What changed in this filing

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Item 1. Financial Statements

2023-04-06 compared with 2023-01-09 · 122 added, 69 removed, 322 unchanged (37% of the section changed)

1 unchanged sentence

WD-40 COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BA LANCE SHEETS

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

24 unchanged sentences

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

19,896,477 and 19,888,807 shares issued at November 30, 2022 and

19,896,477 and 19,888,807 shares issued at February 28, 2023 and

August 31, 2022, respectively;

and 13,578,346 and 13,602,346 shares

outstanding at November 30, 2022 and August 31, 2022, respectively

outstanding at February 28, 2023 and August 31, 2022, respectively

Additional paid-in capital

2 unchanged sentences

Common stock held in treasury, at cost — 6,318,131 and 6,286,461

shares at November 30, 2022 and August 31, 2022, respectively

shares at February 28, 2023 and August 31, 2022, respectively

Total stockholders’ equity

1 unchanged sentence

See accompanying notes to condensed consolidated financial statements.

WD-40 COM PANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPE RATIONS

(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

14 unchanged sentences

See accompanying notes to condensed consolidated financial statements.

WD-40 COM PANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPRE HENSIVE INCOME

(Unaudited and in thousands)

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

Other comprehensive income (loss):

2 unchanged sentences

See accompanying notes to condensed consolidated financial statements.

WD-40 CO MPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCK HOLDERS’ EQUITY

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

8 unchanged sentences

Cash dividends ($ 0.78 per share)

Acquisition of treasury stock

Repurchases of common stock

Foreign currency translation adjustment

Balance at November 30, 2022

Stock-based compensation

Cash dividends ($ 0.83 per share)

Repurchases of common stock

Foreign currency translation adjustment

Balance at February 28, 2023

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

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

Comprehensive

7 unchanged sentences

Cash dividends ($ 0.72 per share)

Acquisition of treasury stock

Repurchases of common stock

Foreign currency translation adjustment

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)

Repurchases of common stock

Foreign currency translation adjustment

Balance at February 28, 2022

See accompanying notes to condensed consolidated financial statements.

WD-40 CO MPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CA SH FLOWS

(Unaudited and in thousands)

Three Months Ended November 30,

Six Months Ended February 28,

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 losses (gains)

Unrealized foreign currency exchange gains

Provision for credit losses

Impairment of inventories

Changes in assets and liabilities:

4 unchanged sentences

Other long-term liabilities and income taxes payable

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing activities:

6 unchanged sentences

Repayments of long-term senior notes

Net proceeds from revolving credit facility

Net proceeds (repayments) from 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 decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

35 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 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 November 30, 2022, the Company had no outstanding foreign currency forward contracts.

Unrealized net gains and losses related to foreign currency forward contracts were no t significant at November 30, 2022 and August 31, 2022 .

Realized net gains and losses related to foreign currency forward contracts were no t significant for the three months ended November 30, 2022 and 2021.

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 condensed consolidated statements of operations.

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

At February 28, 2023, the Company had a notional amount of $ 7.0 million outstanding in foreign currency forward contracts, which matured on March 30, 2023.

Unrealized net gains and losses related to foreign currency forward contracts were no t significant at February 28, 2023 and August 31, 2022 .

Realized net gains and losses related to foreign currency forward contracts were not significant for the three months ended February 28, 2023 and 2022.

Realized net gains and losses related to foreign currency forward contracts were $ 0.5 million for the six months ended February 28, 2023, while realized net gains and losses for such contracts were no t significant for the six months ended February 28, 2022.

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

10 unchanged sentences

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 $ 60.8 million as of November 30, 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 $ 68.0 million .

During the three months ended November 30, 2022, 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 $ 60.3 million as of February 28, 2023, 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 $ 68.0 million .

During the six months ended February 28, 2023, the Company did no t record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

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.

13 unchanged sentences

accumulated depreciation and amortization

As of November 30, 2022 and August 31, 2022, the Company’s condensed consolidated balance sheets included $ 7.6 million and $ 6.5 million, respectively, of capitalized cloud-based implementation costs recorded as other assets within the Company’s condensed consolidated balance sheets.

These balances primarily consist of capitalized costs related to the new cloud-based enterprise resource planning system which we are in the process of implementing.

