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Item 7. Management’s Discussion and Analysis

2024-10-21 compared with 2023-10-23 · 190 added, 214 removed, 282 unchanged (59% of the section changed)

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This MD&A includes the following sections:

Overview, Highlights, Results of Operations, Performance Measures and Non-GAAP Reconciliations, Liquidity and Capital Resources, Critical Accounting Policies and Estimates, and Recently Issued Accounting Standards.

Overview, Highlights, Results of Operations, Performance Measures and Non-GAAP Reconciliations, Liquidity and Capital Resources, Critical Accounting Estimates, and Recently Issued Accounting Standards.

The MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the related notes included in Item 15 of this report.

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Results on a constant currency basis are not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”) and should be considered in addition to, not as a substitute for, results prepared in accordance with U.S.

We use results on a constant currency basis as one of the measures to

understand our operating results and evaluate our performance in comparison to prior periods in order to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations.

We use results on a constant currency basis as one of the measures to understand our operating results and evaluate our performance in comparison to prior periods in order to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations.

Management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing our underlying business performance and trends.

However, reference to constant currency basis should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S.

However, reference

to constant currency basis should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S.

WD-40 Company, based in San Diego, California, is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world.

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Our 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, the Middle East and Africa.

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.

We sell our products 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.

During the first quarter of fiscal year 2025 we reclassified our homecare and cleaning product portfolios in the Americas and EIMEA segments to held for sale.

We sell our products 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.

On March 4, 2024, we acquired all of the issued and outstanding capital stock of Brazilian distributor, Theron, from M12 Participações Empresarias S.A.

See Note 3 – Acquisitions for additional information on this business combination.

As a result of this acquisition, we shifted from an indirect distribution model to a direct model.

Results from Brazil continue to be reported in the Americas segment for the fiscal year ended August 31, 2024.

The following summarizes the financial and operational highlights for our business during the fiscal year ended August 31, 2024:

• Consolidated net sales increased $18.4 million, or 4%, for fiscal year 2023 compared to the corresponding period of the prior fiscal year.

Increases in the average selling price of our products positively impacted net sales by approximately $81.9 million from period to period, primarily due to sales price increases implemented across all segments at varying times during the current and prior fiscal year.

These favorable impacts were partially offset by decreases in sales volume, which unfavorably impacted net sales by approximately $45.8 million from period to period.

• Consolidated net sales increased $53.3 million, or 10%, for fiscal year 2024 compared to the prior fiscal year.

Increases in sales volume favorably impacted net sales by approximately $41.3 million from period to period.

Increases in the average selling price of our products positively impacted net sales by approximately $4.2 million from period to period, primarily due to sales price increases implemented in certain regions during the prior fiscal year.

Changes to net sales attributable to volumes and average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period.

In addition, changes in foreign currency exchange rates from period to period had an unfavorable impact of $17.7 million on consolidated net sales for fiscal year 2023.

In addition, changes in foreign currency exchange rates from period to period had a favorable impact of $7.8 million on consolidated net sales for the fiscal year 2024.

On a constant currency basis, net sales would have increased by $45.5 million, or 8% for fiscal year 2024 compared to the prior fiscal year.

This unfavorable impact from changes in foreign currency exchange rates mainly came from our EMEA segment, which accounted for 36% of our consolidated sales for the fiscal year ended August 31, 2023.

• Gross profit as a percentage of net sales increased to 51.0% for fiscal year 2023 compared to 49.1% for the prior fiscal year, primarily due to the positive impacts of price increases implemented at varying times during the current and prior fiscal year, offset by ongoing global supply chain challenges, including the increased cost of raw materials and changes in consumer behavior as a result of inflation.

See the Impact of Global Supply Chain Constraints and Inflation on Our Business section which follows for details, including actions we continue to take in response to these challenges.

• Consolidated net income decreased $1.3 million, or 2%, for fiscal year 2023 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates from period to period had an unfavorable impact of $2.4 million on consolidated net income for fiscal year 2023.

This favorable impact from changes in foreign currency exchange rates mainly came from our EIMEA segment, which accounted for 37% of our consolidated sales for the fiscal year ended August 31, 2024.

• Gross profit as a percentage of net sales increased to 53.4% for fiscal year 2024 compared to 51.0% for the prior fiscal year.

• Consolidated net income increased $3.7 million, or 6%, for fiscal year 2024 compared to the corresponding period of the prior fiscal year.

