WD 40 CO 10-Q

Item 1. Financial Statements WD-40 COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except share and per share amounts) May 31, 2024 August 31, 2023 Assets Current assets: Cash and cash equivalents $ 45,300 $ 48,143 Trade and other accounts receivable, net 116,434 98,039 Inventories 76,576 86,522 Other current assets 10,453 15,821 Total current assets 248,763 248,525 Property and equipment, net 63,903 66,791 Goodwill 96,927 95,505 Other intangible assets, net 6,682 4,670 Right-of-use assets 11,590 7,820 Deferred tax assets, net 1,197 1,201 Other assets 14,548 13,454 Total assets $ 443,610 $ 437,966 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 32,377 $ 30,826 Accrued liabilities 29,697 30,000 Accrued payroll and related expenses 18,740 16,722 Short-term borrowings 22,316 10,800 Income taxes payable 2,111 494 Total current liabilities 105,241 88,842 Long-term borrowings 85,473 109,743 Deferred tax liabilities, net 10,844 10,305 Long-term operating lease liabilities 6,072 5,832 Other long-term liabilities 13,738 13,066 Total liabilities 221,368 227,788 Commitments and Contingencies (Note 13) Stockholders’ equity: Common stock — authorized 36,000,000 shares, $ 0.001 par value; 19,924,268 and 19,905,815 shares issued at May 31, 2024 and August 31, 2023, respectively; and 13,547,637 and 13,563,434 shares outstanding at May 31, 2024 and August 31, 2023, respectively 20 20 Additional paid-in capital 174,177 171,546 Retained earnings 495,109 477,488 Accumulated other comprehensive loss ( 31,300 ) ( 31,206 ) Common stock held in treasury, at cost — 6,376,631 and 6,342,381 shares at May 31, 2024 and August 31, 2023, respectively ( 415,764 ) ( 407,670 ) Total stockholders’ equity 222,242 210,178 Total liabilities and stockholders’ equity $ 443,610 $ 437,966 See accompanying notes to condensed consolidated financial statements (unaudited). 3 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except per share amounts) Three Months Ended May 31, Nine Months Ended May 31, 2024 2023 2024 2023 Net sales $ 155,045 $ 141,717 $ 434,566 $ 396,803 Cost of products sold 72,657 69,955 203,684 194,708 Gross profit 82,388 71,762 230,882 202,095 Operating expenses: Selling, general and administrative 45,564 38,195 134,722 115,869 Advertising and sales promotion 9,345 7,660 23,053 18,984 Amortization of definite-lived intangible assets 303 250 806 753 Total operating expenses 55,212 46,105 158,581 135,606 Income from operations 27,176 25,657 72,301 66,489 Other income (expense): Interest income 136 69 276 164 Interest expense ( 1,182 ) ( 1,597 ) ( 3,336 ) ( 4,268 ) Other (expense) income, net ( 283 ) 243 ( 516 ) 558 Income before income taxes 25,847 24,372 68,725 62,943 Provision for income taxes 6,005 5,477 15,865 13,525 Net income $ 19,842 $ 18,895 $ 52,860 $ 49,418 Earnings per common share: Basic $ 1.46 $ 1.39 $ 3.89 $ 3.62 Diluted $ 1.46 $ 1.38 $ 3.88 $ 3.62 Shares used in per share calculations: Basic 13,552 13,573 13,556 13,582 Diluted 13,577 13,600 13,581 13,606 See accompanying notes to condensed consolidated financial statements (unaudited). 4 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited and in thousands) Three Months Ended May 31, Nine Months Ended May 31, 2024 2023 2024 2023 Net income $ 19,842 $ 18,895 $ 52,860 $ 49,418 Other comprehensive income (loss): Foreign currency translation adjustment ( 51 ) 1,955 ( 94 ) 3,299 Total comprehensive income $ 19,791 $ 20,850 $ 52,766 $ 52,717 See accompanying notes to condensed consolidated financial statements (unaudited). 5 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited and in thousands, except share and per share amounts) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at August 31, 2023 19,905,815 $ 20 $ 171,546 $ 477,488 $ ( 31,206 ) 6,342,381 $ ( 407,670 ) $ 210,178 Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 5,680 - ( 678 ) ( 678 ) Stock-based compensation 2,271 2,271 Cash dividends ($ 0.83 per share) ( 11,297 ) ( 11,297 ) Repurchases of common stock 11,500 ( 2,414 ) ( 2,414 ) Foreign currency translation adjustment 390 390 Net income 17,482 17,482 Balance at November 30, 2023 19,911,495 $ 20 $ 173,139 $ 483,673 $ ( 30,816 ) 6,353,881 $ ( 410,084 ) $ 215,932 Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 8,554 - ( 1,742 ) ( 1,742 ) Stock-based compensation 1,866 1,866 Cash dividends ($ 0.88 per share) ( 11,976 ) ( 11,976 ) Repurchases of common stock 11,500 ( 2,905 ) ( 2,905 ) Foreign currency translation adjustment ( 433 ) ( 433 ) Net income 15,536 15,536 Balance at February 29, 2024 19,920,049 $ 20 $ 173,263 $ 487,233 $ ( 31,249 ) 6,365,381 $ ( 412,989 ) $ 216,278 Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 4,219 - - - Stock-based compensation 914 914 Cash dividends ($ 0.88 per share) ( 11,966 ) ( 11,966 ) Repurchases of common stock 11,250 ( 2,775 ) ( 2,775 ) Foreign currency translation adjustment ( 51 ) ( 51 ) Net income 19,842 19,842 Balance at May 31, 2024 19,924,268 $ 20 $ 174,177 $ 495,109 $ ( 31,300 ) 6,376,631 $ ( 415,764 ) $ 222,242 See accompanying notes to condensed consolidated financial statements (unaudited). 