What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-07-10 compared with 2023-04-06 · 169 added, 125 removed, 319 unchanged (48% of the section changed)

1 unchanged sentence

WD-40 COMPANY

CONDENSED CONSOLIDATED BA LANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS

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

2023 August 31,

Current assets:

1 unchanged sentence

Trade and other accounts receivable, net 100,556 89,930

Inventories 95,326 104,101

Other current assets 15,575 17,766

1 unchanged sentence

Property and equipment, net 66,636 65,977

Goodwill 95,410 95,180

Other intangible assets, net 4,898 5,588

1 unchanged sentence

Deferred tax assets, net 647 679

Other assets 12,618 9,672

Total assets $ 438,050 $ 434,295

Liabilities and Stockholders’ Equity

14 unchanged sentences

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

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 February 28, 2023 and August 31, 2022, respectively

19,896,477 and 19,888,807 shares issued at May 31, 2023 and August 31, 2022, respectively;

and 13,568,346 and 13,602,346 shares outstanding at May 31, 2023 and August 31, 2022, respectively

Additional paid-in capital 171,166 165,973

1 unchanged sentence

Accumulated other comprehensive loss ( 32,910 ) ( 36,209 )

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

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

Common stock held in treasury, at cost — 6,328,131 and 6,286,461 shares at May 31, 2023 and August 31, 2022, respectively

( 404,670 ) ( 397,236 )

Total stockholders’ equity 205,827 188,624

2 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPE RATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31, Nine Months Ended May 31,

2023 2022 2023 2022

Net sales $ 141,717 $ 123,667 $ 396,803 $ 388,399

Cost of products sold 69,955 64,682 194,708 195,426

Gross profit 71,762 58,985 202,095 192,973

Operating expenses:

10 unchanged sentences

Provision for income taxes 5,477 3,820 13,525 13,296

Net income $ 18,895 $ 14,480 $ 49,418 $ 52,543

Earnings per common share:

Basic $ 1.39 $ 1.07 $ 3.62 $ 3.83

Diluted $ 1.38 $ 1.07 $ 3.62 $ 3.82

Shares used in per share calculations:

Basic 13,573 13,656 13,582 13,683

Diluted 13,600 13,680 13,606 13,712

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPRE HENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31, Nine Months Ended May 31,

2023 2022 2023 2022

Net income $ 18,895 $ 14,480 $ 49,418 $ 52,543

Other comprehensive income (loss):

3 unchanged sentences

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCK HOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Treasury Stock

Income (Loss) Treasury Stock Total

Stockholders’

Income (Loss)

Shares Amount Shares Amount

Balance at August 31, 2022 19,888,807 $ 20 $ 165,973 $ 456,076 $ ( 36,209 ) 6,286,461 $ ( 397,236 ) $ 188,624

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 7,670 - ( 600 ) ( 600 )

Stock-based compensation 2,719 2,719

Cash dividends ($ 0.78 per share)

( 10,634 ) ( 10,634 )

Repurchases of common stock 22,420 ( 4,072 ) ( 4,072 )

Foreign currency translation adjustment 1,336 1,336

Net income 13,997 13,997

Balance at November 30, 2022 19,896,477 $ 20 $ 168,092 $ 459,439 $ ( 34,873 ) 6,308,881 $ ( 401,308 ) $ 191,370

1 unchanged sentence

Cash dividends ($ 0.83 per share)

( 11,324 ) ( 11,324 )

Repurchases of common stock 9,250 ( 1,569 ) ( 1,569 )

Foreign currency translation adjustment 8 8

Net income 16,526 16,526

Balance at February 28, 2023 19,896,477 $ 20 $ 170,353 $ 464,641 $ ( 34,865 ) 6,318,131 $ ( 402,877 ) $ 197,272

Stock-based compensation 813 813

Cash dividends ($ 0.83 per share)

( 11,315 ) ( 11,315 )

Repurchases of common stock 10,000 ( 1,793 ) ( 1,793 )

Foreign currency translation adjustment 1,955 1,955

Net income 18,895 18,895

Balance at May 31, 2023 19,896,477 $ 20 $ 171,166 $ 472,221 $ ( 32,910 ) 6,328,131 $ ( 404,670 ) $ 205,827

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

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

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Treasury Stock

Income (Loss) Treasury Stock Total

Stockholders’

Income (Loss)

Shares Amount Shares Amount

Balance at August 31, 2021 19,856,865 $ 20 $ 163,737 $ 430,735 $ ( 26,030 ) 6,147,899 $ ( 368,080 ) $ 200,382

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 30,072 - ( 4,246 ) ( 4,246 )

Stock-based compensation 2,891 2,891

Cash dividends ($ 0.72 per share)

( 9,905 ) ( 9,905 )

Repurchases of common stock 32,000 ( 7,386 ) ( 7,386 )

Foreign currency translation adjustment ( 1,893 ) ( 1,893 )

Net income 18,555 18,555

Balance at November 30, 2021 19,886,937 $ 20 $ 162,382 $ 439,385 $ ( 27,923 ) 6,179,899 $ ( 375,466 ) $ 198,398

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 579 - ( 75 ) ( 75 )

Stock-based compensation 1,885 1,885

Cash dividends ($ 0.78 per share)

( 10,714 ) ( 10,714 )

Repurchases of common stock 46,637 ( 10,779 ) ( 10,779 )

Foreign currency translation adjustment 627 627

Net income 19,508 19,508

Balance at February 28, 2022 19,887,516 $ 20 $ 164,192 $ 448,179 $ ( 27,296 ) 6,226,536 $ ( 386,245 ) $ 198,850

Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 61 - ( 8 ) ( 8 )

Stock-based compensation 975 975

Cash dividends ($ 0.78 per share)

( 10,697 ) ( 10,697 )

Repurchases of common stock 23,200 ( 4,225 ) ( 4,225 )

Foreign currency translation adjustment ( 4,146 ) ( 4,146 )

Net income 14,480 14,480

Balance at May 31, 2022 19,887,577 $ 20 $ 165,159 $ 451,962 $ ( 31,442 ) 6,249,736 $ ( 390,470 ) $ 195,229

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CA SH FLOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

Six Months Ended February 28,

Operating activities:

Adjustments to reconcile net income to net cash provided by

Nine Months Ended May 31,

Operating activities:

Net income $ 49,418 $ 52,543

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 5,939 6,140

2 unchanged sentences

Stock-based compensation 5,793 5,751

Unrealized foreign currency exchange gains

Unrealized foreign currency exchange (gains) losses ( 1,780 ) 261

Provision for credit losses 18 115

Impairment of inventories

Write-off of inventories 693 456

Changes in assets and liabilities:

Trade and other accounts receivable ( 9,015 ) ( 6,932 )

Inventories 9,826 ( 42,767 )

Other assets ( 326 ) ( 5,213 )

Operating lease assets and liabilities, net 55 ( 2 )

11 unchanged sentences

Repayments of long-term senior notes ( 800 ) ( 800 )

Net proceeds (repayments) from revolving credit facility

Net (repayments) proceeds from revolving credit facility ( 11,917 ) 15,576

Shares withheld to cover taxes upon conversions of equity awards ( 600 ) ( 4,329 )

6 unchanged sentences

Accrued capital expenditures

$ 813 $ 1,018

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

NOTES TO CONDENSED CONSOL IDATED FINANCIAL STATEMENTS (Unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

WD-40 Company (the “Company”), incorporated in Delaware and 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.

7 unchanged sentences

Basis of Consolidation

The condensed consolidated financial statements included herein have been prepared by the Company, without audit, according to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

The unaudited condensed consolidated financial statements included herein have been prepared by the Company according to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have been condensed or omitted pursuant to such rules and regulations.

9 unchanged sentences

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

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.

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.

Global economic conditions have been adversely impacted and financial markets have experienced significant volatility in recent years.

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 factors that have been subject to such volatility 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 its results of operations and financial condition.

Foreign Currency Forward Contracts

1 unchanged sentence

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

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

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

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.

2 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 condensed consolidated balance sheets.

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.

At May 31, 2023, the Company had a notional amount of $ 7.6 million outstanding in foreign currency forward contracts, which matured on June 29, 2023.

Unrealized net gains and losses related to foreign currency forward contracts were not significant at May 31, 2023 and August 31, 2022.

Realized net gains and losses related to foreign currency forward contracts were not significant for the three and nine months ended May 31, 2023 and 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 $ 60.3 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.

The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 61.1 million as of May 31, 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 $ 67.6 million.

During the nine months ended May 31, 2023, the Company did not 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.

Inventories consisted of the following (in thousands):

2023 August 31,

Product held at third-party contract manufacturers $ 6,100 $ 7,915

2 unchanged sentences

Finished goods 71,683 81,353

Total $ 95,326 $ 104,101

Property and Equipment and Capitalized Cloud-Based Software Implementation Costs

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

2023 August 31,

Machinery, equipment and vehicles $ 47,763 $ 44,533

4 unchanged sentences

Capital in progress 9,440 10,135

Land 4,196 4,240

Subtotal 108,443 104,883

accumulated depreciation and amortization ( 41,807 ) ( 38,906 )

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.

Total $ 66,636 $ 65,977

As of May 31, 2023 and August 31, 2022, the Company’s condensed consolidated balance sheets included $ 10.1 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.

Accumulated amortization associated with cloud-based implementation costs were $ 0.7 million and $ 0.5 million as of May 31, 2023 and August 31, 2022, respectively.

Amortization expense associated with these assets was not significant for the three and nine months ended May 31, 2023 and 2022.

Goodwill and Other Intangible Assets

The following table summarizes the changes in the carrying amounts of goodwill by segment (in thousands):

Americas EMEA Asia-Pacific Total

Balance as of August 31, 2022 $ 85,402 $ 8,569 $ 1,209 $ 95,180

Translation adjustments 24 206 - 230

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.

Balance as of May 31, 2023 $ 85,426 $ 8,775 $ 1,209 $ 95,410

There were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its goodwill as of May 31, 2023.

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

2 unchanged sentences

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

2023 August 31,

Gross carrying amount $ 35,670 $ 35,166

1 unchanged sentence

Net carrying amount $ 4,898 $ 5,588

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):

There has been no impairment charge for the nine months ended May 31, 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 nine months ended May 31, 2023 are summarized below (in thousands):

Americas EMEA Asia-Pacific Total

Balance as of August 31, 2022 $ 4,437 $ 1,151 $ - $ 5,588

1 unchanged sentence

Translation adjustments - 63 - 63

Balance as of February 28, 2023

Balance as of May 31, 2023 $ 3,827 $ 1,071 $ - $ 4,898

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

1 unchanged sentence

Accrued liabilities consisted of the following (in thousands):

2023 August 31,

Accrued advertising and sales promotion expenses $ 14,021 $ 13,563

3 unchanged sentences

Short-term operating lease liability 1,960 1,703

Other 3,531 3,933

Total $ 27,142 $ 27,161

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

2023 August 31,

Accrued incentive compensation $ 4,076 $ 2,524

2 unchanged sentences

Accrued payroll taxes 1,291 1,779

As of February 28, 2023, the Company held borrowings under two separate agreements as detailed below.

Other 533 521

Total $ 13,217 $ 11,583

As of May 31, 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 February 28, 2023, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement.

As of May 31, 2023, 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):

Issuance Maturities May 31,

2023 August 31,

Credit Agreement – revolving credit facility (1)

Various 9/30/2025 $ 68,549 $ 77,912

Note Agreement

Series A Notes – 3.39 % fixed rate (2)

11/15/2017 2023-2032

15,600 16,400

Series B Notes – 2.50 % fixed rate (3)

9/30/2020 11/15/2027 26,000 26,000

Series C Notes – 2.69 % fixed rate (3)

9/30/2020 11/15/2030 26,000 26,000

Total borrowings 136,149 146,312

3 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 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.

As of May 31, 2023, $ 42.1 million on this facility is classified as long-term and is denominated in Euros and Pounds Sterling, whereas $ 26.4 million is classified as short-term and is denominated entirely in U.S.

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

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

As of May 31, 2023, 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 (“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.

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

Under the 2021 Repurchase 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 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.

During the period from November 1, 2021 through May 31, 2023, the Company repurchased 180,232 shares at an average price of $ 203.02 per share, for a total cost of $ 36.6 million under this $ 75.0 million plan.

During the nine months ended May 31, 2023, the Company repurchased 41,670 shares at an average price of $ 178.41 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 stockholders (in thousands):

Three Months Ended February 28,

Six Months Ended February 28,

Net income allocated to

participating securities

Three Months Ended May 31, Nine Months Ended May 31,

2023 2022 2023 2022

Net income $ 18,895 $ 14,480 $ 49,418 $ 52,543

Net income allocated to participating securities ( 82 ) ( 56 ) ( 207 ) ( 193 )

Net income available to common stockholders $ 18,813 $ 14,424 $ 49,211 $ 52,350

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 February 28,

Six Months Ended February 28,

Weighted-average common

shares outstanding, basic

Three Months Ended May 31, Nine Months Ended May 31,

2023 2022 2023 2022

Weighted-average common shares outstanding, basic 13,573 13,656 13,582 13,683

Weighted-average dilutive securities 27 24 24 29

Weighted-average common

shares outstanding, diluted

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.

Weighted-average common shares outstanding, diluted 13,600 13,680 13,606 13,712

For the three months ended May 31, 2023, there were no anti-dilutive stock-based equity awards outstanding.

For the nine months ended May 31, 2023 , weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 6,068 were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive .

For the three and nine months ended May 31, 2022, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 11,607 and 8,677 , 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 February 28, 2023:

Six Months Ended February 28, 2023:

Three Months Ended May 31, 2023 Nine Months Ended May 31, 2023

Americas EMEA Asia-Pacific Total Americas EMEA Asia-Pacific Total

Maintenance products $ 67,435 $ 49,721 $ 16,169 $ 133,325 $ 180,132 $ 132,801 $ 58,808 $ 371,741

3,695 2,803 1,894 8,392 11,902 7,304 5,856 25,062

Total net sales $ 71,130 $ 52,524 $ 18,063 $ 141,717 $ 192,034 $ 140,105 $ 64,664 $ 396,803

Three Months Ended February 28, 2022:

Six Months Ended February 28, 2022:

Three Months Ended May 31, 2022 Nine Months Ended May 31, 2022

Americas EMEA Asia-Pacific Total Americas EMEA Asia-Pacific Total

Maintenance products $ 57,778 $ 47,289 $ 10,427 $ 115,494 $ 160,171 $ 154,825 $ 48,429 $ 363,425

3,675 2,161 2,337 8,173 12,067 6,243 6,664 24,974

Total net sales $ 61,453 $ 49,450 $ 12,764 $ 123,667 $ 172,238 $ 161,068 $ 55,093 $ 388,399

4 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 $ 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.

The Company had contract liabilities of $ 2.6 million and $ 5.0 million as of May 31, 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 nine months ended May 31, 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 February 28, 2023 and August 31, 2022.

The Company did not have any contract assets as of May 31, 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 was insignificant as of February 28, 2023 and August 31, 2022.

These receivables are presented net of an allowance for doubtful accounts, which was insignificant as of May 31, 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.

1 unchanged sentence

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 February 28, 2023, no such commitments were outstanding.

As of May 31, 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 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 of May 31, 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 February 28, 2023 .

Thus, no liabilities have been recorded for these agreements as of May 31, 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 February 28, 2023 .

Thus, no liabilities have been recorded with respect to such indemnification agreements as of May 31, 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 20.8 % 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 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 .

The building, net of its tax basis, is estimated to result in a charitable donation of $ 3.5 million and an approximate tax benefit of $ 0.7 million.

The provision for income taxes was 22.5 % and 20.9 % of income before income taxes for the three months ended May 31, 2023 and 2022, respectively.

The rate increase of 1.6 % in the effective tax rate was primarily due to higher tax rates in certain foreign jurisdictions.

The provision for income taxes was 21.5 % and 20.2 % of income before income taxes for the nine months ended May 31, 2023 and 2022, respectively.

The rate increase of 1.3 % in the effective income tax rate from period to period was primarily due to tax shortfalls from the settlements of stock-based equity awards, resulting in a 1.5 % unfavorable impact on the Company’s effective tax rate from period to period.

In addition, higher tax rates in certain foreign jurisdictions resulted in a 1.3 % unfavorable impact on the Company’s effective tax rate.

These unfavorable impacts to the effective tax rate were partially offset by a one-time tax-deductible charitable 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 1.2 % favorable impact on the Company’s effective tax rate from period to period.

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

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Summary information about reportable segments is as follows (in thousands):

For the Three Months Ended

For the Three Months Ended Americas EMEA Asia-Pacific Unallocated

Corporate (1)

February 28, 2023:

Net sales $ 71,130 $ 52,524 $ 18,063 $ - $ 141,717

Income from operations $ 16,906 $ 11,966 $ 5,312 $ ( 8,527 ) $ 25,657

Depreciation and

amortization expense

Depreciation and amortization expense $ 911 $ 1,035 $ 53 $ 76 $ 2,075

Interest income $ - $ 40 $ 29 $ - $ 69

Interest expense $ 1,079 $ 516 $ 2 $ - $ 1,597

February 28, 2022:

Net sales $ 61,453 $ 49,450 $ 12,764 $ - $ 123,667

Income from operations $ 13,360 $ 10,146 $ 3,101 $ ( 7,623 ) $ 18,984

Depreciation and

amortization expense

Depreciation and amortization expense $ 1,077 $ 780 $ 70 $ 131 $ 2,058

Interest income $ - $ - $ 27 $ - $ 27

Interest expense $ 518 $ 151 $ — $ - $ 669

Six Months Ended:

February 28, 2023:

For the Nine Months Ended

Net sales $ 192,034 $ 140,105 $ 64,664 $ - $ 396,803

Income from operations $ 43,390 $ 28,632 $ 21,952 $ ( 27,485 ) $ 66,489

Depreciation and

amortization expense

Depreciation and amortization expense $ 2,658 $ 2,905 $ 149 $ 227 $ 5,939

Interest income $ 4 $ 75 $ 85 $ - $ 164

Interest expense $ 3,056 $ 1,208 $ 4 $ - $ 4,268

February 28, 2022:

Net sales $ 172,238 $ 161,068 $ 55,093 $ - $ 388,399

Income from operations $ 36,594 $ 38,074 $ 18,328 $ ( 25,209 ) $ 67,787

Depreciation and

amortization expense

Depreciation and amortization expense $ 3,289 $ 2,377 $ 214 $ 260 $ 6,140

Interest income $ - $ - $ 73 $ - $ 73

Interest expense $ 1,502 $ 397 $ 3 $ - $ 1,902

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

(1) These expenses are reported separately from the Company’s identified segments and are included in Selling, General and Administrative expenses on the Company’s condensed consolidated statements of operations.

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.

Subsequent Event

Subsequent Events

Dividend Declaration

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 .

On June 20, 2023, the Company’s Board declared a cash dividend of $ 0.83 per share payable on July 31, 2023 to stockholders of record on July 14, 2023.

Share Repurchase Plan

On June 19, 2023, the Company’s Board approved a new share repurchase plan (the “2023 Repurchase Plan”).

Under the 2023 Repurchase Plan, which will become effective on September 1, 2023, the Company is authorized to acquire up to $ 50.0 million of its outstanding shares through August 31, 2025.

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