Accumulated amortization associated with cloud-based implementation costs were $ 0.5 million as of both November 30, 2022 and August 31, 2022.

Amortization expense associated with these assets were no t significant during the three months ended November 30, 2022 or 2021.

As of February 28, 2023 and August 31, 2022, the Company’s condensed consolidated balance sheets included $ 8.9 million and $ 6.5 million, respectively, of capitalized cloud-based implementation costs recorded as other assets within the Company’s condensed consolidated balance sheets.

These balances primarily consist of capitalized costs related to the new cloud-based enterprise resource planning system which the Company is in the process of implementing.

Accumulated amortization associated with cloud-based implementation costs were $ 0.6 million and $ 0.5 million as of February 28, 2023 and August 31, 2022, respectively.

Amortization expense associated with these assets was no t significant for the three and six months ended February 28, 2023 and 2022.

Goodwill and Other Intangible Assets

2 unchanged sentences

Translation adjustments

Balance as of November 30, 2022

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, the date of its most recent annual goodwill impairment test, which was a qualitative assessment conducted during the second quarter of fiscal year 2022.

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 and, thus, a quantitative analysis was not required.

Balance as of February 28, 2023

During the second quarter of fiscal year 2023, the Company performed its annual goodwill impairment test.

The annual goodwill impairment test was performed at the reporting unit level as of the Company’s most recent goodwill impairment testing date, December 1, 2022.

During the fiscal year 2023 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, 2022.

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, 2022 through February 28, 2023.

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, 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.

Changes in the carrying amounts of definite-lived intangible assets by segment for the three months ended November 30, 2022 are summarized below (in thousands):

There has been no impairment charge for the six months ended February 28, 2023 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.

Changes in the carrying amounts of definite-lived intangible assets by segment for the six months ended February 28, 2023 are summarized below (in thousands):

Balance as of August 31, 2022

1 unchanged sentence

Translation adjustments

Balance as of November 30, 2022

Balance as of February 28, 2023

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, 2022, the Company held borrowings under two separate agreements as detailed below.

As of February 28, 2023, 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, 2022, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement.

As of February 28, 2023, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement.

Credit Agreement

16 unchanged sentences

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 November 30, 2022, $ 40.7 million on this facility is classified as long-term and is denominated in Euros and Pound Sterling, whereas $ 41.7 million is classified as short-term and is denominated entirely in U.S.

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

As of February 28, 2023, $ 41.1 million on this facility is classified as long-term and is denominated in Euros and Pounds Sterling, whereas $ 46.7 million is classified as short-term and is denominated entirely in U.S.

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

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

13 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, 2022, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

As of February 28, 2023, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

Share Repurchase Plan

2 unchanged sentences

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, 2022, the Company repurchased 160,982 shares at an average price of $ 206.38 per share, for a total cost of $ 33.2 million under this $ 75.0 million plan.

During the three months ended November 30, 2022, the Company repurchased 22,420 shares at an average price of $ 181.60 per share, for a total cost of $ 4.1 million under this $ 75.0 million plan.

During the period from November 1, 2021 through February 28, 2023, the Company repurchased 170,232 shares at an average price of $ 204.39 per share, for a total cost of $ 34.8 million under this $ 75.0 million plan.

During the six months ended February 28, 2023, the Company repurchased 31,670 shares at an average price of $ 178.10 per share, for a total cost of $ 5.6 million under this $ 75.0 million plan.

Earnings per Common Share

The table below reconciles net income to net income available to common stockholders (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, 2022 and 2021, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 7,471 and 5,145 , 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, 2023 , weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 10,734 and 9,103 , 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, 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.

Revenue Recognition

1 unchanged sentence

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

Three Months Ended November 30, 2022:

Three Months Ended February 28, 2023:

Six Months Ended February 28, 2023:

Maintenance products

Total net sales

Three Months Ended November 30, 2021:

Three Months Ended February 28, 2022:

Six Months Ended February 28, 2022:

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 $ 2.4 million and $ 5.0 million as of November 30, 2022 and August 31, 2022, respectively.

All of the $ 5.0 million that was included in contract liabilities as of August 31, 2022 was recognized to revenue during the three months ended November 30, 2022.

The Company had contract liabilities of $ 3.1 million and $ 5.0 million as of February 28, 2023 and August 31, 2022, respectively.

