What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-08 compared with 2021-01-07 · 331 added, 148 removed, 236 unchanged (67% of the section changed)

32 unchanged sentences

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.

The following summarizes the financial and operational highlights for our business during the three months ended November 30, 2020:

 Consolidated net sales increased $26.0 million for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $2.8 million on consolidated net sales for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

The following summarizes the financial and operational highlights for our business during the six months ended February 28, 2021:

 Consolidated net sales increased $37.9 million for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $5.5 million on consolidated net sales for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Thus, on a constant currency basis, net sales would have increased by $32.4 million from period to period.

This favorable impact from changes in foreign currency exchange rates mainly came from our EMEA segment, which accounted for 44% of our consolidated sales for the three months ended November 30, 2020.

 Gross profit as a percentage of net sales increased to 56.4% for the three months ended November 30, 2020 compared to 54.3% for the corresponding period of the prior fiscal year.

 Consolidated net income increased $11.4 million, or 94%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $0.8 million on consolidated net income for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

This favorable impact from changes in foreign currency exchange rates mainly came from our EMEA segment, which accounted for 44% of our consolidated sales for the six months ended February 28, 2021.

 Gross profit as a percentage of net sales increased to 55.9% for the six months ended February 28, 2021 compared to 53.9% for the corresponding period of the prior fiscal year.

 Consolidated net income increased $14.3 million, or 54%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $1.5 million on consolidated net income for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Thus, on a constant currency basis, net income would have increased $12.8 million.

 Although consolidated results for the three months ended November 30, 2020 were significantly improved from the same period last fiscal year due to a variety of factors, the Company’s operations and business continue to be impacted by the COVID-19 pandemic.

 Although consolidated results for the six months ended February 28, 2021 were significantly improved from the same period last fiscal year due to a variety of factors, the Company’s operations and business continue to be impacted by the COVID-19 pandemic.

See Significant Developments section which follows for details.

 Diluted earnings per common share for the three months ended November 30, 2020 were $1.72 versus $0.88 in the prior fiscal year period.

 Diluted earnings per common share for the six months ended February 28, 2021 were $2.96 versus $1.92 in the prior fiscal year period.

Our strategic initiatives and the areas where we will continue to focus our time, talent and resources in future periods include:

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Significant Developments

Sales increased in all three segments during the three months ended November 30, 2020 as compared to the corresponding period of the prior fiscal year.

Although our financial results and operations continued to be impacted by the COVID-19 pandemic that began in early calendar year 2020, we were able to reduce the adverse impacts of these challenging times due to the strength of our brands, increased focus on e-commerce, global expansion in the distribution of our products and a continued focus on our strategic initiatives.

While we experienced significant sales declines in fiscal year 2020 as compared to the previous full fiscal year, sales during the first quarter of fiscal year 2021 rebounded significantly due to various reasons, including the following:

Sales increased in all three segments during the six months ended February 28, 2021 as compared to the corresponding period of the prior fiscal year.

Although our financial results and operations continued to be impacted by the COVID-19 pandemic that began in early calendar year 2020, we have been able to reduce the adverse impacts of these challenging times due to the strength of our brands, increased focus on e-commerce, global expansion in the distribution of our products and a continued focus on our strategic initiatives.

While we experienced significant sales declines in fiscal year 2020 as compared to the previous full fiscal year, sales during the six months ended February 28, 2021 increased significantly due to various reasons, including the following:

 Continued increases in renovation and maintenance activities by end-users during the pandemic, particularly in North America, some countries in EMEA and in Australia;

 Increased distribution and sales within the e-commerce channel;

 Recoveries we are experiencing in industrial channels globally as well as in markets where we do not have direct operations (distributor markets), particularly in our EMEA and Asia distributor markets where these distributors have been participating in more of our promotional activities and have been adjusting to more normal levels of inventory for our products;

 Recoveries we are experiencing in industrial channels globally as well as in markets where we do not have direct operations (distributor markets), particularly in our EMEA distributor markets where these distributors have been participating in more of our promotional activities and have been adjusting to more normal levels of inventory for our products;

 Significant increases in sales of our WD-40 Bike product;

 Continued increased sales of our homecare and cleaning products due to the high demand for such products during the pandemic.

These combined impacts produced a 26% increase in our consolidated net sales during the first quarter of fiscal year 2021 compared to the corresponding period of the prior fiscal year, a period in which the COVID-19 pandemic had not yet commenced.

 Continued increased sales of many of our homecare and cleaning products due to the high demand for such products during the pandemic.

These combined impacts produced a 19% increase in our consolidated net sales during the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, a period in which the COVID-19 pandemic had not yet resulted in significant government restrictions on movement and commerce in most regions, with the exception of certain regions within our Asia-Pacific segment.

We are continuing to actively manage and monitor supply chain and transportation disruptions and constraints that have arisen periodically within all three of our business segments during the COVID-19 pandemic, which has both directly and indirectly impacted our suppliers and other third-party distribution centers and manufacturers.

Some of the challenges that we have experienced at our third-party manufacturers include general capacity constraints and competition for such capacity by other companies who utilize the same third-party manufacturers.

These challenges were significantly compounded in the Americas segment during the second quarter of fiscal year 2021 as a result of severe winter storms in parts of the United States that directly impacted some of our third-party contract manufacturers and distribution centers.

While we have been successful in managing most of the disruptions in our supply chain and the distribution of our products as a result of the pandemic, the timing and magnitude of the challenges that we experienced in our supply chain in the Americas segment during the second quarter of fiscal year 2021 resulted in us not being able to meet the high level of demand for our products by customers and end-users in certain markets.

In addition, the Americas has incurred significant additional costs within its supply chain as a result of these constraints.

Although we have positioned ourselves to address these disruptions in the Americas supply chain and we will continue to manage these challenges in our global supply chain and distribution networks in future periods, we are not able at this time to estimate the degree of the impact of future disruptions within our supply chain or the level of additional costs that we will continue to incur due to these challenges.

Some of these additional costs are expected to unfavorably impact our cost of goods sold for the remainder of fiscal year 2021 and this will result in a lower gross margin for the second half of fiscal year 2021 as compared to the gross margin that we realized for the first six months of the fiscal year.

We are continually monitoring and actively managing this situation with our supply chain.

Due to the speed and fluidity with which the situation continues to evolve, it is very difficult for us to estimate with certainty the extent to which the COVID-19 pandemic will impact our financial results and operations in future periods.

Although sales increased during the first quarter of fiscal year 2021, many regions globally are experiencing increased COVID-19 case counts and governmental authorities are reimplementing temporary closures, lockdowns and restrictions intended to combat the COVID-19 pandemic at certain physical store retailers, suppliers and manufacturers.

These increased restrictions may have negative economic impacts on our customers and may limit the ability of our customers in certain trade channels and markets to sell our products, which could adversely impact our financial results and operations for the remainder of fiscal year 2021.

Although sales increased during the six months ended February 28, 2021, many regions globally are experiencing continued fluctuations in their COVID-19 case counts.

This has resulted in governmental authorities periodically adjusting temporary closures, lockdowns and restriction policies intended to combat the COVID-19 pandemic at certain physical store retailers, suppliers and manufacturers in reaction to those changes.

These restrictions may have negative economic impacts on our customers and may limit the ability of our customers in certain trade channels and markets to sell our products, which could adversely impact our financial results and operations for the remainder of fiscal year 2021.

We also cannot predict when certain restrictions to protect our customers, retailers and our employees will be either increased or safely reduced in future periods.

These impacts could be material in all business segments during any future period affected either directly or indirectly by this pandemic.

Also, if social distancing requirements resulting from the COVID-19 pandemic lessen in future periods, particularly as vaccinations become more widely available, this may result in a decrease in renovation and maintenance activities by end-users which could adversely impact our financial results.

Also, if social distancing requirements resulting from the COVID-19 pandemic lessen in future periods, this may result in a decrease in renovation and maintenance activities by end-users which could adversely impact our financial results.

In addition, if there are decreases in future periods in the benefits provided to our end-users via government assistance programs which have been put in place due to the pandemic, this may also impact the level of renovation and maintenance activities that we have experienced in recent periods and this could adversely impact our financial results.

We are continuing to actively manage and monitor supply chain and transportation disruptions and constraints that have arisen at our suppliers and other third-party distribution centers and manufacturers as a result of the COVID-19 pandemic.

