What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-01-06 compared with 2021-07-07 · 91 added, 224 removed, 320 unchanged (50% of the section changed)

6 unchanged sentences

Trade and other accounts receivable, less allowance for doubtful

accounts of $ 620 and $ 362 at May 31, 2021

accounts of $ 451 and $ 463 at November 30, 2021

and August 31, 2021, respectively

21 unchanged sentences

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

19,855,666 and 19,812,685 shares issued at May 31, 2021 and

19,886,937 and 19,856,865 shares issued at November 30, 2021 and

August 31, 2021, respectively;

and 13,707,038 and 13,708,966 shares

outstanding at May 31, 2021 and August 31, 2020, respectively

outstanding at November 30, 2021 and August 31, 2021, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

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

at both May 31, 2021 and August 31, 2020

Common stock held in treasury, at cost ― 6,179,899 and 6,147,899

shares at November 30, 2021 and August 31, 2021, respectively

Total shareholders'

1 unchanged sentence

See accompanying notes to condensed consolidated financial statements.

WD-40 CO MPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

WD-40 COMPANY

CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Cost of products sold

15 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Other comprehensive income (loss):

2 unchanged sentences

See accompanying notes to condensed consolidated financial statements.

WD-40 COM PANY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEM ENTS OF SHAREHOLDERS'

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

8 unchanged sentences

Cash dividends ($ 0.72 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Cumulative effect of change in accounting principle

Balance at November 30, 2021

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

Stock-based compensation

Cash dividends ($ 0.67 per share)

Foreign currency translation adjustment

Balance at February 28, 2021

Stock-based compensation

Cash dividends ($ 0.72 per share)

Foreign currency translation adjustment

Balance at May 31, 2021

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS'

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

Comprehensive

7 unchanged sentences

Cash dividends ($ 0.67 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at November 30, 2020

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

Stock-based compensation

Cash dividends ($ 0.67 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at February 29, 2020

Stock-based compensation

Cash dividends ($ 0.67 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at May 31, 2020

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPA NY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

WD-40 COMPANY

CONDENSED CONSOLIDATED STAT EMENTS OF CASH FLOWS

(Unaudited and in thousands)

Nine Months Ended May 31,

Three Months Ended November 30,

Operating activities:

2 unchanged sentences

Depreciation and amortization

Net gains on sales and disposals of property and equipment

Net losses (gains) on sales and disposals of property and equipment

Deferred income taxes

Stock-based compensation

Unrealized foreign currency exchange (gains) losses

Unrealized foreign currency exchange losses

Provision for bad debts

5 unchanged sentences

Other long-term liabilities and income taxes payable

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Investing activities:

7 unchanged sentences

Repayments of long-term senior notes

Net (repayments) proceeds of revolving credit facility

Net repayments of revolving credit facility

Shares withheld to cover taxes upon conversions of equity awards

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

6 unchanged sentences

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

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

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

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

22 unchanged sentences

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

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

It is reasonably possible

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

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

It is reasonably possible that actual

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

Foreign Currency Forward Contracts

3 unchanged sentences

While the Company engages in foreign currency hedging activity to reduce its risk, for accounting purposes, none of its foreign currency forward contracts are designated as hedges .

Foreign currency forward contracts are carried at fair value, with net realized and unrealized gains and losses recognized currently in other income (expense) in the Company’s consolidated statements of operations.

Foreign currency forward contracts are carried at fair value, with net realized and unrealized gains and losses recognized in other income (expense), net in the Company’s consolidated statements of operations.

Cash flows from settlements of foreign currency forward contracts are included in operating activities in the consolidated statements of cash flows.

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

At May 31, 2021, the Company had a notional amount of $ 15.8 million outstanding in foreign currency forward contracts, which matured on June 29, 2021 .

Unrealized net gains and losses related to foreign currency forward contracts were no t significant at May 31, 2021 and August 31, 2020 .

Realized net gains and losses related to foreign currency forward contracts were no t significant for both the three months ended May 31, 2021 and 2020.

Realized net gains and losses related to foreign currency forward contracts were no t significant for both the nine months ended May 31, 2021 and 2020.

