What changed in this filing

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Item 1. Financial Statements

2024-01-09 compared with 2023-07-10 · 113 added, 137 removed, 351 unchanged (42% of the section changed)

13 unchanged sentences

Other intangible assets, net 4,419 4,670

Operating lease right-of-use assets 7,981 7,559

Right-of-use assets 11,483 7,820

Deferred tax assets, net 1,194 1,201

17 unchanged sentences

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

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

19,911,495 and 19,905,815 shares issued at November 30, 2023 and August 31, 2023, respectively;

and 13,557,614 and 13,563,434 shares outstanding at November 30, 2023 and August 31, 2023, respectively

Additional paid-in capital 173,139 171,546

1 unchanged sentence

Accumulated other comprehensive loss ( 30,816 ) ( 31,206 )

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

Common stock held in treasury, at cost — 6,353,881 and 6,342,381 shares at November 30, 2023 and August 31, 2023, respectively

( 410,084 ) ( 407,670 )

1 unchanged sentence

Total liabilities and stockholders’ equity $ 430,606 $ 437,966

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements (unaudited).

WD-40 COMPANY

1 unchanged sentence

(Unaudited and in thousands, except per share amounts)

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

2023 2022 2023 2022

Three Months Ended November 30,

Net sales $ 140,416 $ 124,893

10 unchanged sentences

Interest expense ( 1,146 ) ( 1,169 )

Other income (expense), net 243 ( 42 ) 558 ( 119 )

Other (expense) income, net ( 40 ) 150

Income before income taxes 23,072 17,704

7 unchanged sentences

Diluted 13,584 13,609

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements (unaudited).

WD-40 COMPANY

1 unchanged sentence

(Unaudited and in thousands)

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

2023 2022 2023 2022

Three Months Ended November 30,

Net income $ 17,482 $ 13,997

2 unchanged sentences

Total comprehensive income $ 17,872 $ 15,333

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements (unaudited).

WD-40 COMPANY

17 unchanged sentences

Balance at November 30, 2023 19,911,495 $ 20 $ 173,139 $ 483,673 $ ( 30,816 ) 6,353,881 $ ( 410,084 ) $ 215,932

Stock-based compensation 2,261 2,261

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.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

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

Common Stock Additional

14 unchanged sentences

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

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.

See accompanying notes to condensed consolidated financial statements (unaudited).

WD-40 COMPANY

1 unchanged sentence

(Unaudited and in thousands)

Nine Months Ended May 31,

Three Months Ended November 30,

Operating activities:

2 unchanged sentences

Depreciation and amortization 2,261 1,896

Net losses (gains) on sales and disposals of property and equipment 20 ( 162 )

Net (gains) losses on sales and disposals of property and equipment ( 58 ) 122

Deferred income taxes 625 271

Stock-based compensation 2,271 2,719

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

Unrealized foreign currency exchange losses (gains) 322 ( 1,481 )

Provision for credit losses 42 30

26 unchanged sentences

Accrued capital expenditures

$ 813 $ 1,018

See accompanying notes to condensed consolidated financial statements.

Finance lease obligation settled with prepaid deposit $ 3,855 $ -

See accompanying notes to condensed consolidated financial statements (unaudited).

WD-40 COMPANY

6 unchanged sentences

Homecare and cleaning products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia.

The Company’s products are sold primarily through warehouse club stores, hardware stores, automotive parts outlets, industrial distributors and suppliers, mass retail and home center stores, value retailers, grocery stores, online retailers, farm supply, sport retailers, and independent bike dealers.

The Company’s products are sold primarily through hardware stores, automotive parts outlets, industrial distributors and suppliers, mass retail and home center stores, value retailers, grocery stores, online retailers, warehouse club stores, farm supply, sport retailers, and independent bike dealers.

Basis of Presentation and Summary of Significant Accounting Policies

19 unchanged sentences

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

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

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 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.

At November 30, 2023, the Company had a notional amount of $ 10.7 million outstanding in foreign currency forward contracts, which will mature in January 2024.

Unrealized net gains and losses related to foreign currency forward contracts were not significant at November 30, 2023 and August 31, 2023.

Realized net gains and losses related to foreign currency forward contracts were not significant for the three months ended November 30, 2023 and 2022.

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

Fair Value of Financial Instruments

5 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.

The Company has no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, except for foreign currency forward contracts, into which the Company enters from time to time, and are classified as Level 2 within the fair value hierarchy.

As of November 30, 2023, the Company had no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, except for 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 $ 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.

The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 59.1 million as of November 30, 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 $ 67.2 million.

During the three months ended November 30, 2023, the Company did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

Inventories consisted of the following (in thousands):

18 unchanged sentences

Total $ 65,704 $ 66,791

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 $ 0.7 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.

As of November 30, 2023 and August 31, 2023, the Company’s condensed consolidated balance sheets included $ 12.2 million and $ 11.0 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 implementation costs related to the new cloud-based enterprise resource planning system which the Company is in the process of implementing.