All of the $ 5.0 million that was included in contract liabilities as of August 31, 2022 was recognized to revenue during the six months ended February 28, 2023.

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

Contract assets are recorded if the Company has satisfied a performance obligation but does not yet have an unconditional right to consideration.

The Company did no t have any contract assets as of November 30, 2022 and August 31, 2022.

The Company did no t have any contract assets as of February 28, 2023 and August 31, 2022.

The Company has an unconditional right to payment for its trade and other accounts receivable on the Company’s condensed consolidated balance sheets.

These receivables are presented net of an allowance for doubtful accounts, which were insignificant at both November 30, 2022 and August 31, 2022.

These receivables are presented net of an allowance for doubtful accounts, which was insignificant as of February 28, 2023 and August 31, 2022.

Commitments and Contingencies

5 unchanged sentences

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

Upon the termination of contracts with contract manufacturers, the Company obtains certain inventory control rights and is obligated to work with the contract manufacturer to sell through all product held by or manufactured by the contract manufacturer on behalf of the Company during the termination notification period.

If any inventory remains at the contract manufacturer at the termination date, the Company is obligated to purchase such inventory, which may include raw materials,

components and finished goods.

manufacturer on behalf of the Company during the termination notification period.

If any inventory remains at the contract manufacturer at the termination date, the Company is 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, 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, 2022, no such commitments were outstanding.

As of February 28, 2023, 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.

As of November 30, 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 of February 28, 2023, 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.

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 November 30, 2022 .

Thus, no liabilities have been recorded for these agreements as of February 28, 2023 .

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 November 30, 2022 .

Thus, no liabilities have been recorded with respect to such indemnification agreements as of February 28, 2023 .

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 20.9 % and 19.8 % of income before income taxes for the three months ended November 30, 2022 and 2021, respectively.

The provision for income taxes was 20.8 % and 20.1 % of income before income taxes for the three months ended February 28, 2023 and 2022, respectively.

The increase in the effective tax rate was primarily due to higher tax rates in certain foreign jurisdictions from period to period, as well as higher interest expense related to existing uncertain tax positions.

The unfavorable impacts to the effective tax rate was partially offset by a decrease in the portion of performance-based compensation that is non-deductible from period to period .

The provision for income taxes was 20.9 % and 19.9 % of income before income taxes for the six months ended February 28, 2023 and 2022, respectively.

The increase in the effective income tax rate from period to period was primarily due to tax shortfalls from the settlements of stock-based equity awards, partially offset by a one-time tax-deductible charitable donation.

The Company recorded tax shortfalls related to settlements of stock-based equity awards of $ 0.7 million during the first quarter of fiscal year 2023 compared to insignificant tax benefits related to these types of settlements in the first quarter of fiscal year 2022, resulting in a 5.1 % unfavorable impact on the Company’s effective tax rate from period to period.

The Company recorded tax shortfalls related to settlements of stock-based equity awards of $ 0.7 million during the first six months of fiscal year 2023 compared to $ 0.2 million in tax benefits related to these types of settlements in the first six months

of fiscal year 2022, resulting in a 2.4 % unfavorable impact on the Company’s effective tax rate from period to period.

Partially offsetting this unfavorable impact was a one-time tax benefit associated with the Company’s donation of its former corporate headquarters building to a local San Diego community foundation that occurred in the first quarter of fiscal year 2023, resulting in a 1.9 % favorable impact on the Company’s effective tax rate .

18 unchanged sentences

Corporate (1)

November 30, 2022:

February 28, 2023:

Income from operations

3 unchanged sentences

Interest expense

November 30, 2021:

February 28, 2022:

Income from operations

3 unchanged sentences

Interest expense

Six Months Ended:

February 28, 2023:

Income from operations

Depreciation and

amortization expense

Interest income

Interest expense

February 28, 2022:

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.

3 unchanged sentences

Dividend Declaration

On December 13, 2022, the Company’s Board approved a 6 % increase in the regular quarterly cash dividend, increasing it from $ 0.78 per share to $ 0.83 per share.

The $ 0.83 per share dividend declared on December 13, 2022 is payable on January 31, 2023 to stockholders of record on January 13 , 2023 .

On March 21, 2023 , the Company’s Board declared a cash dividend of $ 0.83 per share payable on April 28, 2023 to stockholders of record on April 14, 2023 .

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