While we have been successful to date in managing such disruptions in our supply chain and the distribution of our products, we have experienced some challenges in meeting the high level of demand for our products by customers and end-users in certain markets.

Although we have positioned ourselves to continue managing these challenges in our supply chain and distribution networks in future periods, we are not able at this time to estimate the impact of future disruptions within our supply chain or the additional costs that we might incur due to these challenges and we are continually monitoring and managing this situation.

We have taken a variety of measures during the COVID-19 pandemic to ensure the availability and functioning of our critical infrastructure, to promote the safety and security of our employees and to support the communities in which we operate.

These measures include requiring remote working arrangements for employees where practicable.

We are following public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing and the adoption of work-from-home arrangements.

These policies and

initiatives will continue to impact how we operate for as long as they are in effect.

These measures have included requiring remote working arrangements for employees where practicable.

We are continuing to follow public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing and the adoption of work-from-home arrangements.

These policies and initiatives will continue to impact how we operate for as long as they are in effect.

As a result of these policies and initiatives, travel and meeting expenses have decreased significantly, positively impacting our net income.

If the current social distancing requirements and policies lessen in future periods, travel and meeting expenses may return to higher levels.

If the current social distancing requirements and policies significantly lessen in future periods, travel and meeting expenses may return to higher levels.

To date, we have been successful in conducting our daily operations and meeting the requirements in all areas of our business with these work-from-home arrangements.

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However, the timing and nature of these reentry plans will vary by location and some of the specifics related to many of these plans are still uncertain at this time.

The safety of our employees and adherence to public and private sector policies related to COVID-19 will remain our top priorities as we have our employees return to working at our global office locations.

The safety of our employees and adherence to public and private sector policies related to the COVID-19 pandemic will remain our top priorities as we have our employees return to working at our global office locations.

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 for information on risks associated with pandemics in general and COVID-19 specifically.

Three Months Ended November 30, 2020 Compared to Three Months Ended November 30, 2019

Results of Operations

Three Months Ended February 28, 2021 Compared to Three Months Ended February 29, 2020

Operating Items

The following table summarizes operating data for our consolidated operations ( in thousands, except percentages and per share amounts):

Three Months Ended November 30,

Three Months Ended February 28/29,

Maintenance products

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The following table summarizes net sales by segment (in thousands, except percentages):

Three Months Ended November 30,

Three Months Ended February 28/29,

The following table summarizes net sales by product line for the Americas segment (in thousands, except percentages):

Three Months Ended November 30,

Three Months Ended February 28/29,

Maintenance products

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% of consolidated net sales

Sales in the Americas segment, which includes the U.S., Canada and Latin America, increased to $54.2 million, up $7.5 million, or 16%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates did not have a significant impact on sales for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

Sales of maintenance products in the Americas segment increased $6.8 million, or 16%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

This sales increase was mainly driven by increased sales of maintenance products in the U.S.

and Latin America, which were up $3.4 million and $2.8 million, or 10% and 42%, respectively, from period to period.

In addition, sales of maintenance products in Canada increased $0.6 million from period to period.

Increased demand for our product as a result of a higher level of renovation and maintenance activities exhibited by our end-users during the COVID-19 pandemic resulted in increased sales of maintenance products across the Americas, including within the e-commerce channel.

This increased demand resulted in sales increases period over period in the Americas of WD-40 Multi-Use Product, WD-40 Specialist and WD-40 Bike of 14%, 20% and 295%, respectively.

In addition, sales in Latin America increased due to the transition to the direct marketing model in Mexico.

Sales in the Americas segment, which includes the U.S., Canada and Latin America, decreased to $46.2 million, down $0.7 million, or 1%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates did not have a significant impact on sales for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Sales of maintenance products in the Americas segment decreased $1.1 million, or 3%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

This sales decrease was mainly driven by decreased sales of maintenance products in the U.S., which were down $3.5 million or 11%, from period to period due to supply chain constraints and disruptions related to the COVID-19 pandemic during the second quarter of fiscal year 2021.

In particular, widespread supply chain disruptions within the consumer products industry during the pandemic has increased competition for production capacity, particularly at some of our third-party manufacturers.

While we have been successful in managing most of the supply chain and distribution disruptions related to the pandemic, the magnitude of these challenges increased during the second quarter of fiscal year 2021 and were significantly compounded as a result of severe winter storms in parts of the United States that directly impacted some of our third-party contract manufacturers and distribution centers.

This combination of factors resulted in us not being able to meet the high level of demand for our products by customers and end-users in certain markets during the second quarter of fiscal year 2021.

These sales decreases were partially offset by increased sales of maintenance products in the Latin America region, which were up $1.9 million or 28%.

Sales in Latin America increased primarily due to the transition to the direct marketing model in Mexico.

In the third quarter of fiscal year 2020, we shifted away from a distribution model for Mexico where we sold products through a large wholesale customer who then supplied various retail customers, to one where we sell direct to these retail customers.

This resulted in increased sales in Latin America during the first quarter of fiscal year 2021 compared to the corresponding period of the prior fiscal year.

Sales of homecare and cleaning products in the Americas increased $0.6 million, or 13%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

This shift in distribution model combined with increased demand for our product, primarily due to decreased COVID restrictions, resulted in increased sales in Latin America during the first half of fiscal year 2021 compared to the corresponding period of the prior fiscal year.

Sales of maintenance products in Canada also increased $0.6 million from period to period primarily as a result of a higher level of renovation and maintenance activities exhibited by our end-users during the COVID-19 pandemic as well as increased sales within the ecommerce channel.

Sales of homecare and cleaning products in the Americas increased $0.4 million, or 10%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

This sales increase was driven primarily by an increase in sales of the 2000 Flushes brand products in the U.S., which were up $0.4 million or 31% from period to period.

We experienced a significant increase in sales of our homecare and cleaning products beginning in the third quarter of fiscal year 2020 due to increased demand for such products as a result of the COVID-19 pandemic.

We started to experience a significant increase in sales of many of our homecare and cleaning products beginning in the third quarter of fiscal year 2020 due to increased demand for such products as a result of the COVID-19 pandemic.

We are not able at this time to estimate the duration of this unexpected increase in the demand for these products and its impact on our financial results and operations in future periods.

While each of our homecare and cleaning products have continued to generate positive cash flows, we had experienced decreased or flat sales for many of these products in recent fiscal years prior to the start of the COVID-19 pandemic.

For the Americas segment, 76% of sales came from the U.S., and 24% of sales came from Canada and Latin America combined for the three months ended November 30, 2020 compared to the distribution for the three months ended November 30, 2019 when 80% of sales came from the U.S., and 20% of sales came from Canada and Latin America.

While each of our homecare and cleaning products have continued to generate positive cash flows, we had experienced decreased or flat sales for many of these products in recent years prior to the COVID-19 pandemic.

For the Americas segment, 72% of sales came from the U.S., and 28% of sales came from Canada and Latin America combined for the three months ended February 28, 2021 compared to the distribution for the three months ended February 29, 2020 when 78% of sales came from the U.S., and 22% of sales came from Canada and Latin America.

The following table summarizes net sales by product line for the EMEA segment (in thousands, except percentages):

Three Months Ended November 30,

Three Months Ended February 28/29,

Maintenance products

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% of consolidated net sales

Sales in the EMEA segment, which includes Europe, the Middle East, Africa and India, increased to $54.7 million, up $15.5 million, or 40%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

(1) While the Company’s reporting currency is the U.S.

Dollar, the functional currency of our U.K.

subsidiary, the entity in which the EMEA results are generated, is Pound Sterling.

Although the functional currency of this subsidiary is Pound Sterling, approximately 50% of its sales are generated in Euro and 15-20% are generated in U.S.

As a result, the Pound Sterling sales and earnings for the EMEA segment can be negatively or positively impacted from period to period upon translation from these currencies depending on whether the Euro and U.S.

Dollar are weakening or strengthening against the Pound Sterling .

Sales in the EMEA segment, which includes Europe, the Middle East, Africa and India, increased to $49.8 million, up $8.1 million, or 19%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact on sales for the EMEA segment from period to period.

Sales for the three months ended November 30, 2020 translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $52.1 million in the EMEA segment.

Sales for the three months ended February 28, 2021 translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $47.9 million in the EMEA segment.

Thus, on a constant currency basis, sales would have increased by $6.1 million, or 15%, from period to period.

The countries in Europe where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain and Portugal) and the Germanics sales region (which includes Germany, Austria, Denmark, Switzerland, Belgium and the Netherlands).