Accumulated amortization associated with these assets was $ 0.8 million and $ 0.7 million as of November 30, 2023 and August 31, 2023, respectively.

Amortization expense associated with these assets was not significant for the three months ended November 30, 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

Americas EIMEA Asia-Pacific Total

Balance as of August 31, 2023 $ 85,436 $ 8,860 $ 1,209 $ 95,505

Translation adjustments 1 7 - 8

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.

Balance as of November 30, 2023 $ 85,437 $ 8,867 $ 1,209 $ 95,513

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 November 30, 2023.

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

6 unchanged sentences

Net carrying amount $ 4,419 $ 4,670

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

There has been no impairment charge for the three months ended November 30, 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 three months ended November 30, 2023 are summarized below (in thousands):

Americas EIMEA Asia-Pacific Total

Balance as of August 31, 2023 $ 3,624 $ 1,046 $ - $ 4,670

1 unchanged sentence

Translation adjustments - - - -

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

Balance as of November 30, 2023 $ 3,422 $ 997 $ - $ 4,419

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

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

2023 August 31,

Operating lease right-of-use assets $ 7,660 $ 7,820

Finance lease right-of-use asset 3,823 -

Total right-of-use assets $ 11,483 $ 7,820

Current operating lease liabilities (1)

$ 2,029 $ 2,144

Long-term operating lease liabilities 5,793 5,832

Total operating lease liabilities $ 7,822 $ 7,976

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

During the three months ended November 30, 2023, the Company entered into a finance lease for a blending facility (the “Finance Lease”).

As of August 31, 2023, the Company had $ 3.8 million of prepaid deposits, which converted to a right-of-use asset at the commencement of the Finance Lease during the three months ended November 30, 2023.

Since the Finance Lease was fully prepaid at commencement, no lease liability exists related to it as of November 30, 2023.

Accrued and Other Liabilities

16 unchanged sentences

Total $ 15,785 $ 16,722

As of May 31, 2023, the Company held borrowings under two separate agreements as detailed below.

As of November 30, 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 May 31, 2023, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement.

As of November 30, 2023, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement.

Credit Agreement

The Company’s Amended and Restated Credit Agreement, as amended (the “Credit Agreement”) with Bank of America, N.A.

consists of a revolving commitment for borrowing by the Company up to $ 150.0 million with a sublimit of $ 100.0 million for WD-40 Company Limited, a wholly owned operating subsidiary of the Company for Europe, the Middle East, Africa and India.

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

3 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,

Issuance Maturities November 30,

2023 August 31,

12 unchanged sentences

Total long-term borrowings $ 86,173 $ 109,743

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

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 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.

(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 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, 2023, $ 19.8 million of this facility was classified as long-term and was entirely denominated in Euros.

$ 23.6 million was classified as short-term and was denominated in U.S.

Dollars and Pounds Sterling.

As of August 31, 2023, $ 42.9 million on this facility was classified as long-term and was denominated in Euros and Pounds Sterling.

$ 10.0 million was classified as short-term and was 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 May 31, 2023, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement.

As of November 30, 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 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.

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

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

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 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.

During the three months ended November 30, 2023, the Company repurchased 11,500 shares at an average price of $ 209.90 per share, for a total cost of $ 2.4 million under this $ 50.0 million plan.

Earnings per Common Share

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

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

2023 2022 2023 2022

Three Months Ended November 30,

Net income $ 17,482 $ 13,997

2 unchanged sentences

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

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

2023 2022 2023 2022

Three Months Ended November 30,

Weighted-average common shares outstanding, basic 13,560 13,590

1 unchanged sentence

Weighted-average common shares outstanding, diluted 13,584 13,609

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

Disaggregation of Revenue

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

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

For the three months ended November 30, 2023 and 2022, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 5,404 and 7,471 , respectively, were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive .

The following table presents the Company’s revenues by segment and major source (in thousands):

Three Months Ended November 30, 2023

Americas EIMEA Asia-Pacific Total

WD-40 Multi-Use Product $ 48,511 $ 37,044 $ 22,122 $ 107,677

WD-40 Specialist 7,108 6,666 3,068 16,842

Other maintenance products (1)

4,126 3,062 438 7,626

Total maintenance products 59,745 46,772 25,628 132,145

4,330 1,982 1,959 8,271

Total net sales $ 64,075 $ 48,754 $ 27,587 $ 140,416

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

Three Months Ended November 30, 2022

Americas EIMEA Asia-Pacific Total

WD-40 Multi-Use Product $ 43,157 $ 30,178 $ 21,252 $ 94,587

WD-40 Specialist 6,825 6,011 2,570 15,406

Other maintenance products (1)

3,589 2,540 190 6,319

Total maintenance products 53,571 38,729 24,012 116,312

4,443 2,043 2,095 8,581

Total net sales $ 58,014 $ 40,772 $ 26,107 $ 124,893

(1) Other maintenance products consist of the 3-IN-ONE and GT85 brands.

(2) Homecare and cleaning products (“HCCP”).