At November 30, 2021, the Company had a notional amount of $ 1.5 million outstanding in foreign currency forward contracts, which will mature on January 28, 2022 .

Unrealized net gains and losses related to foreign currency forward contracts were no t significant at November 30, 2021 and August 31, 2021 .

Realized net gains and losses related to foreign currency forward contracts were no t significant for both the three months ended November 30, 2021 and 2020.

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

6 unchanged sentences

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

As of May 31, 2021, the Company had no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, with the exception of the foreign currency forward contracts, which are classified as Level 2 within the fair value hierarchy.

As of November 30, 2021, the Company had no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, with the exception of the foreign currency forward contracts, which are classified as Level 2 within the fair value hierarchy.

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

1 unchanged sentence

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

The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 66.4 million as of May 31, 2021, which was determined based on a discounted cash flow analysis using current market interest rates for instruments with similar terms, compared to their carrying value of $ 69.2 million .

During the nine months ended May 31, 2021, the Company did no t record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

Recently Issued Accounting Standards

The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 66.3 million as of November 30, 2021, which was determined based on a discounted cash flow analysis using current market interest rates for instruments with similar terms, compared to their carrying value of $ 68.8 million .

During the three months ended November 30, 2021, the Company did no t record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU No.

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

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

This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year.

Early adoption is permitted.

The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures .

The Company adopted this new guidance on September 1, 2021 , and the adoption of this guidance did not have a material impact on its consolidated financial statements and related disclosures.

Inventories consist primarily of raw materials and components, finished goods, and product held at third-party contract manufacturers.

13 unchanged sentences

accumulated depreciation and amortization

At August 31, 2021, capital in progress on the balance sheet included $ 30.3 million associated with capital costs related to proprietary machinery and equipment for the Company’s next generation of delivery systems for its WD-40 Smart Straw ® products.

During the three months ended November 30, 2021, $ 13.5 million of this machinery and equipment was placed in service and thus the Company reclassified these amounts from capital in progress to machinery, equipment and vehicles.

Goodwill and Other Intangible Assets

2 unchanged sentences

Translation adjustments

Balance as of May 31, 2021

Balance as of November 30, 2021

There were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its goodwill subsequent to December 1, 2020, the date of its most recent annual goodwill impairment test, which was conducted during the second quarter of fiscal year 2021.

Based on the results of the annual goodwill impairment test, the estimated fair value of each of the Company’s reporting units exceeded their respective carrying values so significantly that an impairment charge to the Company’s goodwill balances is remote.

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

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

5 unchanged sentences

Net carrying amount

There has been no impairment charge for the nine months ended May 31, 2021 and there were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its existing definite-lived intangible assets.

There has been no impairment charge for the three months ended November 30, 2021 and there were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its existing definite-lived intangible assets.

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

Changes in the carrying amounts of definite-lived intangible assets by segment for the nine months ended May 31, 2021 are summarized below (in thousands):

Changes in the carrying amounts of definite-lived intangible assets by segment for the three months ended November 30, 2021 are summarized below (in thousands):

Balance as of August 31, 2021

1 unchanged sentence

Translation adjustments

Balance as of May 31, 2021

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

Customer-Based

Remainder of fiscal year 2021

Fiscal year 2022

Fiscal year 2023

Fiscal year 2024

Fiscal year 2025

Included in the total estimated future amortization expense is the amortization expense for the 1001 trade name and the GT85 intangible assets, which are based on current foreign currency exchange rates, and as a result amounts in future periods may differ from those presented due to fluctuations in those rates.

The Company leases real estate for its regional sales offices, a research and development facility, and offices located at its international subsidiaries and branch locations.

In addition, the Company leases an automobile fleet in the United States.

The Company has also identified warehouse leases within certain third-party distribution center service contracts.

All other leases are insignificant to the Company’s consolidated financial statements.

To determine if a contract contains a lease, the Company assesses its contracts and determines if there is an identified asset for which the Company has obtained the right to control, as defined in ASC 842.

The Company records right-of-use assets and lease liabilities on its consolidated balance sheets for leases with an expected term greater than one year.

The lease term includes the committed lease term, also taking into account early termination and renewal options that management is reasonably certain to exercise.

For leases that do not have a readily determinable implicit rate, the Company uses its estimated secured incremental borrowing rate based on the information available at the lease commencement date to determine the present value of lease payments.

The Company’s estimated secured incremental borrowing rate is determined using a portfolio approach based on the rate of interest the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term.

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

As of May 31, 2021, finance leases were not significant and all leases recorded on the Company’s consolidated balances sheets were operating leases.

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

The Company has made the accounting policy election to use certain ongoing practical expedients made available by ASC 842 to:

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

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

However, the Company had no significant short-term leases as of May 31, 2021.

The Company obtained additional right-of-use assets of $ 1.9 million in exchange for lease obligations related to renewals of existing leases during the nine months ended May 31, 2021.

The Company did no t obtain significant additional right-of-use assets during the nine months ended May 31, 2020.

The Company recorded $ 0.5 million and $ 1.5 million in lease expense during both the three and nine months ended May 31, 2021 and 2020.

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

An insignificant amount of lease expense was classified within cost of products sold for both the three and nine months ended May 31, 2021 and 2020.

During the three and nine months ended May 31, 2021, the Company paid cash of $ 0.5 million and $ 1.6 million related to lease liabilities, respectively, compared to $ 0.5 million and $ 1.5 million in the corresponding period of the prior fiscal year.

Variable lease expense under the Company’s lease agreements was not significant for both the three and nine months ended May 31, 2021 and 2020.

As of May 31, 2021, the weighted-average remaining lease term was 6.9 years and the weighted-

average discount rate was 2.9 % for the Company’s operating leases.

There were no leases that had not yet commenced as of May 31, 2021 that will create additional significant rights and obligations for the Company.

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

Operating lease right-of-use assets

Current operating lease liabilities (1)

Long-term operating lease liabilities

Total operating lease liabilities

(1) Current operating lease liabilities are classified in accrued liabilities on the Company’s condensed consolidated balance sheet.

The Company’s maturities of its operating lease liabilities, including early termination and renewal options that management is reasonably certain to exercise, are as follows (in thousands):

Remainder of fiscal year 2021

Fiscal year 2022

Fiscal year 2023

Fiscal year 2024

Fiscal year 2025

Total undiscounted future cash flows

Present value of lease liabilities

Balance as of November 30, 2021

The estimated amortization expense for the Company’s definite-lived intangible assets is not significant in any future individual fiscal year.

Accrued and Other Liabilities

10 unchanged sentences

Accrued payroll taxes

As of May 31, 2021, the Company held borrowings under two separate agreements as detailed below.

As of November 30, 2021, the Company held borrowings under two separate agreements as detailed below.

Note Purchase and Private Shelf Agreement

1 unchanged sentence

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

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

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

As of November 30, 2021, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement.

Credit Agreement

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

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

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

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

The Credit Agreement currently has a maturity date of September 30, 2025 .

On November 29, 2021, the Company entered into its most recent amendment to the Credit Agreement (the “LIBOR Amendment”) with Bank of America.

The LIBOR Amendment changed the Company’s index rates under the Credit Agreement for British Pound Sterling and U.S.

Dollar borrowings from the London Interbank Offered Rate as administered by ICE Benchmark Administration to the Sterling Overnight Index Average Reference Rate and the Bloomberg Short-term Bank Yield Index rate, respectively, as well as certain definitions and clarifications within the Credit Agreement to accommodate the change in index rates.

The impact of the LIBOR amendment was insignificant to the Company’s consolidated financial statements.

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

10 unchanged sentences

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

As of May 31, 2021, the entire balance on this facility is classified as long-term and only contains amounts denominated in Euros and Pound Sterling.

As of November 30, 2021, the entire balance on this facility is classified as long-term and only contains amounts denominated in Euros and Pound Sterling.

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

2 unchanged sentences

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

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

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

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

(3) Interest on notes is payable semi-annually in May and November of each year with no principal due until the maturity date.

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

9 unchanged sentences

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

As of May 31, 2021, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

As of November 30, 2021, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

Share Repurchase Plan

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

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

The Company will continue to evaluate future authorizations of share buy-backs.

No repurchase transactions were made during the nine months ended May 31, 2021.

On October 12, 2021, the Company’s Board of Directors approved a new share buy-back plan.

Under the plan, which became effective on November 1, 2021, the Company is authorized to acquire up to $ 75.0 million of its outstanding shares through August 31, 2023.

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

During the period from November 1, 2021 through November 30, 2021, the Company repurchased 32,000 shares at an average price of $ 230.79 per share, for a total cost of $ 7.4 million under this $ 75.0 million plan.

Earnings per Common Share

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

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Net income allocated to

2 unchanged sentences

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

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Weighted-average common

3 unchanged sentences

shares outstanding, diluted

For the three and nine months ended May 31, 2021, there were no anti-dilutive stock-based equity awards outstanding.

For the three and nine months ended May 31, 2020, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 9,479 and 8,229 , respectively, were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive.

Revenue Recognition

The following paragraphs detail the Company’s revenue recognition policies and provide additional information used in its determination of net sales and contract balances under ASC 606.

For the three months ended November 30, 2021, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 5,145 were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive .

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

Revenue Recognition

The Company generates revenue from sales of its products to customers in its Americas, EMEA and Asia-Pacific segments.

Product sales for the Company include maintenance products and homecare and cleaning products.

The Company recognizes revenue related to the sale of these products when it satisfies a performance obligation in an amount reflecting the consideration to which it expects to be entitled.

Sales are recorded net of allowances for damaged goods and other sales returns, sales incentives, trade promotions and cash discounts.

The Company applies a five-step approach in determining the amount and timing of revenue to be recognized which includes the following:

(1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied.

Contracts with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, sales incentives, warranty and supply, but do not require mandatory purchase commitments.

In the absence of a specific sales agreement with a customer, the Company’s standard terms and conditions at the time of acceptance of purchase orders apply to the sales transaction.

The Company’s standard terms and conditions are either included in a standalone document or on the Company’s price lists or both, and these standard terms and conditions are provided to the customer prior to the sales transaction.

The Company considers the customer purchase orders, governed by specific sales agreements or the Company’s standard terms and conditions, to be the contract with the customer.

The Company considers each transaction to sell products as separate and distinct, with no additional promises made, and as a result, all of the Company's sales are single performance obligation arrangements for which the transaction price is equivalent to the stated price of the product, net of any variable consideration for items such as sales returns, discounts, rebates and other sales incentives.

The Company recognizes sales at a point in time upon transferring control of its product to the customer.

This typically occurs when products are shipped or delivered, depending on when risks of loss and title have passed to the customer per the terms of the contract.

Taxes imposed by governmental authorities on the Company's revenue, such as sales taxes and value added taxes, are excluded from net sales.

Sales commissions are paid to certain third parties based upon specific sales levels achieved during a defined time period.

Since the Company’s contracts related to these sales commissions do not exceed one year, the Company has elected as a practical expedient to expense these payments as incurred.

The Company also elected the practical expedient related to shipping and handling fees which allows the Company to account for freight costs as fulfillment activities instead of assessing such activities as performance obligations.

The Company’s freight costs are sometimes paid by the customer, while other times, the freight costs are included in the sales price.

The Company does not account for freight costs as a separate performance obligation, but rather as an activity performed to transfer the products to its customers.

Variable Consideration - Sales Incentives

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

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

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

The Company reviews its assumptions and adjusts these estimates accordingly on a quarterly basis.

Rebates/Other Discounts — The Company offers various on-going trade promotion programs with customers and provides other discounts to customers that require management to estimate and accrue for the expected costs of such programs or discounts.

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

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

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

The Company had a $ 8.5 million and $ 7.5 million balance in rebate/other discount liabilities as of May 31, 2021 and August 31, 2020, respectively, which are included in accrued liabilities on the Company ’ s condensed consolidated balance sheets.

The Company recorded approximately $ 7.5 million and $ 20.2 million in rebates/other discounts as a reduction to sales during the three and nine months ended May 31, 2021, respectively.

Rebates/other discounts as a reduction to sales during the three and nine months ended May 31, 2020 were approximately $ 5.2 million and $ 14.6 million, respectively.

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

Coupon redemption liabilities, which are included in accrued liabilities on the Company ’ s condensed consolidated balance sheets, were not significant at May 31, 2021 and August 31, 2020.

Coupons recorded as a reduction to sales during the three and nine months ended May 31, 2021 and 2020, were also not significant.

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

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

The Company had a $ 0.5 million balance in the allowance for cash discounts at both May 31, 2021 and August 31, 2020.

The Company recorded approximately $ 1.3 million and $ 3.6 million in cash discounts as a reduction to sales during the three and nine months ended May 31, 2021, respectively.

Cash discounts as a reduction to sales during the three and nine months ended May 31, 2020 were approximately $ 1.1 million and $ 3.1 million, respectively.

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

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

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

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

The Company’s refund liability for sales returns was not significant at both May 31, 2021 and August 31, 2020.

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

The value of this inventory is recorded to other current assets and the balance in this account associated with product returns was not significant at May 31, 2021 and August 31, 2020.

Disaggregation of Revenue

The Company's revenue is presented on a disaggregated basis in Note 14 – Business Segments and Foreign Operations included in this report.

The Company discloses certain information about its business segments, which are determined consistent with the way the Company’s Chief Operating Decision Maker organizes and evaluates financial information internally for making operating decisions and assessing performance.

The Chief Operating Decision Maker assesses and measures revenue based on geographic area and product groups.

The following table presents our revenues by segment and major source (in thousands):

Three Months Ended November 30, 2021:

Maintenance products

Total net sales

Three Months Ended November 30, 2020:

Maintenance products

Total net sales

(1) Homecare and cleaning products (“HCCP”)

Contract Balances

2 unchanged sentences

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

The Company had contract liabilities of $ 2.2 million and $ 1.4 million as of May 31, 2021 and August 31, 2020, respectively.

The Company had contract liabilities of $ 5.0 million and $ 3.7 million as of November 30, 2021 and August 31, 2021, respectively.

All of the $ 3.7 million that was included in contract liabilities as of August 31, 2021 was recognized to revenue during the three months ended November 30, 2021.

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

The Company did no t have any contract assets as of May 31, 2021 and August 31, 2020.

The Company did no t have any contract assets as of November 30, 2021 and August 31, 2021.

Commitments and Contingencies

9 unchanged sentences

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

As of May 31, 2021, no such commitments were outstanding.

As of November 30, 2021, no such commitments were outstanding.

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

Except as disclosed herein, there are no unasserted claims or pending proceedings for claims against the Company that the Company believes will result in a probable loss for the Company as of May 31, 2021.

Except as disclosed herein, there were no unasserted claims or pending proceedings for claims against the Company that the Company believes will result in a probable loss for the Company as of November 30, 2021.

As to claims that the Company believes may result in a reasonably possible loss, the Company believes that no reasonably possible outcome of any such claim will have a materially adverse impact on the Company’s financial condition, results of operations or cash flows.

2 unchanged sentences

In April 2021, the Company and WD-40 Manufacturing, owner of the WD-40 brand trademarks, were served with Summons and Complaint for the Jakarta Litigation, in which Bong is seeking damages based on the Company’s enforcement actions against Bong following registration of a Get All-40 trademark that includes a yellow shield logo similar to the WD-40 brand shield logo.

The complaint asserts claims for damages for more than $25.0 million, and a request for a public apology by the Company and WD-40 Manufacturing.

The complaint asserted claims for damages for more than $ 25.0 million.

The dispute underlying the Jakarta Litigation follows 2018 litigation filed by WD-40 Manufacturing, in which the Commercial District Court ordered cancellation of two earlier Get All-40 trademark registrations.

In January 2021, WD-40 Manufacturing filed a new cancellation action seeking to invalidate the most recent Get All-40 trademark registration.

In January 2021, WD-40 Manufacturing filed a new cancellation action in a separate proceeding before the Commercial District Court seeking to invalidate the most recent Get All-40 Trademark registration.

In August 2021, the Commercial District Court granted WD-40 Manufacturing’s action for cancellation of the Get All-40 Trademark.

Bong initiated appeal of the cancellation decision in September 2021.

On October 28, 2021, the Commercial District Court in the Jakarta Litigation found in favor of the Company and dismissed Bong’s claim.

On November 26, 2021, Bong submitted a memorandum of cassation to appeal the decision in the Jakarta Litigation.

The Jakarta Litigation and trademark cancellation are pending appellate proceedings.

The Company denies the allegations asserted by Bong and will vigorously defend itself in the Jakarta Litigation.

The Company believes that an unfavorable outcome in the Jakarta Litigation is not probable.

Due to the uncertainty as to the claims asserted by Bong for recovery of damages and as to future actions in the Jakarta Litigation, the Company is unable to estimate an amount of possible future loss or a range of possible loss.

The Company believes that an unfavorable outcome in the Jakarta Litigation is remote.

For further information on the risks the Company faces from existing and future claims, suits, investigations and proceedings , see the Company’s risk factors disclosed in Part I―Item 1A, “Risk Factors,” in its Annual Report on Form 10-K for the fiscal year ended August 31, 2021, which was filed with the SEC on October 22, 2021.

4 unchanged sentences

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

Thus, no liabilities have been recorded for these agreements as of May 31, 2021 .

Thus, no liabilities have been recorded for these agreements as of November 30, 2021 .

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

1 unchanged sentence

Although the maximum amount of future payments that the Company could be required to make under these indemnification agreements is unlimited, management believes that the Company maintains adequate levels of insurance coverage to protect the Company with respect to most potential claims arising from such agreements and that such agreements do not otherwise have value separate and apart from the liabilities incurred in the ordinary course of the Company’s business.

Thus, no liabilities have been recorded with respect to such indemnification agreements as of May 31, 2021 .

Thus, no liabilities have been recorded with respect to such indemnification agreements as of November 30, 2021 .

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

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

The provision for income taxes was 21.9 % and 23.9 % of income before income taxes for the three months ended May 31 2021 and 2020, respectively.

The decrease in the effective income tax rate from period to period was primarily due to higher earnings from foreign operations resulting in an increase in the benefit received from the application of the Foreign-Derived Intangible Income calculation, coupled with a one-time benefit received in fiscal year 2021 from an Investment Tax Credit.

The provision for income taxes was 17.7 % and 19.1 % of income before income taxes for the nine months ended May 31, 2021 and 2020, respectively.

The decrease in the effective income tax rate from period to period was primarily due to a benefit from the High Tax Exception associated with Global Intangible Low Taxed Income during the first half of fiscal year 2021, as well as an increase in excess earnings from foreign operations resulting in an increase in the benefit received from the application of the Foreign-Derived Intangible Income calculation.

The provision for income taxes was 19.8 % and 15.7 % of income before income taxes for the three months ended November 30, 2021 and 2020, respectively.

The increase in the effective income tax rate from period to period was primarily due to an increase in nondeductible performance-based compensation expenses.

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

17 unchanged sentences

Corporate (1)

May 31, 2021:

Income from operations

Depreciation and

amortization expense

Interest income

Interest expense

May 31, 2020:

Income from operations

Depreciation and

amortization expense

Interest income

Interest expense

Nine Months Ended:

May 31, 2021:

November 30, 2021:

Income from operations

3 unchanged sentences

Interest expense

May 31, 2020:

November 30, 2020:

Income from operations

6 unchanged sentences

The Company’s Chief Operating Decision Maker does not review assets by segment as part of the financial information provided, and therefore, no asset information is provided in the above table.

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

Three Months Ended May 31,

Nine Months Ended May 31,

Maintenance products

Homecare and cleaning products

Subsequent Events

On June 15, 2021, the Company’s Board of Directors declared a cash dividend of $ 0.72 per share payable on July 30, 2021 to shareholders of record on July 16 , 2021 .

On December 13, 2021, the Company’s Board of Directors approved an 8 % increase in the regular quarterly cash dividend, increasing it from $ 0.72 per share to $ 0.78 per share.

The $ 0.78 per share dividend declared on December 13, 2021 is payable on January 31, 2022 to shareholders of record on January 14 , 2022 .

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

What changed 10-Q

Item 1. Financial Statements