6 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited and in thousands, except share and per share amounts) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity 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 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 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 (unaudited). 7 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) Nine Months Ended May 31, 2024 2023 Operating activities: Net income $ 52,860 $ 49,418 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,186 5,939 Net (gains) losses on sales and disposals of property and equipment ( 141 ) 20 Deferred income taxes 539 ( 376 ) Stock-based compensation 5,051 5,793 Amortization of cloud computing implementation costs 650 212 Unrealized foreign currency exchange losses (gains) 108 ( 1,780 ) Provision for credit losses 325 18 Write-off of inventories 1,347 693 Changes in assets and liabilities: Trade and other accounts receivable ( 15,771 ) ( 9,015 ) Inventories 9,137 9,826 Other assets ( 186 ) ( 538 ) Operating lease assets and liabilities, net ( 26 ) 55 Accounts payable and accrued liabilities ( 347 ) ( 7,086 ) Accrued payroll and related expenses 1,915 1,470 Other long-term liabilities and income taxes payable 2,177 944 Net cash provided by operating activities 64,824 55,593 Investing activities: Purchases of property and equipment ( 3,359 ) ( 4,650 ) Proceeds from sales of property and equipment 457 437 Acquisition of business, net of cash acquired ( 6,201 ) - Net cash used in investing activities ( 9,103 ) ( 4,213 ) Financing activities: Treasury stock purchases ( 8,094 ) ( 7,434 ) Dividends paid ( 35,239 ) ( 33,273 ) Repayments of long-term senior notes ( 800 ) ( 800 ) Net repayments from revolving credit facility ( 11,592 ) ( 11,917 ) Shares withheld to cover taxes upon conversions of equity awards ( 2,420 ) ( 600 ) Net cash used in financing activities ( 58,145 ) ( 54,024 ) Effect of exchange rate changes on cash and cash equivalents ( 419 ) 3,204 Net (decrease) increase in cash and cash equivalents ( 2,843 ) 560 Cash and cash equivalents at beginning of period 48,143 37,843 Cash and cash equivalents at end of period $ 45,300 $ 38,403 Supplemental disclosure of noncash investing activities: Accrued capital expenditures $ 205 $ 813 Finance lease obligation settled with prepaid deposit $ 3,855 $ — See accompanying notes to condensed consolidated financial statements (unaudited). 8 Table of Contents WD-40 COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. The Company 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. The Company owns a wide range of brands that include maintenance products and homecare and cleaning products: WD-40® Multi-Use Product, WD-40 Specialist®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and Solvol®. The Company’s products are sold in various locations around the world. Maintenance products are sold worldwide in markets throughout North, Central and South America, Asia, Australia, Europe, India, the Middle East and Africa. 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 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. Note 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Consolidation 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. The August 31, 2023 year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management, the unaudited financial information for the interim periods shown reflects all adjustments necessary for a fair statement thereof and such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the SEC on October 23, 2023. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. Global economies 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 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 In the normal course of business, the Company employs established policies and procedures to manage its exposure to fluctuations in foreign currency exchange rates. 