3 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 $ 2.6 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.

The Company had contract liabilities of $ 3.1 million and $ 4.6 million as of November 30, 2023 and August 31, 2023, respectively.

Substantially all of the $ 4.6 million that was included in contract liabilities as of August 31, 2023 was recognized to revenue during the three months ended November 30, 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 not have any contract assets as of May 31, 2023 and August 31, 2022.

The Company did not have any contract assets as of November 30, 2023 and August 31, 2023.

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 May 31, 2023 and August 31, 2022.

These receivables are presented net of an allowance for credit losses, which was insignificant as of November 30, 2023 and August 31, 2023.

Commitments and Contingencies

1 unchanged sentence

The Company has ongoing relationships with various suppliers (contract manufacturers) that manufacture the Company’s products and third-party distribution centers that warehouse and ship the Company’s products to customers.

The contract manufacturers maintain title and control of certain raw materials and components, materials utilized in finished products, and the finished products themselves until shipment to the Company’s third-party distribution centers or customers in accordance with agreed upon shipment terms.

Although the Company has definitive minimum purchase obligations included in the contract terms with certain of its contract manufacturers, when such obligations have been included, they have either been immaterial or the minimum amounts have been such that they are well below the volume of goods that the Company has historically purchased.

manufacturers maintain title and control of certain raw materials and components, materials utilized in finished products, and the finished products themselves until shipment to the Company’s third-party distribution centers or customers in accordance with agreed upon shipment terms.

Although the Company has contractual minimum purchase obligations with certain contract manufacturers, such obligations are immaterial or well below the volume of goods that the Company has historically purchased.

In the ordinary course of business, supply needs are communicated by the Company to its contract manufacturers based on orders and short-term projections, ranging from two months to six months .

4 unchanged sentences

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

As of May 31, 2023, no such commitments were outstanding.

As of November 30, 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 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 of November 30, 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 May 31, 2023.

Thus, no liabilities have been recorded for these agreements as of November 30, 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 May 31, 2023.

Thus, no liabilities have been recorded with respect to such indemnification agreements as of November 30, 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 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 provision for income taxes was 24.2 % and 20.9 % of income before income taxes for the three months ended November 30, 2023 and 2022, respectively.

This 3.3 % increase in the effective tax rate from period to period was primarily due to the following impacts:

Description of impacts on the Company’s estimated annual effective tax rate

Unfavorable/(Favorable)

A non-recurring charitable donation made in the first quarter of fiscal year 2023.

Higher tax rates in certain foreign jurisdictions from period to period.

Lower shortfalls from the settlements of stock-based equity awards in the first quarter of fiscal year 2024.

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

11 unchanged sentences

and Asia-Pacific.

Segment data does not include inter-segment revenues.

Unallocated corporate expenses are general corporate overhead expenses not directly attributable to the business segments and are reported separate from the Company’s identified segments.

The corporate overhead costs include expenses for the Company’s accounting and finance, information technology, human resources, research and development, quality control and executive management functions, as well as all direct costs associated with public company compliance matters including legal, audit and other professional services costs.

Corporate overhead costs include expenses for the Company’s accounting and finance, information technology, human resources, research and development, quality control and executive management functions, as well as all direct costs associated with public company compliance matters including legal, audit and other professional services costs.

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

For the Three Months Ended Americas EMEA Asia-Pacific Unallocated

For the Three Months Ended Americas EIMEA Asia-Pacific Unallocated

Corporate (1)

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 $ 911 $ 1,035 $ 53 $ 76 $ 2,075

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

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

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 $ 1,077 $ 780 $ 70 $ 131 $ 2,058

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

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

For the Nine Months Ended

November 30, 2023

Net sales $ 64,075 $ 48,754 $ 27,587 $ - $ 140,416

1 unchanged sentence

Depreciation and amortization expense (2)

$ 1,051 $ 1,074 $ 57 $ 79 $ 2,261

Interest income $ - $ 46 $ 28 $ - $ 74

Interest expense $ 560 $ 584 $ 2 $ - $ 1,146

November 30, 2022

Net sales $ 58,014 $ 40,772 $ 26,107 $ - $ 124,893

1 unchanged sentence

Depreciation and amortization expense (2)

$ 878 $ 897 $ 45 $ 76 $ 1,896

Interest income $ 4 $ 9 $ 31 $ - $ 44

Interest expense $ 890 $ 279 $ - $ - $ 1,169

(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.

(1) These expenses are reported separately from the Company’s identified segments and are included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

(2) Amortization presented above includes amortization of definite-lived intangible assets and excludes amortization of implementation costs associated with cloud computing arrangements.

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 Events

Subsequent Event

Dividend Declaration

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.

On December 12, 2023, the Company’s Board approved a 6 % increase in the regular quarterly cash dividend, increasing it from $ 0.83 per share to $ 0.88 per share.

The $ 0.88 per share dividend declared on December 12, 2023 is payable on January 31, 2024 to stockholders of record on January 19, 2024.

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