Sales in the direct markets increased to $35.4 million, up $10.6 million, or 43%, for the three months ended November 30, 2020, compared to the corresponding period of the prior fiscal year primarily due to increased sales of WD-40 Multi-Use Product and WD-40 Specialist of $7.1 million or 41% and $1.7 million or 61%, respectively, throughout the direct markets.

Sales in the direct markets increased to $33.3 million, up $3.7 million, or 13%, for the three months ended February 28, 2021, compared to the corresponding period of the prior fiscal year primarily due to increased sales of WD-40 Multi-Use Product and WD-40 Specialist of $2.8 million or 14% and $1.0 million or 31%, respectively, throughout all of the direct markets.

This increase in sales was primarily due to increased demand for our products as a result of a higher level of renovation and maintenance activities exhibited by our end-users during the COVID-19 pandemic.

This increased demand and consumption of our products resulted in increased sales, particularly within the e-commerce channel.

Sales from direct markets accounted for 65% of the EMEA segment’s sales for the three months ended November 30, 2020 compared to 63% for the corresponding period of the prior fiscal year .

Sales from direct markets accounted for 67% of the EMEA segment’s sales for the three months ended February 28, 2021 compared to 71% for the corresponding period of the prior fiscal year .

The regions in the EMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and Northern Europe.

Sales in the distributor markets increased $4.9 million, or 34%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year, primarily due to increased sales of the WD-40 Multi-Use Product in Northern Europe, Eastern Europe and India, which were up 62%, 24% and 120%, respectively.

This increase in sales from period to period was primarily due to recoveries experienced during the first quarter of fiscal year 2021 in distributor markets that previously experienced more severe lockdowns during the second half of fiscal year 2020 due to the COVID-19 pandemic.

During the first quarter of fiscal year 2021, many of these regions experienced improved economic conditions as a result of reductions in COVID-19 related restrictions.

Sales in the distributor markets increased $4.3 million, or 35%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, primarily due to increased sales of the WD-40 Multi-Use Product in India, the Middle East and Northern Europe, which were up $1.8 million, $1.4 million, and $1.0 million, respectively.

This increase in sales from period to period was primarily due to the continued recoveries in the EMEA distributor markets which had previously experienced more severe lockdowns during the second half of fiscal year 2020 due to the COVID-19 pandemic.

During the first half of fiscal year 2021, many of these regions experienced improved economic conditions as a result of reductions in COVID-19 related restrictions.

This allowed our marketing distributors to participate in more of our promotional activities and to adjust to more normal levels of inventory for our product, which resulted in increased sales.

In addition, continued increases in renovation and maintenance activities by end-users during the pandemic also positively impacted sales in some of our distributor markets.

The distributor markets accounted for 35% of the EMEA segment’s total sales for the three months ended November 30, 2020, compared to 37% for the corresponding period of the prior fiscal year .

The distributor markets accounted for 33% of the EMEA segment’s total sales for the three months ended February 28, 2021, compared to 29% for the corresponding period of the prior fiscal year .

The following table summarizes net sales by product line for the Asia-Pacific segment (in thousands, except percentages):

Three Months Ended November 30,

Three Months Ended February 28/29,

Maintenance products

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% of consolidated net sales

Sales in the Asia-Pacific segment, which includes Australia, China and other countries in the Asia region, increased to $15.6 million, up $3.0 million, or 24%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

Sales in the Asia-Pacific segment, which includes Australia, China and other countries in the Asia region, increased to $15.9 million, up $4.5 million, or 39%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact on sales for the Asia-Pacific segment from period to period.

Sales for the three months ended November 30, 2020 translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $15.2 million in the Asia-Pacific segment.

Sales for the three months ended February 28, 2021 translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $15.1 million in the Asia-Pacific segment.

Thus, on a constant currency basis, sales would have increased by $3.7 million, or 32%, from period to period.

Sales in Asia, which represented 67% of the total sales in the Asia-Pacific segment, increased $1.9 million, or 23%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

Sales in China increased $1.2 million, or 53%, primarily due to the timing of customer orders as well as increased sales within the e-commerce channel during the first quarter of fiscal year 2021.

In addition, sales in China during the first quarter of fiscal year 2020 were negatively impacted due to activities associated with the country’s preparation for the 70 th Anniversary National Day in China which resulted in temporary factory closures and slowed market conditions, with no comparable event occurring in the first quarter of the current fiscal year.

Sales in the Asia distributor markets increased $0.7 million, or 11%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

These increased sales were primarily due to the easing of COVID-19 lockdown measures in many of the Asia markets during the first quarter of fiscal year 2021 compared to late in fiscal year 2020.

These reduced lockdown measures have positively impacted economic conditions in industrial channels and resulted in marketing distributors adjusting to more normal levels of our product, which resulted in increased sales period over period.

Sales in Australia increased $1.1 million, or 28%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

Sales in Asia, which represented 67% of the total sales in the Asia-Pacific segment, increased $3.0 million, or 39%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Sales in China increased $3.3 million, or 227%, primarily due to improved market conditions as a result of the reduction of COVID-19 lockdown measures compared to the corresponding period of the prior fiscal year when the COVID-19 outbreak was in its earliest stages.

These disruptions in the second quarter of the prior fiscal year included those related to supply chain, transportation and demand for our product, as a result of the government’s response to the public health crisis caused by COVID-19 during the second quarter of fiscal year 2020.

The impact to sales due to these disruptions were material since China had a significant number of orders that were expected to be shipped to customers after the Chinese New Year’s holiday in early February 2020 and those shipments could not take place due to COVID-19.

No such comparable event occurred in the second quarter of the current fiscal year.

Sales in the Asia distributor markets decreased $0.3 million, or 4%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year primarily due to a shift in the timing of customer orders from period to period, particularly in Indonesia, Singapore and the Philippines, and the delayed shipment of certain customer orders in the second quarter of fiscal year 2021 as a result of shipping container shortages.

Sales in Australia increased $1.5 million, or 39%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact on sales in Australia.

On a constant currency basis, sales in Australia would have increased by $0.8 million, or 21%, primarily due to continued increased demand for homecare and cleaning products, which were up $0.7 million, or 44%, as a result of the COVID-19 pandemic.

In addition, sales of WD-40 Multi Use Product and WD-40 Specialist were up 20% and 25%, respectively, from period to period primarily due to a higher level of renovation and maintenance activities exhibited by our end-users during the COVID-19 pandemic which resulted in increased sales.

On a constant currency basis, sales in Australia would have increased by $1.0 million, or 26%, primarily due to increased demand for WD-40 Multi Use Product and WD-40 Specialist, which were up $0.5 million, or 37%, and $0.4 million or 92%, respectively, due to a higher level of renovation and maintenance activities undertaken by our end-users during the COVID-19 pandemic which resulted in increased sales.

In addition, demand for homecare and cleaning products were up $0.6 million or 32%, from period to period, primarily as a result of the COVID-19 pandemic.

Negative sales impacts to Australia due to the COVID-19 pandemic have continued to be limited in fiscal year 2021 since COVID-19 case numbers have remained relatively low in Australia since the initial outbreak and governmental authorities have adopted less severe lockdown requirements.

This has resulted in many of our key customers remaining open for business during the COVID-19 pandemic.

Gross profit increased to $70.2 million for the three months ended November 30, 2020 compared to $53.5 million for the corresponding period of the prior fiscal year.

As a percentage of net sales, gross profit increased to 56.4% for the three months ended November 30, 2020 compared to 54.3% for the corresponding period of the prior fiscal year.

This has resulted in our key customers remaining open for business during the COVID-19 pandemic .

Gross profit increased to $62.0 million for the three months ended February 28, 2021 compared to $53.6 million for the corresponding period of the prior fiscal year.

As a percentage of net sales, gross profit increased to 55.4% for the three months ended February 28, 2021 compared to 53.6% for the corresponding period of the prior fiscal year.

Gross margin was favorably impacted by 1.6 percentage points from period to period due to favorable changes in the costs of petroleum-based specialty chemicals in all three segments.

Beginning in late February 2020, the price of crude oil dropped significantly for a period of several months.

Although the price of crude oil has partially recovered in recent months, it has not returned to the much higher levels seen during the first quarter of the prior fiscal year.

There is often a delay of one quarter

or more before changes in raw material costs impact the cost of products sold due to production and inventory life cycles.