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. subsidiary. 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. 9 Table of Contents 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. 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, 2024, the Company had a notional amount of $ 4.1 million outstanding in foreign currency forward contracts, which matured in June 2024. Unrealized net gains and losses related to foreign currency forward contracts were not significant at May 31, 2024 and August 31, 2023. Realized net gains and losses related to foreign currency forward contracts were not significant for the three and nine months ended May 31, 2024 and 2023. Both unrealized and realized net gains and losses are recorded in other (expense) income, net in the Company’s condensed consolidated statements of operations. Functional Currencies The reporting currency of the Company is the U.S. Dollar. The functional currency of each of the Company’s subsidiaries is based on the currency of the economic environment in which it operates. Management periodically assesses the functional currency of each subsidiary in accordance with Accounting Standards Codification (“ASC”) 830, “ Foreign Currency Matters ”. The functional currency of the Company’s U.K. subsidiary, the entity in which the EIMEA results are generated, is the Pound Sterling. Trends within EIMEA have indicated a shift towards the Euro over time, particularly those pertaining to sales, cost of products sold and operating expenses. Management expects these trends may become other-than-temporary in a future period, which could result in a change in functional currency from Pound Sterling to Euro in that period. While the Company is in the process of evaluating the materiality of the overall impact of such a change, it does not expect that the impact to income from operations would be material. Fair Value of Financial Instruments ASC 820, “ Fair Value Measurements and Disclosures ”, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes its financial assets and liabilities measured at fair value into a hierarchy that categorizes fair value measurements into the following three levels based on the types of inputs used in measuring their fair value: Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities; Level 2: Observable market-based inputs or observable inputs that are corroborated by market data; and Level 3: Unobservable inputs reflecting the Company’s own assumptions. Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of May 31, 2024, 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. In addition, the carrying value of borrowings held under the Company’s revolving credit facility approximates fair value, based on Level 2 inputs, due to the variable nature of underlying interest rates, which generally reflect market conditions. 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 $ 58.9 million as of May 31, 2024, 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 $ 66.8 million. During the nine months ended May 31, 2024, the Company did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition. Recently Issued Accounting Standards In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” These amendments primarily require enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments are effective for the Company’s annual periods beginning September 1, 2024, and interim periods beginning September 1, 2025, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. The Company is in the process of evaluating this ASU to determine its impact on the Company’s disclosures. 10 Table of Contents In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning September 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU to determine its impact on the Company’s disclosures . Note 3. Acquisitions On March 4, 2024, WD-40 Holding Company Brasil Ltda., a wholly-owned subsidiary of the Company, acquired all of the issued and outstanding capital stock of the Company’s Brazilian distributor, Theron Marketing Ltda. (“Theron”), from M12 Participações Empresarias S.A. for total consideration of $ 6.9 million. Contingent consideration of $ 0.3 million is included in the total purchase price and recorded as a liability in the Company’s condensed consolidated balance sheets. With this transaction, the Company began direct distribution within Brazil in March 2024. Under the terms of the purchase agreement, the Company acquired assets