13.4 million, respectively.

The Company had a $ 7.9 million and $ 7.5 million balance in rebate/other discount liabilities as of November 30 and August 31, 2020, respectively, which are included in accrued liabilities on the Company ’ s condensed consolidated balance sheets.

The Company recorded approximately $ 5.3 million and $ 5.0 million in rebates/other discounts as a reduction to sales during the three months ended November 30, 2020 and 2019, respectively.

Coupons — Coupon costs are based upon historical redemption rates and are recorded as a reduction to sales as incurred, which is when the coupons are circulated.

Coupon redemption liabilities, which are included in accrued liabilities on the Company ’ s condensed consolidated balance sheets, were not significant at May 31, 2020 and August 31, 2019.

Coupons recorded as a reduction to sales during the three and nine months ended May 31, 2020 and May 31, 2019, respectively, were also not significant.

Coupon redemption liabilities, which are included in accrued liabilities on the Company ’ s condensed consolidated balance sheets, were not significant at November 30, 2020 and August 31, 2020.

Coupons recorded as a reduction to sales during the three months ended November 30, 2020 and 2019 were also not significant.

Cash discounts — The Company offers certain of its customers a cash discount program to incentivize them to pay the invoice earlier than the normal payment date on the invoice.

Although payment terms vary, most customers typically pay within 30 to 90 days of invoicing.

The Company had a $ 0.5 million balance in the allowance for cash discounts at both May 31, 2020 and August 31, 2019.

The Company recorded approximately $ 1.1 million and $ 3.1 million in cash discounts as a reduction to sales during the three and nine months ended May 31, 2020, respectively.

Cash discounts as a reduction to sales during the three and nine months ended May 31, 2019 were approximately $ 1.2 million and $ 3.2 million, respectively.

The Company had a $ 0.4 million and $ 0.5 million balance in the allowance for cash discounts at November 30, 2020 and August 31, 2020, respectively.

The Company recorded approximately $ 1.2 million and $ 1.0 million in cash discounts as a reduction to sales during the three months ended November 30, 2020 and 2019, respectively.

Sales returns — The Company recognizes revenue net of allowances for estimated returns, which is based on historical return rates, with a corresponding reduction to cost of products sold.

Although the Company typically does not have definitive sales return provisions included in the contract terms with its customers, when such provisions have been included, they have not been significant.

Under the current revenue accounting standard, ASC 606, the Company is required to present its provision for sales returns on a gross basis as a liability.

The Company ’ s refund liability for sales returns, which is included in accrued liabilities and represents the amount expected to be owed to the customers for product returns, was not significant at both May 31, 2020 and August 31, 2019.

The Company now also records an asset for the value of inventory that represents the right to recover products from customers associated with sales returns.

The value of this inventory is recorded to other current assets and the balance in this account associated with product returns was not significant at May 31, 2020.

The Company presents its provision for sales returns on a gross basis as a liability.

The Company ’ s refund liability for sales returns is included in accrued liabilities and represents the amount expected to be owed to the customers for product returns.

The Company’s refund liability for sales returns was not significant at both November 30, 2020 and August 31, 2019.

The Company also records an asset for the value of inventory that represents the right to recover products from customers associated with sales returns.

The value of this inventory is recorded to other current assets and the balance in this account associated with product returns was not significant at November 30, 2020 and August 31, 2020.

Disaggregation of Revenue

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Contract Balances

Contract liabilities consists of deferred revenue related to undelivered products.

Contract liabilities consist of deferred revenue related to undelivered products.

Deferred revenue is recorded when payments have been received from customers for undelivered products.

Revenue is subsequently recognized when revenue recognition criteria are met, generally when control of the product transfers to the customer.

The Company had contract liabilities of $ 0.7 million as of May 31, 2020.

Contract liabilities were not significant as of August 31, 2019.

Contract liabilities are recorded in accrued liabilities on the Company ’ s condensed consolidated balance sheets.

The Company did no t have any contract assets as of May 31, 2020 and August 31, 2019.

The Company had contract liabilities of $ 2.3 million and $ 1.4 million as of November 30, 2020 and August 31, 2020, respectively.

These contract liabilities are recorded in accrued liabilities on the Company ’ s condensed consolidated balance sheets.

The Company did no t have any contract assets as of November 30, 2020 and August 31, 2020.

Commitments and Contingencies

Purchase Commitments

The Company has ongoing relationships with various suppliers (contract manufacturers) who manufacture the Company’s products.

The Company has ongoing relationships with various suppliers (contract manufacturers) that manufacture the Company’s products and third-party distribution centers that warehouse and ship the Company’s products to customers.

The contract manufacturers maintain title and control of certain raw materials and components, materials utilized in finished products, and of the finished products themselves until shipment to the Company’s customers or third-party distribution centers in accordance with agreed upon shipment terms.

Although the Company has definitive minimum purchase obligations included in the contract terms with certain of its contract manufacturers, when such obligations have been included, they have either been immaterial or the minimum amounts have been such that they are well below the volume of goods that the Company has historically purchased.