Changes in foreign currency exchange rates from period to period had a favorable impact of $1.5 million on consolidated net income for fiscal year 2024.

Thus, on a constant currency basis, net income would have increased by $2.2 million, or 3%, for fiscal year 2024 compared to the prior fiscal year.

• Diluted earnings per common share for fiscal year 2024 were $5.11 versus $4.83 in the prior fiscal year.

Significant Developments

Impact of Global Supply Chain Constraints and Inflation on Our Business

Our financial results and operations continue to be impacted by certain ongoing macroeconomic factors that have been affecting global economies, the rate of inflation, supply chains, distribution networks and consumer behavior around the world.

Global supply chain issues have resulted in increased raw material costs and other input costs, higher competition for freight resources, and labor constraints within manufacturing and distribution networks.

This inflationary environment started to negatively impact our gross margin and financial results in fiscal year 2021 and these trends have continued to increase our cost of goods sold since that time.

In response to these global supply chain issues, we implemented various initiatives.

These initiatives included improvements within our existing third-party manufacturer network, as well as identifying and onboarding new third-party manufacturers, particularly in the Americas and EMEA segments.

As a result of these initiatives, we experienced increases in the capacity and flexibility of our supply chain and were able to reduce our inventory levels since they peaked during the first quarter of fiscal year 2023.

Although it is not possible to estimate the costs or impacts associated with potential future supply chain disruptions or the inflationary environment that continues to impact our raw material costs, we believe that the changes we continue to implement will have a positive impact on our ability to better manage any future disruptions.

To offset the unfavorable impact of increased costs to our gross margin, price increases have been implemented across all of our markets and geographies in fiscal years 2022 and 2023.

Although we are seeing the favorable impacts of these price increases, sales volumes are often impacted unfavorably in the short term as customers and end users adjust to increased sales prices.

The severity and duration of these conditions and their effects on our supply chain, changes in end-user demand and the current inflationary environment remain uncertain and it is not possible to estimate the extent to which these conditions will impact our financial results and operations in future periods.

See our risk factors disclosed in Part I—Item 1A, “Risk Factors,” for further information on these risks.

The Impact of Russian Military Action in Ukraine

On February 24, 2022, Russian forces launched significant military action against Ukraine, which has resulted in conflict and disruption in the region.

In response to this action taken by Russia, the U.S.

and other countries immediately imposed various economic sanctions against Russia and this event has continued to impact global economies, particularly in Europe.

It is uncertain when conditions will improve or whether additional governmental sanctions will be enacted in future periods.

It is not possible to predict the direct and indirect impacts of this evolving situation and its effect on global economies in future periods.

We suspended selling our products to markets in Russia and Belarus beginning in March 2022, which had and continues to have an unfavorable impact on our business.

In addition, we were temporarily unable to sell our products in Ukraine due to the disruption in the country, but sales to Ukraine resumed in the first quarter of fiscal year 2023.

Prior to the suspension of sales in Russia and Belarus, our net sales to these two regions were approximately 3% to 4% of consolidated net sales, the majority of which is related to Russia.

We do not have facilities, third-party manufacturing partners, employees or inventory located in these affected regions.

Additionally, the only activities we conducted in these regions prior to the suspension of sales were through local marketing distributors.

Write-offs of previously existing accounts receivable from those marketing distributors affected by the crisis have not been significant to date and are not expected to become significant in future periods.

As a result of this conflict, commodity markets remain subject to heightened levels of uncertainty, especially as they relate to the price of crude oil, which increased significantly in the immediate aftermath of the sanctions against Russia.

Increases in crude oil prices unfavorably impact the cost of our products, as well as the cost of the transportation and distribution of our products.

The length and severity of the recent volatility increases in the price of crude oil are highly unpredictable and may impact our cost of goods sold for as long as these conditions exist.

• During the first quarter of fiscal year 2025 we reclassified our homecare and cleaning product portfolios in the Americas and EIMEA segments to held for sale.