with approximate fair values of $ 3.0 million of intangible assets, including customer relationships and a non-compete agreement, $ 3.4 million of accounts receivable, $ 0.6 million of inventory, and assumed liabilities with an approximate fair value of $ 1.6 million. The total consideration paid less the fair value of net assets acquired resulted in $ 1.5 million of goodwill. Transaction-related expenses were not material. The following table summarizes the fair value of assets acquired and liabilities assumed on the condensed consolidated balance sheets as of March 4, 2024 (in thousands): March 4, 2024 Fair value of consideration paid Cash, net of cash acquired $ 6,201 Other consideration 703 Total consideration paid 6,904 Fair value of assets acquired Definite-lived intangible assets 2,959 Tangible assets acquired 4,069 Total assets 7,028 Fair value of liabilities assumed 1,604 Fair value of net assets acquired 5,424 Goodwill incident to acquisition $ 1,481 The transaction was treated as a business combination. The Company recognized goodwill of $ 1.5 million as of March 4, 2024, which is calculated as the excess of the consideration exchanged as compared to the fair value of identifiable assets acquired. The Company’s accounting for the acquisition has not been finalized and could necessitate a one-year measurement period of determination from the acquisition date. Goodwill is expected to be deductible for tax purposes. See Note 6 to the condensed consolidated financial statements for further information on goodwill and other intangible assets. Pro forma results are not presented because they are not material to the Company’s consolidated financial results. 11 Table of Contents Note 4. Inventories Inventories consisted of the following (in thousands): May 31, 2024 August 31, 2023 Product held at third-party contract manufacturers $ 6,749 $ 6,680 Raw materials and components 10,673 11,924 Work-in-process 759 497 Finished goods 58,395 67,421 Total $ 76,576 $ 86,522 Note 5. Property and Equipment and Capitalized Cloud-Based Software Implementation Costs Property and equipment, net, consisted of the following (in thousands): May 31, 2024 August 31, 2023 Machinery, equipment and vehicles $ 55,083 $ 49,804 Buildings and improvements 27,941 27,555 Computer and office equipment 6,582 6,151 Internal-use software 10,179 11,277 Furniture and fixtures 3,082 3,027 Capital in progress 3,414 7,937 Land 4,222 4,220 Subtotal 110,503 109,971 Less: accumulated depreciation and amortization ( 46,600 ) ( 43,180 ) Total $ 63,903 $ 66,791 As of May 31, 2024 and August 31, 2023, the Company’s condensed consolidated balance sheets included $ 12.4 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 a new cloud-based enterprise resource planning (“ERP”) system which the Company placed into service in the U.S. during the second quarter of fiscal year 2024. The useful lives of the Company’s internal-use software and capitalized cloud computing implementation costs are generally three to five years . However, the useful lives of major information system installations such as implementations of ERP systems and certain related software are determined on an individual basis and may exceed five years depending on the estimated period of use. The Company has determined the useful life of the new ERP system to be ten years and is amortizing over such period. Accumulated amortization associated with these assets was $ 1.4 million and $ 0.7 million as of May 31, 2024 and August 31, 2023, respectively. Amortization expense associated with these assets was $ 0.6 million for the nine months ended May 31, 2024 and was not significant for three months ended May 31, 2024 or for the three and nine months ended May 31, 2023. Note 6. Goodwill and Other Intangible Assets Goodwill The Company recorded goodwill on March 4, 2024 incident to its acquisition of Theron. At the time of acquisition a fair value study was conducted to determine the goodwill created as part of the transaction. 