In the ordinary course of business, supply needs are communicated by the Company to its contract manufacturers based on orders and short-term projections, ranging from two months to five months .

In the ordinary course of business, supply needs are communicated by the Company to its contract manufacturers based on orders and short-term projections, ranging from two months to six months .

The Company is committed to purchase the products produced by the contract manufacturers based on the projections provided .

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In addition to the commitments to purchase products from contract manufacturers described above, the Company may also enter into commitments with other manufacturers to purchase finished goods and components to support innovation and renovation initiatives and/or supply chain initiatives.

As of May 31, 2020, no such commitments were outstanding.

As of November 30, 2020, no such commitments were outstanding.

From time to time, the Company is subject to various claims, law suits, investigations and proceedings arising in the ordinary course of business , including but not limited to, product liability litigation and other claims and proceedings with respect to intellectual property, breach of contract, labor and employment, tax and other matters .

As of May 31, 2020, there were no unasserted claims or pending proceedings for claims against the Company that the Company believes will result in a probable loss for the Company and, as to claims that the Company believes may result in a reasonably possible loss, the Company believes that no reasonably possible outcome of any such claim will have a materially adverse impact on the Company’s financial condition , results of operations or cash flows.

As of November 30, 2020, there were no unasserted claims or pending proceedings for claims against the Company that the Company believes will result in a probable loss for the Company and, as to claims that the Company believes may result in a reasonably possible loss, the Company believes that no reasonably possible outcome of any such claim will have a materially adverse impact on the Company’s financial condition , results of operations or cash flows.

For further information on the risks the Company faces from existing and future claims, suits, investigations and proceedings, see the Company’s risk factors disclosed in Part I―Item 1A, “Risk Factors,” in its Annual Report on Form 10-K for the fiscal year ended August 31, 2020, which was filed with the SEC on October 21, 2020.

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As a result of the Company’s insurance coverage, management believes that the estimated fair value of these indemnification agreements is minimal .

Thus, no liabilities have been recorded for these agreements as of May 31, 2020 .

Thus, no liabilities have been recorded for these agreements as of November 30, 2020 .

From time to time, the Company enters into indemnification agreements with certain contractual parties in the ordinary course of business, including agreements with lenders, lessors, contract manufacturers, marketing distributors, customers and certain vendors.

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the Company with respect to most potential claims arising from such agreements and that such agreements do not otherwise have value separate and apart from the liabilities incurred in the ordinary course of the Company’s business.

Thus, no liabilities have been recorded with respect to such indemnification agreements as of May 31, 2020 .

Thus, no liabilities have been recorded with respect to such indemnification agreements as of November 30, 2020 .

The Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes.

Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

The provision for income taxes was 23.9 % and 19.8 % of income before income taxes for the three months ended May 31, 2020 and May 31, 2019, respectively.

The increase in the effective income tax rate from period to period was primarily due to a decrease in earnings from foreign operations resulting in a decrease in the net benefit received from the application of the GILTI / FDII calculation.

The provision for income taxes was 19.1 % and 18.8 % of income before income taxes for the nine months ended May 31, 2020 and May 31, 2019, respectively.

The increase in the effective income tax rate from period to period was primarily due to a decrease in the net benefit received from the application of GILTI / FDII calculation, partially offset by an increase in excess tax benefits from settlements of stock-based equity awards during the first six months of fiscal year 2020 that are recognized in the provision for income tax.

The provision for income taxes was 15.7 % and 14.7 % of income before income taxes for the three months ended November 30, 2020 and 2019, respectively.

Discrete benefits, primarily those related to excess tax benefits from settlements of stock-based equity awards, reduced the effective income tax rate to a level significantly below the anticipated annual effective tax rate for each period.

Although these discrete benefits increased from period to period, they decreased as a percentage of pre-tax income due to significantly higher pre-tax income during the first quarter of fiscal year 2021 which resulted in a higher effective income tax rate from period to period.

The Company is subject to taxation in the U.S.

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Generally, for the majority of state and foreign jurisdictions where the Company does business, periods prior to fiscal year 2017 are no longer subject to examination .

The Company is currently under audit in various state and foreign jurisdictions for fiscal years 2017 through 2019.

Estimated unrecognized tax benefits related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitation within the next twelve months were not significant.

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Corporate (1)

May 31, 2020:

Income from operations

Depreciation and

amortization expense

Interest income

Interest expense

May 31, 2019:

Income from operations

Depreciation and

amortization expense

Interest income

Interest expense

Nine Months Ended:

May 31, 2020:

November 30, 2020:

Income from operations

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Interest expense

May 31, 2019:

November 30, 2019:

Income from operations

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Net sales by product group are as follows (in thousands):

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Maintenance products

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Subsequent Events

On June 16, 2020 , the Company’s Board of Directors declared a cash dividend of $ 0.67 per share payable on July 31, 2020 to shareholders of record on July 17 , 2020 .

On December 7, 2020 , the Company’s Board of Directors declared a cash dividend of $ 0.67 per share payable on January 29, 2021 to shareholders of record on January 15, 2021 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements