What changed in this filing

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Item 1. Financial Statements

2022-04-07 compared with 2022-01-06 · 142 added, 83 removed, 328 unchanged (41% of the section changed)

6 unchanged sentences

Trade and other accounts receivable, less allowance for doubtful

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

accounts of $ 366 and $ 463 at February 28, 2022

and August 31, 2021, respectively

21 unchanged sentences

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

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

19,887,516 and 19,856,865 shares issued at February 28, 2022 and

August 31, 2021, respectively;

and 13,660,980 and 13,708,966 shares

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

outstanding at February 28, 2022 and August 31, 2021, respectively

Additional paid-in capital

2 unchanged sentences

Common stock held in treasury, at cost ― 6,226,536 and 6,147,899

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

shares at February 28, 2022 and August 31, 2021, respectively

Total shareholders'

2 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

Cost of products sold

15 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

Other comprehensive income (loss):

3 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEM ENTS OF SHAREHOLDERS'

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'

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

10 unchanged sentences

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 ($ 0.78 per share)

Acquisition of treasury stock

Foreign currency translation adjustment

Balance at February 28, 2022

See accompanying notes to condensed consolidated financial statements.

Comprehensive

9 unchanged sentences

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 28, 2021

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STAT EMENTS OF CASH FLOWS

CONDENSED CONSOLIDATE D STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

Three Months Ended November 30,

Six Months Ended February 28,

Operating activities:

2 unchanged sentences

Depreciation and amortization

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

Net gains on sales and disposals of property and equipment

Deferred income taxes

Stock-based compensation

Unrealized foreign currency exchange losses

Unrealized foreign currency exchange (gains) losses

Provision for bad debts

5 unchanged sentences

Other long-term liabilities and income taxes payable

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Investing activities:

7 unchanged sentences

Repayments of long-term senior notes

Net repayments of revolving credit facility

Net proceeds (repayments) of revolving credit facility

Shares withheld to cover taxes upon conversions of equity awards

10 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 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®.

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

The Company owns a wide range of well-known brands that include maintenance products and homecare and cleaning products:

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

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

18 unchanged sentences

COVID-19 Considerations

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

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

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.

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

6 unchanged sentences

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

At 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.

At February 28, 2022, the Company had a notional amount of $ 4.5 million outstanding in foreign currency forward contracts, which matured on March 30, 2022 .

Unrealized net gains and losses related to foreign currency forward contracts were no t significant at February 28, 2022 and August 31, 2021 .

Realized net gains and losses related to foreign currency forward contracts were no t significant for both the three and six months ended February 28, 2022 and 2021.

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 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.

As of February 28, 2022, 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 $ 66.3 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.

The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 64.8 million as of February 28, 2022, 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 six months ended February 28, 2022, the Company did no t record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

Internal-Use Software and Cloud Computing Arrangements

The Company capitalizes costs related to computer software obtained or developed for internal use.

Software obtained for internal use has generally been enterprise-level business and finance software that the Company customizes to meet its specific operational needs.

Costs incurred in the application development phase are capitalized as property and equipment in the Company’s consolidated balance sheets and are depreciated using the straight-line method over their estimated useful lives.

The Company also enters into certain cloud-based software hosting arrangements.

In evaluating whether cloud computing arrangements include an embedded internal-use software license, management considers whether the Company has the contractual right to take possession of the software during the hosting period without significant penalty and whether it is feasible to either i) run the software on the Company’s hardware, or ii) contract with another party unrelated to the vendor to host the software.

If management determines a cloud computing arrangement includes an embedded software license, the Company accounts for the software license element of the arrangement consistent with the acquisition of other internal-use software licenses.

If a cloud computing arrangement does not include a software license, the Company accounts for the arrangement as a service contract.

For such cloud computing service contracts, the Company capitalizes certain implementation costs such as the configuration, coding and customization of the software.

Capitalizable cloud computing arrangement costs are generally consistent with those incurred during the application development stage for internal-use software, however, these costs are capitalized as “other assets” in the Company’s consolidated balance sheets.

The Company amortizes these capitalized cloud computing implementation costs into selling, general and administrative expenses using the straight-line method over the fixed, non-cancellable term of the associated hosting arrangement, plus any reasonably certain renewal periods.

The useful lives of the Company’s internal-use software and capitalized cloud computing implementation costs are generally three to five years .

However, the useful lives of major information system installations such as implementations of enterprise resource planning (“ERP”) systems are determined on an individual basis and may exceed five years depending on the estimated period of use.

The Company applies the same impairment model to both internal-use software and capitalized cloud computing implementation costs.

Recently Adopted Accounting Standards

3 unchanged sentences

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.

Inventories are stated at the lower of cost or net realizable value and cost is determined based on a first-in, first-out method or, for a portion of raw materials inventory, the average cost method.

4 unchanged sentences

Finished goods

Property and Equipment

Property and Equipment and Capitalized Cloud-Based Software Implementation Costs

Property and equipment, net, consisted of the following (in thousands):

2 unchanged sentences

Computer and office equipment

Internal-use software

Furniture and fixtures

2 unchanged sentences

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.

During the six months ended February 28, 2022, $ 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.

As of February 28, 2022 and August 31, 2021, the Company’s balance sheet included $ 4.7 million and $ 2.6 million, respectively, of capitalized cloud-based implementation costs recorded as other assets within the Company’s condensed consolidated balance sheets.

Accumulated amortization associated with these assets were no t significant as of February 28, 2022 and August 31, 2021.

Amortization expense associated with these assets were no t significant for the three or six months ended February 28, 2022 or February 28, 2021.

Goodwill and Other Intangible Assets

2 unchanged sentences

Translation adjustments

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.

Balance as of February 28, 2022

During the second quarter of fiscal year 2022, the Company performed its annual goodwill impairment test.

The annual goodwill impairment test was performed at the reporting unit level as required by the authoritative guidance as of the Company’s most recent goodwill impairment testing date, December 1, 2021.

During the fiscal year 2022 annual goodwill impairment test, the Company performed a qualitative assessment of each reporting unit to determine whether it was more likely than not that the fair value of a reporting unit was less than its carrying amount.

In performing this qualitative assessment, the Company assessed relevant events and circumstances that may impact the fair value and the carrying amount of each of its reporting units.

Factors that were considered included, but were not limited to, the following:

(1) macroeconomic conditions, including the impacts of the COVID-19 pandemic;

(2) industry and market conditions;

(3) historical financial performance and expected financial performance;

(4) other entity specific events, such as changes in management or key personnel;

and (5) events affecting the Company’s reporting units, such as a change in the composition of net assets or any expected dispositions.

Based on the results of this qualitative assessment, the Company determined that 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 and, thus, a quantitative analysis was not required.

As a result, the Company concluded that no impairment of its goodwill existed as of December 1, 2021.

In addition, the Company concluded that 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, 2021 through February 28, 2022.

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 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.

There has been no impairment charge for the six months ended February 28, 2022 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 three months ended November 30, 2021 are summarized below (in thousands):

Changes in the carrying amounts of definite-lived intangible assets by segment for the six months ended February 28, 2022 are summarized below (in thousands):

Balance as of August 31, 2021

1 unchanged sentence

Translation adjustments

Balance as of November 30, 2021

Balance as of February 28, 2022

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

11 unchanged sentences

Accrued payroll taxes

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

As of February 28, 2022, 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”).

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

As of February 28, 2022, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement.

Credit Agreement

6 unchanged sentences

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

(calendar year)

Credit Agreement - revolving credit facility (1)

7 unchanged sentences

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

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

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.

Outstanding draws for which management has 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 February 28, 2022, $ 44.8 million on this facility is classified as long-term and is denominated in Euros and Pound Sterling, whereas $ 1.2 million is classified as short-term and is denominated in U.S.

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

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

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

(2) Principal payments are required semi-annually in May and November of each year in equal installments of $ 0.4 million through May 15, 2032 , resulting in $ 0.8 million classified as short-term.

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

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

As of February 28, 2022, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

Share Repurchase Plan

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

On October 12, 2021, the Company’s Board of Directors (“Board”) approved a new share repurchase 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.

During the period from November 1, 2021 through February 28, 2022, the Company repurchased 78,637 shares at an average price of $ 230.98 per share, for a total cost of $ 18.2 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 November 30,

Three Months Ended February 28,

Six Months Ended February 28,

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 November 30,

Three Months Ended February 28,

Six Months Ended February 28,

Weighted-average common

3 unchanged sentences

shares outstanding, diluted

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.

For the three and six months ended February 28, 2022, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 9,280 and 7,212 , respectively, were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive .

For the three and six months ended February 28, 2021, there were no anti-dilutive stock-based equity awards outstanding.

Revenue Recognition

1 unchanged sentence

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

Three Months Ended November 30, 2021:

Three Months Ended February 28, 2022:

Six Months Ended February 28, 2022:

Maintenance products

Total net sales

Three Months Ended November 30, 2020:

Three Months Ended February 28, 2021:

Six Months Ended February 28, 2021:

Maintenance products

5 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 $ 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.

The Company had contract liabilities of $ 4.0 million and $ 3.7 million as of February 28, 2022 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 six months ended February 28, 2022.

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

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

The Company did no t have any contract assets as of February 28, 2022 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 November 30, 2021, no such commitments were outstanding.

As of February 28, 2022, 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 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 of February 28, 2022, there were no unasserted claims or pending proceedings for claims against the Company that the Company believes will result in a probable loss.

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.

On or about August 18, 2020, Benny Bong (“Bong”) filed a civil action against the Company and the Company’s wholly-owned subsidiary, WD-40 Manufacturing Company (“WD-40 Manufacturing”), in Indonesia in the Commercial District Court of Central Jakarta, case reference number 41 / Pdt.Sus-Merek / 2020 / PN.Niaga.Jkt.Pst.

(the “Jakarta Litigation”).

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 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 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 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.

For further information on the risks the Company faces from existing and future claims, lawsuits, 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.

Indemnifications

As permitted under Delaware law, the Company has agreements whereby it indemnifies senior officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited;

The maximum potential future payments the Company could be required to make under these indemnification agreements is unlimited;

however, the Company maintains Director and Officer insurance coverage that mitigates the Company’s exposure with respect to such obligations.

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 November 30, 2021 .

Thus, no liabilities have been recorded for these agreements as of February 28, 2022 .

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.

All such indemnification agreements are entered into in the context of the particular agreements and are provided in an attempt to properly allocate risk of loss in connection with the consummation of the underlying contractual arrangements.

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 November 30, 2021 .

Although the maximum 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 February 28, 2022 .

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 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 provision for income taxes was 20.1 % and 15.0 % of income before income taxes for the three months ended February 28, 2022 and 2021, respectively.

The increase in the effective income tax rate from period to period was primarily due to a non-recurring benefit received in the prior year from the settlement of stock-based equity awards.

The provision for income taxes was 19.9 % and 15.4 % of income before income taxes for the six months ended February 28, 2022 and 2021, respectively.

The increase in the effective income tax rate from period to period was primarily due to non-recurring benefits received in the prior year from stock-based compensation, coupled with an increase in performance-based compensation that is not deductible for tax purposes in the current year.

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

4 unchanged sentences

The Company is currently under audit in various state jurisdictions for fiscal years 2018 through 2020.

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

Estimated unrecognized tax benefits related to income tax positions affected

by the resolution of tax examinations or expiring statutes of limitation within the next twelve months were not significant.

Audit outcomes and the timing of settlements are subject to significant uncertainty .

10 unchanged sentences

Corporate (1)

November 30, 2021:

February 28, 2022:

Income from operations

3 unchanged sentences

Interest expense

November 30, 2020:

February 28, 2021:

Income from operations

3 unchanged sentences

Interest expense

Six Months Ended:

February 28, 2022:

Income from operations

Depreciation and

amortization expense

Interest income

Interest expense

February 28, 2021:

Income from operations

Depreciation and

amortization expense

Interest income

Interest expense

(1) Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the business segments.

2 unchanged sentences

Subsequent Events

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 .

Dividend Declaration

On March 15, 2022, the Company’s Board declared a cash dividend of $ 0.78 per share payable on April 29, 2022 to shareholders of record on April 15 , 2022 .

Changes to Executive Leadership and the Board

On March 15, 2022, the Board adopted a resolution to increase the size of the Board from ten to eleven , effective immediately.

On March 16, 2022, the Company announced the (i) retirement of Garry O.

Ridge as CEO of the Company, effective August 31, 2022, (ii) the appointment of Steven A.

Brass, currently the President and Chief Operating Officer (“COO”) of the Company, as CEO, effective September 1, 2022, and (iii) the appointment of Mr.

Brass to the Board, effective March 15, 2022.

Ridge will remain as an employee of the Company until January 2, 2023, after which he will serve as a consultant to the Company until June 30, 2023, and will remain on the Board of the Company and serve as Chairman, until December 13, 2022.

In connection with Mr.

Ridge’s retirement, the Company and Mr.

Ridge entered into a Transition and Release Agreement on March 11, 2022 (the “Transition Agreement”) and signed the FY 2022 Restricted Stock Unit Award Agreement (“RSU Agreement”).

Pursuant to the Transition Agreement, the Company granted him 5,347 restricted stock units (with a value of $ 1.0 million) with a grant date of March 17, 2022, which are scheduled to vest on June 30, 2023 , subject to certain terms and conditions in the Transition Agreement and/or the RSU Agreement.

The foregoing description of the terms and conditions of the Transition Agreement and the RSU Agreement does not purport to be complete and is qualified in its entirety by reference to the Transition Agreement and the RSU Agreement, which are filed as Exhibit 10(c) and Exhibit 10(d), respectively, included in Part II-Item 6, “Exhibits” and incorporated by reference in this report.

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