12 Table of Contents The following table summarizes the changes in the carrying amounts of goodwill by segment (in thousands): Americas EIMEA Asia-Pacific Total Balance as of August 31, 2023 $ 85,436 $ 8,860 $ 1,209 $ 95,505 Goodwill incident to acquisition 1,481 - - 1,481 Translation adjustments ( 71 ) 12 - ( 59 ) Balance as of May 31, 2024 $ 86,846 $ 8,872 $ 1,209 $ 96,927 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, 2024. To date, there have been no impairment losses identified and recorded related to the Company’s goodwill. Definite-lived Intangible Assets The Company’s definite-lived intangible assets include the Spot Shot, Carpet Fresh, 1001, EZ REACH and GT85 trade names at both May 31, 2024 and August 31, 2023. In addition, intangible assets related to customer relationships and a non-compete agreement were acquired in connection with the Company’s purchase of Theron during the nine months ended May 31, 2024. All of these assets are included in other intangible assets, net in the Company’s condensed consolidated balance sheets. The weighted-average useful life of the customer relationships and non-compete agreement acquired from Theron is 14.80 years. The following table summarizes the definite-lived intangible assets and the related accumulated amortization (in thousands): May 31, 2024 August 31, 2023 Gross carrying amount $ 35,862 $ 35,877 Definite-lived intangible assets acquired 2,959 - Accumulated amortization ( 32,139 ) ( 31,207 ) Net carrying amount $ 6,682 $ 4,670 There has been no impairment charge for the nine months ended May 31, 2024 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, 2024 are summarized below (in thousands): Americas EIMEA Asia-Pacific Total Balance as of August 31, 2023 $ 3,624 $ 1,046 - $ 4,670 Definite-lived intangible assets acquired 2,959 - - 2,959 Amortization expense ( 656 ) ( 150 ) - ( 806 ) Translation adjustments ( 135 ) ( 6 ) - ( 141 ) Balance as of May 31, 2024 $ 5,792 $ 890 - $ 6,682 The estimated amortization expense for the Company’s definite-lived intangible assets is not significant in any future individual fiscal year. 13 Table of Contents Note 7. Leases Right-of-use assets and lease liabilities consisted of the following (in thousands): May 31, 2024 August 31, 2023 Assets: Operating lease right-of-use assets $ 7,960 $ 7,820 Finance lease right-of-use asset 3,630 - Total right-of-use assets $ 11,590 $ 7,820 Liabilities: Current operating lease liabilities (1) $ 1,997 $ 2,144 Long-term operating lease liabilities 6,072 5,832 Total operating lease liabilities $ 8,069 $ 7,976 (1) Current operating lease liabilities are classified in accrued liabilities on the Company’s condensed consolidated balance sheets. During the nine months ended May 31, 2024, 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 nine months ended May 31, 2024. Since the Finance Lease was fully prepaid at commencement, no lease liability exists related to it . Note 8. Accrued and Other Liabilities Accrued liabilities consisted of the following (in thousands): May 31, 2024 August 31, 2023 Accrued advertising and sales promotion expenses $ 15,283 $ 14,472 Accrued professional services fees 2,405 1,924 Accrued sales taxes and other taxes 3,134 2,618 Deferred revenue 2,185 4,552 Short-term operating lease liability 1,997 2,144 Other 4,693 4,290 Total $ 29,697 $ 30,000 Accrued payroll and related expenses consisted of the following (in thousands): May 31, 2024 August 31, 2023 Accrued incentive compensation $ 7,661 $ 6,698 Accrued payroll 5,508 4,298 Accrued payroll taxes 2,218 1,650 Accrued profit sharing 2,785 3,561 Other 568 515 Total $ 18,740 $ 16,722 14 Table of Contents Note 9. Debt As of May 31, 2024, the Company held borrowings under two separate agreements as detailed below. Note Purchase and Private Shelf Agreement The Company holds borrowings under its Note Purchase and Private Shelf Agreement, as amended (the “Note Agreement”) by and among the Company, PGIM, Inc. (“Prudential”), and certain affiliates and managed accounts of Prudential (the “Note Purchasers”). As of May 31, 2024, the Company had outstanding balances on its series A, B and C notes issued under this Note Agreement. The Note Agreement was most recently amended on April 30, 2024 (the “Fourth Amendment”). The Fourth Amendment permitted the Company to enter into an amendment to its revolving credit agreement with Bank of America and also included certain conforming amendments to the credit agreement, including the revision of financial and restrictive covenants. Credit Agreement On April 30, 2024, the Company and certain subsidiaries of the Company, entered into a Second Amended and Restated Credit Agreement with Bank of America, N.A. (the “Credit Agreement”). The Credit Agreement modified certain terms and conditions of the Company’s previous Amended and Restated Agreement dated March 16, 2020 (as amended on September 30, 2020, and November 29, 2021), and extended the maturity date for the revolving credit facility