The average cost of crude oil which flowed through our cost of goods sold was lower during the first quarter of fiscal year 2021 compared to the corresponding period of the prior fiscal year, thus resulting in favorable impacts to our gross margin from period to period.

Beginning in late February 2020, which was late in the second quarter of our fiscal year 2020, the price of crude oil dropped significantly for a period of several months.

Although the price

of crude oil has recently recovered to the prices seen in early calendar year 2020, the average cost of crude oil which flowed through our cost of goods sold was lower during the second quarter of fiscal year 2021 compared to the corresponding period of the prior fiscal year, thus resulting in favorable impacts to our gross margin from period to period.

There is often a delay of one quarter or more before changes in raw material costs impact the cost of products sold due to production and inventory life cycles.

Due to the volatility of the price of crude oil, it is uncertain the level to which gross margin will be impacted by such costs in future periods.

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In addition, gross margin was positively impacted by 0.2 percentage points from period to period due to sales price increases, primarily in the EMEA and Asia-Pacific segments during the last twelve months.

Gross margin was also positively impacted by 0.2 percentage points due to the favorable impacts of changes to product mix and market mix, primarily in the Asia-Pacific segment resulting from increased sales in China from period to period.

Changes in foreign currency exchange rates from period to period in the EMEA segment positively impacted by 0.2 percentage points.

These favorable impacts to gross margin were partially offset by higher warehousing and in-bound freight costs, primarily in the EMEA and Americas segments, negatively impacting gross margin by 0.6 percentage points from period to period.

Gross margin was also negatively impacted by 0.5 percentage points from period to period due to the combined effects of unfavorable impacts of changes to sales mix, related to market, product and customer mix, as well as increases in other miscellaneous costs from period to period in the Americas and EMEA segments.

Gross margin was also negatively impacted by 0.3 percentage points from period to period due to increases to advertising, promotional, and other discounts that we give to our customers, primarily in the EMEA and Americas segments.

In general, the timing of advertising, promotional and other discounts may cause fluctuations in gross margin from period to period.

The costs associated with certain promotional activities are recorded as a reduction to sales while others are recorded as advertising and sales promotion expenses.

Advertising, promotional and other discounts that are given to our customers are recorded as a reduction to sales, whereas advertising and sales promotional costs associated with promotional activities that we pay to third parties are recorded as advertising and sales promotion expenses.

Several of the unfavorable impacts to gross margin were caused by the widespread supply chain disruptions and constraints within the consumer products industry and distribution networks that occurred during the second quarter of fiscal year 2021 related to the COVID-19 pandemic.

These disruptions and constraints have included increased competition for more limited production capacity at our third-party manufacturers and reduced availability of freight providers, both of which have resulted in increased costs to the Company.

The recent increase in the magnitude of these trends combined with the continued increases in the price of crude oil that we are seeing in the market are expected to unfavorably impact our cost of goods sold for the remainder of fiscal year 2021 and this will result in a lower gross margin for the second half of fiscal year 2021 as compared to the gross margin that we have realized for the first six months of the fiscal year.

Note that our gross profit and gross margin may not be comparable to those of other consumer product companies, since some of these companies include all costs related to distribution of their products in cost of products sold, whereas we exclude the portion associated with amounts paid to third parties for shipment to our customers from our distribution centers and contract manufacturers and include these costs in selling, general and administrative expenses.

These costs totaled $4.1 million and $3.0 million for the three months ended November 30, 2020 and 2019, respectively.

These costs totaled $3.5 million and $3.1 million for the three months ended February 28, 2021 and February 29, 2020, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for the three months ended November 30, 2020 increased $3.4 million to $36.0 million from $32.6 million for the corresponding period of the prior fiscal year.

As a percentage of net sales, SG&A expenses decreased to 28.9% for the three months ended November 30, 2020 compared to 33.1% for the corresponding period of the prior fiscal year.

The increase in SG&A expenses from period to period was due to a variety of factors, but most significantly due to increased employee-related costs of $3.0 million due to increased earned incentive compensation, increased headcount, and higher stock-based compensation from period to period.

Increases in freight costs associated with higher sales from period to period also increased SG&A expenses by $1.0 million.

Selling, general and administrative (“SG&A”) expenses for the three months ended February 28, 2021 increased $5.6 million to $35.5 million from $29.9 million for the corresponding period of the prior fiscal year.

As a percentage of net sales, SG&A expenses increased to 31.7% for the three months ended February 28, 2021 compared to 29.9% for the corresponding period of the prior fiscal year.

The increase in SG&A expenses from period to period was due to a variety of factors, but most significantly due to increased employee-related costs of $5.9 million as a result of increased incentive compensation accruals, increased headcount and higher stock-based compensation from period to period.

Changes in foreign currency exchange rates from period to period increased SG&A expenses by $0.6 million.

In addition, professional services fees, including cloud-based software, increased $0.6 million and other miscellaneous expenses increased $0.4 million from period to period.

These increases to SG&A were offset by a decrease in travel and meeting expenses of $2.2 million.

Increases in freight costs associated with higher sales from period to period also increased SG&A expenses by $0.3 million.

In addition, professional services fees increased $0.3 million due to increased cloud-based software usage and license fees and other miscellaneous expenses increased $0.2 million from period to period.

These increases to SG&A expenses were offset by a decrease in travel and meeting expenses of $1.7 million from period to period.

Travel and meeting expenses decreased primarily due to continued initiatives to reduce the transmission of COVID-19, including the imposition of business travel restrictions for all employees and the cancellation of all large meetings, such as regional sales meetings and global leadership meetings, in support of social distancing requirements .

We continued our research and development investment, the majority of which is associated with our maintenance products, in support of our focus on innovation and renovation of our products.

Research and development costs were $1.6 million and $1.7 million for the three months ended November 30, 2020 and 2019, respectively.

Research and development costs were $1.3 million and $1.5 million for the three months ended February 28, 2021 and February 29, 2020, respectively.

Our research and development team engages in consumer research, product development, current product improvements and testing activities.

2 unchanged sentences

Advertising and Sales Promotion Expenses

Advertising and sales promotion expenses for the three months ended November 30, 2020 decreased $0.1 million, or 1%, to $5.5 million from $5.6 million for the corresponding period of the prior fiscal year .

As a percentage of net sales, these expenses decreased to 4.4% for the three months ended November 30, 2020 from 5.7% for the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates did not have a significant impact on advertising and sales promotion expenses for the three months ended November 30, 2020.

The decrease in advertising and sales promotion expenses was primarily within the Asia-Pacific segment due to differences in the timing of promotional activities from period to period as well as a lower level of trade shows and marketing activities due to the COVID-19 pandemic.

Advertising and sales promotion expenses as a percentage of net sales was significantly lower in the first quarter of fiscal year 2021 compared to the corresponding period of the prior fiscal year, partially due to higher sales and a reduction of activities at physical

locations in all three segments due to indirect effects of the COVID-19 pandemic, including the cancellations of trade shows and fewer opportunities for physical marketing and sampling activities.

Advertising and sales promotion expenses for the three months ended February 28, 2021 increased $0.6 million, or 13%, to $5.5 million from $4.9 million for the corresponding period of the prior fiscal year .

As a percentage of net sales, these expenses remained constant at 4.9% for both the three months ended February 28, 2021 and February 29, 2020.

Changes in foreign currency exchange rates did not have a significant impact on advertising and sales promotion expenses for the three months ended February 28, 2021.

The increase in advertising and sales promotion expenses was primarily due to a higher level of promotional programs and marketing support in all three segments as a result of increased consumer demand and higher sales from period to period.

As a percentage of net sales, advertising and sales promotion expenses may fluctuate period to period based upon the type of marketing activities we employ and the period in which the costs are incurred.

Total promotional costs recorded as a reduction to sales for the three months ended November 30, 2020 were $5.8 million compared to $5.0 million for the corresponding period of the prior fiscal year.

Therefore, our total investment in advertising and sales promotion activities totaled $11.3 million and $10.6 million for the three months ended November 30, 2020 and 2019, respectively.

Total promotional costs recorded as a reduction to sales was $5.9 million and $4.5 million for three months ended February 28, 2021 and February 29, 2020, respectively.

Therefore, our total investment in advertising and sales promotion activities totaled $11.4 million and $9.4 million for the three months ended February 28, 2021 and February 29, 2020, respectively.

Amortization of Definite-lived Intangible Assets Expense

Amortization of our definite-lived intangible assets decreased to $0.4 million for the three months ended November 30, 2020 compared to $0.7 million for the three months ended November 30, 2019 due to decreased amortization associated with the 2000 Flushes trade name, which became fully amortized during the third quarter of fiscal year 2020.

Amortization of our definite-lived intangible assets decreased to $0.4 million for the three months ended February 28, 2021 compared to $0.7 million for the corresponding period in the prior year due to decreased amortization associated with the 2000 Flushes trade name, which became fully amortized during the third quarter of fiscal year 2020.

Income from Operations by Segment

The following table summarizes income from operations by segment (in thousands, except percentages):

Three Months Ended November 30,

Three Months Ended February 28/29,

Unallocated corporate (1)

Income from operations for the Americas increased to $14.6 million, up $4.0 million, or 38%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year, primarily due to a $7.5 million increase in sales and a higher gross margin, partially offset by higher operating expenses.

As a percentage of net sales, gross profit for the Americas segment increased from 53.1% to 54.2% period over period primarily due to the combined favorable impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans from period to period, as well as decreases to advertising, promotional, and other discounts that we give to our customers.

These favorable impacts to gross margin were partially offset by increases in warehousing, distribution and freight costs as well as unfavorable changes in sales mix and higher miscellaneous costs.

Operating expenses increased $0.5 million period over period , primarily due to higher accruals for earned incentive compensation and other employee-related costs, as well as higher outbound freight costs due to the increase in sales from period to period.

These increases in operating expenses were partially offset by lower travel and meeting expenses due to initiatives adopted by the Company during the third quarter of fiscal year 2020 to reduce the transmission of COVID-19 and decreased amortization from period to period.

Income from operations for the Americas decreased to $10.4 million, down $1.0 million, or 9%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, primarily due to a $1.2 million increase in operating expenses and a $0.7 million decrease in sales, partially offset by a higher gross margin.

Operating expenses increased period over period primarily due to higher accruals for incentive compensation and other employee-related costs.

In addition, operating

expenses were favorably impacted by decreased amortization associated with the 2000 Flushes trade name, which became fully amortized during the third quarter of fiscal year 2020.

As a percentage of net sales, gross profit for the Americas segment increased from 52.4% to 53.5% period over period primarily due to the combined favorable impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans from period to period.

These favorable impacts to gross margin were partially offset by increases in warehousing, distribution and freight costs as well as unfavorable changes in sales mix and higher miscellaneous costs from period to period.

Operating income as a percentage of net sales decreased from 24.3% to 22.4% period over period .

Income from operations for the EMEA segment increased to $14.2 million, up $3.6 million, or 34% from period to period, primarily due to a $8.1 million increase in sales and a higher gross margin, partially offset by a $1.7 million increase in operating expenses.

As a percentage of net sales, gross profit for the EMEA segment increased from 55.0% to 56.7% period over period primarily due to the combined favorable impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans from period to period, as well as favorable changes to exchange rates and sales price increases from period to period.

These favorable impacts to gross margin were partially offset by increases in warehousing, distribution and freight costs, as well as increases to advertising, promotional, and other discounts that we give to our customers from period to period.

The increased sales were accompanied by a $1.7 million increase in total operating expenses period over period, primarily due to higher accruals for incentive compensation and other employee-related costs as well as increased outbound freight costs due to the higher sales volumes.

These increases in operating expenses were partially offset by lower travel and meeting expenses due to the Company’s reduced travel initiatives as a result of the COVID-19 pandemic.

Operating income as a percentage of net sales increased from 25.3% to 28.5% period over period .

Income from operations for the EMEA segment increased to $17.7 million, up $9.2 million, or 107%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year, primarily due to a $15.5 million increase in sales and a higher gross margin, partially offset by higher operating expenses.

As a percentage of net sales, gross profit for the EMEA segment increased from 55.9% to 58.5% period over period primarily due to the combined favorable impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans from period to period, as well as sales price increases from period to period.

These favorable impacts to gross margin were partially offset by increases in warehousing, distribution and freight costs, as well as higher miscellaneous costs from period to period.

Income from operations for the Asia-Pacific segment increased to $5.2 million, up $2.1 million, or 67%, for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, primarily due to a $4.5 million increase in sales and a higher gross margin, partially offset by a $0.9 million increase in operating expenses.

As a percentage of net sales, gross profit for the Asia-Pacific segment increased from 53.1% to 56.9% period over period primarily due to decreases to the cost of petroleum-based specialty chemicals and favorable changes in both sales product mix and market mix, as well as sales price increases and decreases to advertising, promotional, and other discounts that we give to our customers from period to period.

These favorable impacts to gross margin were slightly offset by the unfavorable impact of increased costs of aerosol cans from period to period.

The increased sales were accompanied by a $0.9 million increase in total operating expenses period over period, primarily due to a higher level of advertising and sales promotion expenses and higher accruals for incentive compensation.

Operating income as a percentage of net sales increased from 27.1% to 32.6% period over period.

Non-Operating Items

The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):

Three Months Ended February 28/29,

Interest income

Interest expense

Other (expense) income, net

Provision for income taxes

Interest Income

Interest income was insignificant for both the three months ended February 28, 2021 and February 29, 2020.

Interest Expense

Interest expense remained relatively constant at $0.6 million for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year .

Other Income (Expense), Net

Other income (expense), net was insignificant for both the three months ended February 28, 2021 and February 29, 2020 .

Provision for Income Taxes

The provision for income taxes was 15.0% and 17.6% of income before income taxes for the three months ended February 28, 2021 and February 29, 2020, respectively.

The decrease in the effective income tax rate from period to period was primarily due to an increase in excess tax benefits from settlements of stock-based equity awards, as well as the release of liabilities related to uncertain tax positions due to the expiration of statutes during the second quarter of fiscal year 2021.

Net income was $17.2 million, or $1.24 per common share on a fully diluted basis, for the three months ended February 28, 2021 compared to $14.3 million, or $1.04 per common share on a fully diluted basis, for the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $0.6 million on net income for the three months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

On a constant currency basis, net income would have increased by $2.2 million from period to period.

Six Months Ended February 28, 2021 Compared to Six Months Ended February 29, 2020

Operating Items

The following table summarizes operating data for our consolidated operations ( in thousands, except percentages and per share amounts):

Six Months Ended February 28/29,

Maintenance products

Homecare and cleaning products

Total net sales

Cost of products sold

Operating expenses

increased $0.9 million period over period, primarily due to increased outbound freight costs due to the higher sales, as well as higher accruals for earned incentive compensation and other employee-related costs.

Income from operations

Earnings per common share - diluted

Shares used in per share calculations - diluted

Net Sales by Segment

The following table summarizes net sales by segment (in thousands, except percentages):

Six Months Ended February 28/29,

The following table summarizes net sales by product line for the Americas segment (in thousands, except percentages):

Six Months Ended February 28/29,

Maintenance products

Homecare and cleaning products

% of consolidated net sales

Sales in the Americas segment, which includes the U.S., Canada and Latin America, increased to $100.3 million, up $6.8 million, or 7%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had an unfavorable impact on sales for the Americas segment from period to period.

Sales for the six months ended February 28, 2021 translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $100.8 million in the Americas segment.

Thus, on a constant currency basis, sales would have increased by $7.3 million, or 8%, from period to period .

Sales of maintenance products in the Americas segment increased $5.7 million, or 7%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

This sales increase was mainly driven by increased sales of maintenance products in the Latin America and Canada, which were up $4.7 million and $1.2 million, or 35% and 23%, respectively, from period to period.

Increased demand for our product as a result of a higher level of renovation and maintenance activities exhibited by our end-users during the COVID-19 pandemic resulted in increased sales of maintenance products in Canada, including within the e-commerce channel.

In addition, sales in Latin America increased due to the transition to the direct marketing model in Mexico.

This resulted in increased sales in Latin America during the first six months of fiscal year 2021 compared to the corresponding period of the prior fiscal year.

Sales of maintenance products in the United States were relatively constant, down only $0.1 million, or less than 1%, from period to period.

Although sales were significantly higher in the United States during the first three months of fiscal year 2021 due to increased demand driven by higher renovation and maintenance activities exhibited by our end users, this was more than offset by lower sales during the second quarter of fiscal year 2021 as a result of supply chain constraints and disruptions related to the both COVID-19 pandemic and the severe winter storms that impacted parts of the United States.

For further information on these supply chain disruptions in the United States during the second quarter of fiscal year 2021, see Results of Operations – Americas for the three months ended February 28, 2021 within Part I―Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Sales of homecare and cleaning products in the Americas increased $1.1 million, or 11%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

This sales increase was driven primarily by an increase in sales of the 2000 Flushes brand products in the U.S., which were up $1.2 million or 39% from period to period.

We started to experience a significant increase in sales of most of our homecare and cleaning products beginning in the third quarter of fiscal year 2020 due to increased demand for such products as a result of the COVID-19 pandemic.

We are not able at this time to estimate the duration of this unexpected increase in the demand for these products and its impact on our financial results and operations in future periods.

For the Americas segment, 75% of sales came from the U.S., and 25% of sales came from Canada and Latin America combined for the six months ended February 28, 2021 compared to the distribution for the six months ended February 29, 2020 when 79% of sales came from the U.S., and 21% of sales came from Canada and Latin America.

The following table summarizes net sales by product line for the EMEA segment (in thousands, except percentages):

Six Months Ended February 28/29,

Maintenance products

Homecare and cleaning products

% of consolidated net sales

Sales in the EMEA segment, which includes Europe, the Middle East, Africa and India, increased to $104.6 million, up $23.6 million, or 29%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact on sales for the EMEA segment from period to period.

Sales for the six months ended February 28, 2021 translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $99.9 million in the EMEA segment.

Thus, on a constant currency basis, sales would have increased by $18.9 million, or 23%, from period to period.

Sales in the direct markets increased to $68.7 million, up $14.3 million, or 26%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year primarily due to increased sales of WD-40 Multi-Use Product and WD-40 Specialist of $9.9 million or 26% and $2.7 million or 45%, respectively, throughout all of the direct markets.

This increased demand and consumption of our products resulted in increased sales, particularly within the e-commerce channel.

Sales from direct markets accounted for 66% of the EMEA segment’s sales for the six months ended February 28, 2021 compared to 67% for the corresponding period of the prior fiscal year .

The regions in the EMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and Northern Europe.

Sales in the distributor markets increased $9.2 million, or 35%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, primarily due to increased sales of the WD-40 Multi-Use Product in Northern Europe, India, the Middle East and Eastern Europe, which were up $3.3 million, $2.9 million, $1.4 million and $1.3 million, respectively.

This increase in sales from period to period was primarily due to recoveries experienced during the first half of fiscal year 2021 in distributor markets that previously experienced more severe lockdowns during the second half of fiscal year 2020 due to the COVID-19 pandemic.

During the first half of fiscal year 2021, many of these regions experienced improved economic conditions as a result of reductions in COVID-19 related restrictions.

This allowed our marketing distributors to participate in more of our promotional activities and to adjust to more normal levels of inventory for our product, which resulted in increased sales.

In addition, continued increases in renovation and maintenance activities by end-users during the pandemic also positively impacted sales in some of our distributor markets.

The distributor markets accounted for 34% of the EMEA segment’s total sales for the six months ended February 28, 2021, compared to 33% for the corresponding period of the prior fiscal year .

The following table summarizes net sales by product line for the Asia-Pacific segment (in thousands, except percentages):

Six Months Ended February 28/29,

Maintenance products

Homecare and cleaning products

% of consolidated net sales

Sales in the Asia-Pacific segment, which includes Australia, China and other countries in the Asia region, increased to $31.6 million, up $7.5 million, or 31%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact on sales for the Asia-Pacific segment from period to period.

Sales for the six months ended February 28, 2021 translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $30.3 million in the Asia-Pacific segment.

Thus, on a constant currency basis, sales would have increased by $6.2 million, or 26%, from period to period.

Sales in Asia, which represented 67% of the total sales in the Asia-Pacific segment, increased $4.9 million, or 30%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Sales in China increased $4.5 million, or 119%, primarily due to improved market conditions as a result of the reduction of COVID-19 lockdown measures compared to the corresponding period of the prior fiscal year when the COVID-19 outbreak was in its earliest stages during the second quarter of fiscal year 2020.

In addition, sales in China during the first half of fiscal year 2020 were negatively impacted due to activities associated with the country’s preparation for the 70th Anniversary National Day in China which resulted in temporary factory closures and slowed market conditions, as well as government restrictions imposed in response to the COVID-19 pandemic.

The impact to sales due to these disruptions in the first half of the prior fiscal year were material since China had a significant number of orders that were expected to be shipped to customers after the Chinese New Year’s holiday in early February 2020 and those shipments could not take place due to COVID-19.

No such comparable event occurred in the first half of the current fiscal year.

Sales in the Asia distributor markets increased $0.4 million, or 3%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

These increased sales were primarily due to the easing of COVID-19 lockdown measures in many of the Asia markets during the first half of fiscal year 2021 compared to late in fiscal year 2020, which resulted in a higher level of sales particularly during the first three months of fiscal year 2021.

Sales in Australia increased $2.6 million, or 33%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact on sales in Australia.

On a constant currency basis, sales in Australia would have increased by $1.8 million, or 23%, partially due to continued increased demand for homecare and cleaning products, which were up $1.2 million, or 38%, as a result of the COVID-19 pandemic.

In addition, sales of WD-40 Multi Use Product and WD-40 Specialist were up $0.9 million, or 27%, and $0.5 million, or 57%, respectively, from period to period primarily due to a higher level of renovation and maintenance activities undertaken by our end-users during the COVID-19 pandemic which resulted in increased sales.

This has resulted in our key customers remaining open for business during the COVID-19 pandemic.

Gross profit increased to $132.3 million for the six months ended February 28, 2021 compared to $107.1 million for the corresponding period of the prior fiscal year.

As a percentage of net sales, gross profit increased to 55.9% for the six months ended February 28, 2021 compared to 53.9% for the corresponding period of the prior fiscal year.

Gross margin was favorably impacted by 2.0 percentage points from period to period due to favorable changes in the costs of petroleum-based specialty chemicals in all three segments.

Beginning in late February 2020, which was late in the second quarter of our fiscal year 2020, the price of crude oil dropped significantly for a period of several months.

Although the price of crude oil has recently recovered to the prices seen in early calendar year 2020, the average cost of crude oil which flowed through our cost of goods sold was lower during the first half of fiscal year 2021 compared to the corresponding period of the prior fiscal year, thus resulting in favorable impacts to our gross margin from period to period.

There is often a delay of one quarter or more before changes in raw material costs impact the cost of products sold due to production and inventory life cycles.

Gross margin was also positively impacted by 0.8 percentage points due to favorable changes in the costs of aerosol cans in the EMEA and Americas segments.

In addition, gross margin was positively impacted by 0.3 percentage points from period to period due to sales price increases, primarily in the EMEA and Asia Pacific segments during the last twelve months.

Changes in foreign currency exchange rates from period to period in the EMEA segment positively impacted by 0.1 percentage points.

Gross margin was also negatively impacted by 0.1 percentage point from period to period due to the combined effects of changes to sales mix and increases in other miscellaneous costs from period to period in the Americas and EMEA segments, which were significantly offset by favorable market mix changes in the Asia-Pacific segment.

In addition, gross margin was negatively impacted by 0.1 percentage point from period to period due to increases to advertising, promotional, and other discounts that we give to our customers, primarily in the EMEA segment .

These costs totaled $7.7 million and $6.1 million for the six months ended February 28, 2021 and February 29, 2020, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for the six months ended February 28, 2021 increased $9.0 million to $71.5 million from $62.5 million for the corresponding period of the prior fiscal year.

As a percentage of net sales, SG&A expenses decreased to 30.2% for the six months ended February 28, 2021 compared to 31.5% for the corresponding period of the prior fiscal year.

The increase in SG&A expenses from period to period was due to a variety of factors, but most significantly due to increased employee-related costs of $8.9 million due to increased incentive compensation accruals, increased headcount, and higher stock-based compensation from period to period.

Increases in freight costs associated with higher sales from period to period also increased SG&A expenses by $1.4 million.

Changes in foreign currency exchange rates from period to period increased SG&A expenses by $1.2 million.

In addition, professional services fees increased $0.9 million due to increased cloud-based software usage and license fees, and other miscellaneous expenses increased $0.5 million from period to period.

These increases to SG&A expenses were offset by a decrease in travel and meeting expenses of $3.9 million from period to period.

We continued our research and development investment, the majority of which is associated with our maintenance products, in support of our focus on innovation and renovation of our products.

Research and development costs were $2.9 million and $3.2 million for the six months ended February 28, 2021 and February 29, 2020, respectively.

Advertising and Sales Promotion Expenses

Advertising and sales promotion expenses for the six months ended February 28, 2021 increased $0.6 million, or 6%, to $11.0 million from $10.4 million for the corresponding period of the prior fiscal year .

As a percentage of net sales, these expenses decreased to 4.7% for the six months ended February 28, 2021 from 5.3% for the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates did not have a significant impact on advertising and sales promotion expenses for the six months ended February 28, 2021.

The increase in advertising and sales promotion expenses was primarily

due to a higher level of promotional programs and marketing support in all three segments as a result of increased consumer demand and higher sales from period to period.

These increases were partially offset by the decrease of physical marketing and sampling activities from period to period, such as the cancellations of trade shows, due to the continued indirect effects of the COVID-19 pandemic during the first half of fiscal year 2021 and this resulted in a decreased in advertising and sales promotion expenses as a percentage of net sales from period to period.

Total promotional costs recorded as a reduction to sales for the six months ended February 28, 2021 were $11.7 million compared to $9.5 million for the corresponding period of the prior fiscal year.

Therefore, our total investment in advertising and sales promotion activities totaled $22.7 million and $19.9 million for the six months ended February 28, 2021 and February 29, 2020, respectively.

Amortization of Definite-lived Intangible Assets Expense

Amortization of our definite-lived intangible assets decreased to $0.7 million for the six months ended February 28, 2021 compared to $1.3 million for the six months ended February 29, 2020 due to decreased amortization associated with the 2000 Flushes trade name, which became fully amortized during the third quarter of fiscal year 2020.

Income from Operations by Segment

The following table summarizes income from operations by segment (in thousands, except percentages):

Six Months Ended February 28/29,

Unallocated corporate

Income from operations for the Americas increased to $25.0 million, up $3.0 million, or 14%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, primarily due to a $6.8 million increase in sales and a higher gross margin, partially offset by higher operating expenses.

As a percentage of net sales, gross profit for the Americas segment increased from 52.8% to 53.9% period over period primarily due to the combined favorable impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans from period to period.

The increased sales were accompanied by a $1.7 million increase in total operating expenses period over period, primarily due to higher accruals for incentive compensation and other employee-related costs, as well as higher outbound freight costs due to the increase in sales and higher freight costs in the market from period to period.

In addition, operating expenses were favorably impacted by decreased amortization associated with the 2000 Flushes trade name, which became fully amortized during the third quarter of fiscal year 2020.

Operating income as a percentage of net sales increased from 23.5% to 24.9% period over period.

Income from operations for the EMEA segment increased to $31.9 million, up $12.7 million, or 66%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, primarily due to a $23.6 million

increase in sales and a higher gross margin, partially offset by higher operating expenses.

As a percentage of net sales, gross profit for the EMEA segment increased from 55.4% to 57.6% period over period primarily due to the combined favorable impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans from period to period, as well as sales price increases from period to period.

The increased sales were accompanied by a $2.6 million increase in total operating expenses period over period, primarily due to higher accruals for incentive compensation and other employee-related costs, as well as increased outbound freight costs due to the higher sales.

These increases in operating expenses were partially offset by lower travel and meeting expenses due to the Company’s COVID-19 pandemic reduced travel initiatives.

Operating income as a percentage of net sales increased from 23.7% to 30.5% period over period.

Income from operations for the Asia-Pacific segment increased to $5.1 million, up $1.9 million, or 58%, for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year, primarily due to a $3.0 million increase in sales and higher gross margin, which were partially offset by slightly higher operating expenses.

Income from operations for the Asia-Pacific segment increased to $10.2 million, up $3.9 million, or 62%, for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year, primarily due to a $7.5 million increase in sales and a higher gross margin, which were partially offset by higher operating expenses.

As a percentage of net sales, gross profit for the Asia-Pacific segment increased from 53.6% to 56.8% period over period primarily due to decreases to the cost of petroleum-based specialty chemicals and favorable changes in both sales product mix and market mix, as well as sales price increases from period to period.

These favorable impacts to gross margin were slightly offset by i ncreases to advertising, promotional, and other discounts that we give to our customers.

The increased sales were accompanied by a $0.2 million increase in total operating expenses period over period, primarily due to higher accruals for earned incentive compensation and increased outbound freight costs, which were partially offset by a lower level of advertising and sales promotion expenses from period to period.

These favorable impacts to gross margin were slightly offset by the unfavorable impact of increased costs of aerosol cans from period to period.

The increased sales were accompanied by a $1.1 million increase in total operating expenses period over period, primarily due to higher accruals for incentive compensation and other employee costs, as well as increased outbound freight costs and other miscellaneous costs from period to period.

Operating income as a percentage of net sales increased from 26.2% to 32.5% period over period.

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The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):

Three Months Ended November 30,

Six Months Ended February 28/29,

Interest income

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Interest Income

Interest income was insignificant for both the three months ended November 30, 2020 and 2019.

Interest income was insignificant for both the six months ended February 28, 2021 and February 29, 2020.

Interest Expense

Interest expense increased $0.1 million for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year primarily due to higher aggregate outstanding balances on our credit and note agreements combined from period over period.

Interest expense increased $0.1 million for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year primarily due to higher aggregate outstanding balances on our credit and note agreements combined from period over period.

Other Income (Expense), Net

Other income (expense), net was insignificant for both the three months ended November 30, 2020 and 2019.

Other income (expense), net changed by $0.6 million for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year primarily due to foreign currency exchange gains of $0.2 million in the current year compared to $0.4 million of foreign currency losses during the corresponding period of the prior fiscal year as a result of fluctuations in the foreign currency exchange rates for both the U.S.

Dollar and the Euro against the Pound Sterling .

Provision for Income Taxes

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 and resulted in a higher effective income tax rate from period to period.

Net income was $23.6 million, or $1.72 per common share on a fully diluted basis, for the three months ended November 30, 2020 compared to $12.2 million, or $0.88 per common share on a fully diluted basis, for the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $0.8 million on net income for the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year.

The provision for income taxes was 15.4% and 16.3% of income before income taxes for the six months ended February 28, 2021 and February 29, 2020, respectively.

The decrease in the effective income tax rate from period to period was primarily due to a benefit from the High Tax Exemption associated with Global Intangible Low Taxed Income during the first half of fiscal year 2021, as well as an increase in excess tax benefits from settlements of stock-based equity awards.

The impact of these items on income tax expense percentages was partially offset by the effect of significantly higher pre-tax income for the six months ended February 28, 2021 when compared to the corresponding period in the prior fiscal year.

Net income was $40.8 million, or $2.96 per common share on a fully diluted basis, for the six months ended February 28, 2021 compared to $26.5 million, or $1.92 per common share on a fully diluted basis, for the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $1.5 million on net income for the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year.

On a constant currency basis, net income would have increased by $12.8 million from period to period.

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The following table summarizes the results of these performance measures for the periods presented:

Three Months Ended November 30,

Three Months Ended February 28/29,

Six Months Ended February 28/29,

Gross margin - GAAP

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Cost of Doing Business (in thousands, except percentages)

Three Months Ended November 30,

Three Months Ended February 28/29,

Six Months Ended February 28/29,

Total operating expenses - GAAP

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EBITDA (in thousands, except percentages)

Three Months Ended November 30,

Three Months Ended February 28/29,

Six Months Ended February 28/29,

Net income - GAAP

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The Company’s financial condition and liquidity remain strong.

Net cash provided by operations was $23.9 million for the three months ended November 30, 2020 compared to $15.2 million for the corresponding period of the prior fiscal year.

Net cash provided by operations was $42.5 million for the six months ended February 28, 2021 compared to $23.4 million for the corresponding period of the prior fiscal year.

Although there continues to be a certain level of uncertainty related to the anticipated impact of the current COVID-19 pandemic on the Company’s future results, we believe our efficient business model and the steps that we have taken leave us positioned to manage our business through this crisis as it continues to unfold.

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During the first quarter of fiscal year 2021, we repaid $50.0 million of our U.S.

borrowings outstanding under our line of credit using $52.0 million in proceeds that we received on September 30, 2020 from the issuance and sale of the Series B and C Notes which mature in November

2027 and 2030, respectively.