from September 30, 2025 to April 30, 2029. Borrowings under the Credit Agreement will be used for the Company’s various operating, investing and financing needs. The Company’s Credit Agreement decreased the revolving commitment for borrowing by the Company from $ 150.0 million to $ 125.0 million and decreased the sublimit from $ 100.0 million to $ 95.0 million for WD-40 Company Limited, a wholly owned operating subsidiary of the Company for Europe, India, the Middle East and Africa. In addition, the Company’s index rate under the Credit Agreement for U.S. Dollar borrowings changed from the Bloomberg Short-term Bank Yield Index rate to the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York. 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, 2024 August 31, 2023 Credit Agreement – revolving credit facility (1) Various 4/30/2029 $ 40,989 $ 52,943 Note Agreement Series A Notes – 3.39 % fixed rate (2) 11/15/2017 2024-2032 14,800 15,600 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 107,789 120,543 Short-term portion of borrowings ( 22,316 ) ( 10,800 ) Total long-term borrowings $ 85,473 $ 109,743 (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 May 31, 2024, $ 19.5 million of this facility was classified as long-term and was entirely denominated in Euros. $ 21.5 million was classified as short-term and was denominated in U.S. Dollars. 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. Dollars. Euro and Pound Sterling denominated draws fluctuate in U.S. Dollars from period to period due to changes in foreign currency exchange rates. (2) Principal payments are required semi-annually in May and November of each year in equal installments of $ 0.4 million through May 15, 2032, resulting in $ 0.8 million classified as short-term. The remaining outstanding principal in the amount of $ 8.4 million will become due on November 15, 2032. (3) Interest on notes is payable semi-annually in May and November of each year with no principal due until the maturity date. 15 Table of Contents Both the Note Agreement and the Credit Agreement contain representations, warranties, events of default and remedies, as well as affirmative, negative and other financial covenants customary for these types of agreements. These covenants include, among other things, certain limitations on the ability of the Company and its subsidiaries to incur indebtedness, create liens, dispose of assets, make investments, declare, make or incur obligations to make certain restricted payments, including payments for the repurchase of the Company’s capital stock and enter into certain merger or consolidation transactions. The Credit Agreement includes, among other limitations on indebtedness, a $ 125.0 million limit on other unsecured indebtedness. Each agreement also includes a most favored lender provision which requires that any time any other lender has the benefit of one or more financial or operational covenants that is different than, or similar to, but more restrictive than those contained in its own agreement, those covenants shall be immediately and automatically incorporated by reference to the other lender’s agreement. Both the Note Agreement and the Credit Agreement require the Company to adhere to the same financial covenants. For the financial covenants, the definition of consolidated EBITDA includes the add back of non-cash stock-based compensation to consolidated net income when arriving at consolidated EBITDA. The terms of the financial covenants are as follows: • The consolidated leverage ratio cannot be greater than three and a half to one. The consolidated leverage ratio means, as of any date of determination, the ratio of (a) consolidated funded indebtedness as of such date to (b) consolidated EBITDA for the most recently completed four fiscal quarters. • The consolidated interest coverage ratio cannot be less than three to one. 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, 2024, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement. Note 10. Share Repurchase Plan 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 nine months ended May 31, 2024, the Company repurchased 34,250 shares at an average price of $ 236.32 per share, for a total cost of $ 8.1 million under this $ 50.0 million plan. Note 11. 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, 2024 2023 2024 2023 Net income $ 19,842 $ 18,895 $ 52,860 $ 49,418 Less: Net income allocated to participating securities ( 67 ) ( 82 ) ( 189 ) ( 207 ) Net income available to common stockholders $ 19,775 $ 18,813 $ 52,671 $ 49,211 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, 2024 2023 2024 2023 Weighted-average common shares outstanding, basic 13,552 13,573 13,556 13,582 Weighted-average dilutive securities 25 27 25 24 Weighted-average common shares outstanding, diluted 13,577 13,600 13,581 13,606 16 Table of Contents For the three months ended May 31, 2024, there were no anti-dilutive stock-based equity awards outstanding. For the nine months ended May 31, 2024, weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 1,801 were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive. 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. Note 12. Revenue The following table presents the Company’s revenues by segment and major source (in thousands): Three Months Ended May 31, 2024 Nine Months Ended May 31, 2024 Americas EIMEA Asia-Pacific Total Americas EIMEA Asia-Pacific Total WD-40 Multi-Use Product $ 58,559 $ 45,402 $ 15,092 $ 119,053 $ 156,113 $ 124,018 $ 53,833 $ 333,964 WD-40 Specialist $ 9,034 $ 8,407 $ 2,783 $ 20,224 $ 23,232 $ 22,598 $ 8,053 $ 53,883 Other maintenance products (1) $ 4,333 $ 3,317 $ 235 $ 7,885 $ 12,462 $ 9,388 $ 849 $ 22,699 Total maintenance products $ 71,926 $ 57,126 $ 18,110 $ 147,162 $ 191,807 $ 156,004 $ 62,735 $ 410,546 HCCP (2) $ 3,177 $ 2,273 $ 2,433 $ 7,883 $ 10,878 $ 6,462 $ 6,680 $ 24,020 Total net sales $ 75,103 $ 59,399 $ 20,543 $ 155,045 $ 202,685 $ 162,466 $ 69,415 $ 434,566 Three Months Ended May 31, 2023 Nine Months Ended May 31, 2023 Americas EIMEA Asia-Pacific Total Americas EIMEA Asia-Pacific Total WD-40 Multi-Use Product $ 54,592 $ 38,932 $ 13,627 $ 107,151 $ 146,154 $ 104,770 $ 51,076 $ 302,000 WD-40 Specialist $ 8,209 $ 7,544 $ 2,133 $ 17,886 21,910 19,677 6,979 48,566 Other maintenance products (1) $ 4,634 $ 3,245 $ 409 $ 8,288 12,068 8,354 753 21,175 Total maintenance products $ 67,435 $ 49,721 $ 16,169 $ 133,325 180,132 132,801 58,808 371,741 HCCP (2) 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 (1) Other maintenance products consist of the 3-IN-ONE and GT85 brands. (2) Homecare and cleaning products (“HCCP”). Contract Balances Contract liabilities consist of deferred revenue related to undelivered products. Deferred revenue is recorded when payments have been received from customers for undelivered products. Revenue is subsequently recognized when revenue recognition criteria are met, generally when control of the product transfers to the customer. The Company had contract liabilities of $ 2.2 million and $ 4.6 million as of May 31, 2024 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 nine months ended May 31, 2024. 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, 2024 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 credit losses of $ 1.3 million as of May 31, 2024 and which was not significant as of August 31, 2023. 17 Table of Contents Note 13. Commitments and Contingencies Purchase Commitments 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 contractual minimum purchase obligations with certain contract manufacturers, such obligations are either immaterial or 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 . 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. 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 May 31, 2024, no such commitments were outstanding. Litigation 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, 2024, 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. Indemnifications As permitted under Delaware law, the Company has agreements whereby it indemnifies senior officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company maintains Director and Officer insurance coverage that mitigates the Company’s exposure with respect to such obligations. As a result of the Company’s insurance coverage, management believes that the estimated fair value of these indemnification agreements is minimal. Thus, no liabilities have been recorded for these agreements as of May 31, 2024. From time to time, the Company enters into indemnification agreements with certain contractual parties in the ordinary course of business, including agreements with lenders, lessors, contract manufacturers, marketing distributors, customers and certain vendors. All such indemnification agreements are entered into in the context of the particular agreements and are provided in an attempt to allocate risk of loss in connection with the consummation of the underlying contractual arrangements. Although the maximum amount of future payments that the Company could be required to make under these indemnification agreements is unlimited, management believes that the Company maintains adequate levels of insurance coverage to protect the Company with respect to most potential claims arising from such agreements and that such agreements do not otherwise have value separate and apart from the liabilities incurred in the ordinary course of the Company’s business. Thus, no liabilities have been recorded with respect to such indemnification agreements as of May 31, 2024. Note 14. Income Taxes 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 18 Table of Contents 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 23.2 % and 22.5 % of income before income taxes for the three months ended May 31, 2024 and 2023, respectively. This 0.7 % 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) Higher tax rates in certain foreign jurisdictions from period to period 1.7 % An increase in benefit from the high tax exception associated with global intangible low-taxed income ( 1.1 )% The provision for income taxes was 23.1 % and 21.5 % of income before income taxes for the nine months ended May 31, 2024 and 2023, respectively. This 1.6 % 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) Higher tax rates in certain foreign jurisdictions from period to period 1.5 % A non-recurring charitable donation made in the first quarter of fiscal year 2023 1.2 % Lower shortfalls from the settlements of stock-based equity awards in fiscal year 2024 ( 0.8 )% An increase in benefit from the high tax exception associated with global intangible low-taxed income ( 0.7 )% The Company is subject to taxation in the U.S. and in various state and foreign jurisdictions. Due to expired statutes, the Company’s federal income tax returns for years prior to fiscal year 2018 are not subject to examination by the U.S. Internal Revenue Service. Generally, for the majority of state and foreign jurisdictions where the Company does business, periods prior to fiscal year 2020 are no longer subject to examination. The Company is currently under audit in various state jurisdictions for fiscal years 2021 through 2022. The Company has estimated that up to $ 12.7 million of unrecognized tax benefits related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitation within the next twelve months. This includes $ 12.4 million associated with the Tax Cuts and Jobs Act’s mandatory one-time “toll tax” on unremitted foreign earnings. Audit outcomes and the timing of settlements are subject to significant uncertainty. Note 15. Business Segments and Foreign Operations The Company evaluates the performance of its segments and allocates resources to them based on sales and income from operations. The Company is organized on the basis of geographical area into the following three segments: the Americas; EIMEA; 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. 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. 19 Table of Contents Summary information about reportable segments is as follows (in thousands): For the Three Months Ended Americas EIMEA Asia-Pacific Unallocated Corporate (1) Total May 31, 2024 Net sales $ 75,103 $ 59,399 $ 20,543 $ - $ 155,045 Income from operations $ 18,382 $ 13,705 $ 6,750 $ ( 11,661 ) $ 27,176 Depreciation and amortization expense (2) $ 1,201 $ 1,180 $ 56 $ 66 $ 2,503 Interest income $ 3 $ 100 $ 33 $ - $ 136 Interest expense $ 807 $ 373 $ 2 $ - $ 1,182 May 31, 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 (2) $ 911 $ 1,035 $ 53 $ 76 $ 2,075 Interest income $ - $ 40 $ 29 $ - $ 69 Interest expense $ 1,079 $ 516 $ 2 $ - $ 1,597 For the Nine Months Ended May 31, 2024 Net sales $ 202,685 $ 162,466 $ 69,415 $ - $ 434,566 Income from operations $ 45,798 $ 35,307 $ 25,264 $ ( 34,068 ) $ 72,301 Depreciation and amortization expense (2) $ 3,396 $ 3,404 $ 169 $ 217 $ 7,186 Interest income $ 3 $ 182 $ 91 $ - $ 276 Interest expense $ 1,872 $ 1,459 $ 5 $ - $ 3,336 May 31, 2023 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 (2) $ 2,658 $ 2,905 $ 149 $ 227 $ 5,939 Interest income $ 4 $ 75 $ 85 $ - $ 164 Interest expense $ 3,056 $ 1,208 $ 4 $ - $ 4,268 (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. Note 16. Subsequent Event Dividend Declaration On June 18, 2024, the Company’s Board declared a cash dividend of $ 0.88 per share payable on July 31, 2024 to stockholders of record at the close of business on July 19, 2024. 20 Table of Contents