Our remaining outstanding balance under our line of credit is denominated completely in Euros and Pound Sterling as of November 30, 2020.

borrowings outstanding under our line of credit using $52.0 million in proceeds

that we received on September 30, 2020 from the issuance and sale of the Series B and C Notes which mature in November 2027 and 2030, respectively.

Our remaining outstanding balance under our line of credit is denominated completely in Euros and Pound Sterling as of February 28, 2021.

We regularly convert many of our draws on our line of credit to new draws with new maturity dates and interest rates.

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Outstanding draws for which we have 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.

As of November 30, 2020, we had a $45.9 million balance of outstanding draws on the revolving credit facility, all of which was classified as long-term.

In addition, we paid $0.4 million in principal payments on our Series A Notes during the first three months of fiscal year 2021, which had an outstanding balance of $17.6 million as of November 30, 2020.

As of February 28, 2021, we had a $47.9 million balance of outstanding draws on the revolving credit facility, all of which was classified as long-term.

In addition, we paid $0.4 million in principal payments on our Series A Notes during the first six months of fiscal year 2021, which had an outstanding balance of $17.6 million as of February 28, 2021.

There were no other letters of credit outstanding or restrictions on the amount available on our line of credit or notes.

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See Note 8 – Debt for additional information on these financial covenants.

At November 30, 2020, we were in compliance with all debt covenants.

At February 28, 2021, we were in compliance with all debt covenants.

We continue to monitor our compliance with all debt covenants.

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On April 8, 2020, we suspended repurchases under our most recent share buy-back plan, which subsequently expired on August 31, 2020, in order to preserve cash while we 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.

At November 30, 2020, we had a total of $65.8 million in cash and cash equivalents.

Management will continue to evaluate future authorizations under its share buy-back program and the Board will consider approval based on management’s recommendations.

At February 28, 2021, we had a total of $72.4 million in cash and cash equivalents.

We do not foresee any ongoing issues with repaying our borrowings and we closely monitor the use of this credit facility.

The following table summarizes our cash flows by category for the periods presented (in thousands):

Three Months Ended November 30,

Six Months Ended February 28/29,

Net cash provided by operating activities

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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

Operating Activities

Net cash provided by operating activities increased $8.7 million to $23.9 million for the three months ended November 30, 2020 from $15.2 million for the corresponding period of the prior fiscal year.

Net cash provided by operating activities increased $19.1 million to $42.5 million for the six months ended February 28, 2021 from $23.4 million for the corresponding period of the prior fiscal year.

Cash flows from operating activities depend heavily on operating performance and changes in working capital.

Our primary source of operating cash flows for the three months ended November 30, 2020 was net income of $23.6 million, which increased $11.4 million from period to period.

The changes in our working capital from period to period, which decreased net cash provided by operating activities, were primarily attributable to increases in trade accounts receivable balances during the three months ended November 30, 2020 compared to the corresponding period of the prior fiscal year as a result of significantly increased sales from period to period.

These working capital changes were partially offset by increases in accounts payable in the EMEA segment related to increased production and the timing of payments to vendors from period to period.

In addition, accrued payroll and related expenses decreased by a lower amount during the first quarter of fiscal year 2021 primarily due to lower payments of earned incentive compensation from period to period.

The change in working capital was also impacted by increases to income tax accruals related to the higher pre-tax income during the first quarter of fiscal year 2021 compared to the corresponding period of the prior fiscal year.

Our primary source of operating cash flows for the six months ended February 28, 2021 was net income of $40.8 million, which increased $14.3 million from period to period.

The changes in our working capital which decreased net cash provided by operating activities were primarily attributable to increases in trade accounts receivable balances during the six months ended February 28, 2021 compared to the corresponding period of the prior fiscal year as a result of significantly increased sales from period to period.

These working capital changes were partially offset by increases in accrued payroll and related expenses during the first six months of fiscal year 2021 primarily due to increased accruals of incentive compensation from period to period.

In addition, accounts payable in the EMEA segment increased due to higher levels of production and the timing of payments to vendors from period to period.

In addition, the change in working capital was also impacted by increases to income tax accruals related to the higher pre-tax income during the first six months of fiscal year 2021 compared to the corresponding period of the prior fiscal year .

Investing Activities

Net cash used in investing activities decreased $2.1 million to $3.7 million for the three months ended November 30, 2020 from $5.8 million for the corresponding period of the prior fiscal year, primarily due to decreased capital expenditures.

Capital expenditures decreased by $2.2 million primarily due to the renovations and equipping of the Company’s office building in Milton Keynes, England that were occurring and were completed in the first quarter of fiscal year 2020.

Capital expenditures during the first quarter of fiscal year 2021 were primarily related to manufacturing equipment which is currently under construction and will be located at our third-party manufacturers in the United States and the United Kingdom once completed.

Net cash used in investing activities decreased $3.1 million to $7.4 million for the six months ended February 28, 2021 from $10.5 million for the corresponding period of the prior fiscal year, primarily due to decreased capital expenditures.

Capital expenditures decreased by $3.1 million primarily due to the renovations and equipping of the Company’s office building in Milton Keynes, England that were completed in the first quarter of fiscal year 2020 and a lower level of manufacturing-related capital expenditures within the U.K.

and the United States from period to period .

Capital expenditures during the first half of fiscal year 2021 were primarily related to manufacturing equipment which is currently under construction and will be located at our third-party manufacturers in the United States and the United Kingdom once completed.

Financing Activities

Net cash used in financing activities increased $2.6 million to $11.1 million for the three months ended November 30, 2020 from $8.5 million for the corresponding period of the prior fiscal year.

Net cash used by financing activities increased $10.5 million to $20.3 million for the six months ended February 28, 2021 from $9.8 million for the corresponding period of the prior fiscal year.

This change was primarily due to a decrease in net proceeds from our debt instruments of $18.5 million.

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This resulted in a $2.0 million cash inflow during the period compared to $20.5 million in net proceeds on our line of credit in the corresponding period of the prior fiscal year.

In addition, increases in shares withheld to cover taxes on conversion of equity rewards and dividends paid of $0.9 million and $0.8 million, respectively, resulted in higher cash outflows from period to period.

In addition, increases in shares withheld to cover taxes on conversion of equity rewards of $0.9 million and increases in dividends paid to our shareholders of $0.8 million, respectively, resulted in higher cash outflows from period to period.

Offsetting these increases in cash outflows was a decrease in treasury stock repurchases due to the suspension of such repurchases beginning in the third quarter of fiscal year 2020, which resulted in a decrease in cash outflows of $9.7 million from period to period.

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The net effect of exchange rate changes on cash and cash equivalents, when expressed in U.S.

Dollar terms, was an increase in cash of $0.2 million and $0.5 million for the three months ended November 30, 2020 and 2019, respectively.

These changes were primarily due to fluctuations in various foreign currency exchange rates from period to period.

For the three months ended November 30, 2020, the majority was related to the fluctuations in the Chinese Yuan against the U.S.

Dollar whereas for the three months ended November 30, 2019, it was primarily related to fluctuations in the Pound Sterling against the U.S.

Dollar terms, was an increase in cash of $1.1 million and $0.2 million for six months ended February 28, 2021 and February 29, 2020, respectively.

These changes were primarily due to fluctuations in various foreign currency exchange rates from period to period, but the majority is related to the fluctuations in the Pound Sterling against the U.S.

Off-Balance Sheet Arrangements

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Upon the termination of contracts with contract manufacturers, we obtain certain inventory control rights and are obligated to work with the contract manufacturer to sell through all products held by or manufactured by the contract manufacturer on our behalf during the termination notification period.

If any inventory remains at the contract manufacturer at the termination

date, we are obligated to purchase such inventory which may include raw materials, components and finished goods .

If any inventory remains at the contract manufacturer at the termination date, we are obligated to purchase such inventory which may include raw materials, components and finished goods .

The amounts for inventory purchased under termination commitments have been immaterial.

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

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

As of February 28, 2021, no such commitments were outstanding .

Share Repurchase Plan

The information required by this item is incorporated by reference to Part I—Item 1, “Notes to Condensed Consolidated Financial Statements” Note 9 — Share Repurchase Plan, included in this report .

On December 7, 2021, 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.

On March 16, 2021, the Company’s Board approved a 7% increase in the regular quarterly cash dividend, increasing it from $0.67 per share to $0.72 per share.

The $0.72 per share dividend declared on March 16, 2021 is payable on April 30, 2021 to shareholders of record on April 16, 2021.

Our ability to pay dividends could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants .

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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 2. Management’s Discussion and Analysis