Results of Operations

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Dollars Percent

Maintenance products $ 503,558 $ 485,326 $ 18,232 4 %

Homecare and cleaning products 33,697 33,494 203 1 %

WD-40 Multi-Use Product $ 452,925 $ 407,672 $ 45,253 11 %

WD-40 Specialist 73,938 66,714 7,224 11 %

Other maintenance products 31,173 29,172 2,001 7 %

Total maintenance products 558,036 503,558 54,478 11 %

32,521 33,697 (1,176) (3) %

Total net sales 590,557 537,255 53,302 10 %

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Net income $ 69,644 $ 65,993 $ 3,651 6 %

Earnings per common share – diluted $ 4.83 $ 4.90 $ (0.07) (1) %

EPS – diluted $ 5.11 $ 4.83 $ 0.28 6 %

Shares used in diluted EPS 13,584 13,604 (20) 0 %

(1) Homecare and cleaning products (“HCCP”)

Net Sales by Segment

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Americas $ 281,883 $ 266,772 $ 15,111 6 %

EMEA 190,818 204,688 (13,870) (7) %

EIMEA 221,045 190,818 30,227 16 %

Asia-Pacific 87,629 79,665 7,964 10 %

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Dollars Percent

Maintenance products $ 250,348 $ 223,470 $ 26,878 12 %

Homecare and cleaning products 16,424 16,763 (339) (2) %

Total $ 266,772 $ 240,233 $ 26,539 11 %

WD-40 Multi-Use Product 216,769 202,651 14,118 7 %

WD-40 Specialist 32,966 31,055 1,911 6 %

Other maintenance products 17,289 16,642 647 4 %

Total maintenance products 267,024 250,348 16,676 7 %

HCCP 14,859 16,424 (1,565) (10) %

Total net sales 281,883 266,772 15,111 6 %

% of consolidated net sales 48 % 50 %

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Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year

Increase in average selling price (1)

Increase (decrease) in average selling price (1)

$ 1.8 $ 2.2 $ 0.1 $ (1.6) $ 2.5

(Decrease) increase in sales volume (1)

Increase (decrease) in sales volume (1)

3.6 (2.4) 3.5 7.0 11.7

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Americas Sales – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Net sales of maintenance products in the Americas segment increased primarily due to the following (by region):

sales increased $30.8 million, or 17%.

WD-40 Multi-Use Product sales increased by $31.0 million, or 19%, primarily due to price increases implemented throughout the prior fiscal year, which had a significant impact on net sales during fiscal year 2023.

In addition, net sales were positively impacted by improved supply chain capacity.

WD-40 Specialist and 3-IN-ONE products are sourced at certain third-party manufacturers that were impacted significantly by global supply chain constraints in the prior period, particularly in the first half of fiscal year 2022.

However, adjustments we have made in our supply chain to increase the production capacity of our most significant products, including WD-40 Specialist and 3-IN-ONE, improved the availability of these products from period to period.

WD-40 Specialist and 3-IN-ONE sales increased by $5.5 million, or 24%, and $3.7 million, or 49%, respectively, primarily due to these improvements that resulted in increased sales volume, as well as price increases implemented during the last twelve months.

• Latin America sales decreased $3.6 million, or 8%, primarily due to weaker economic conditions in many countries within this region, as well as the timing of marketing distributor orders from period to period.

Sales were unfavorably impacted period to period due to marketing distributors purchasing a higher level of our product in advance of price increases that went into effect in late fiscal year 2022 for some regions in Latin America.

This resulted in certain marketing distributors carrying a higher level of our product than usual leading into fiscal year 2023, which was combined with lower demand due to weaker economic conditions in these regions that limited the level of orders from these distributors during the fiscal year 2023.

These unfavorable impacts were partially offset by higher sales in our direct market in Mexico, primarily due to favorable impacts of changes in foreign

currency exchange rates and price increases from period to period, partially offset by lower sales volumes as a result of lower demand.

• Canada sales decreased $0.6 million, or 4%, due to unfavorable changes in foreign currency exchange rates and weaker economic conditions that resulted in lower levels of demand and decreased sales volume.

In the prior fiscal year, we experienced a higher level of demand in the industrial channel of Western Canada as a result of increased activity levels of end-users in the oil industry due to market conditions within the industry at that time.

Demand in the industrial channel of Western Canada was significantly lower in fiscal year 2023.

These unfavorable impacts were partially offset by price increases from period to period.

Net sales of homecare and cleaning products in the Americas decreased due to the following:

• The unfavorable impact of lower demand for certain brands was partially offset by price increases and the improvement in the capacity and flexibility of our supply chain from period to period.

• While each of our homecare and cleaning products have continued to generate positive cash flows, we have generally experienced flat or slightly decreased sales for many of these products in recent periods.

Net sales in the Americas segment increased from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $14.1 million, or 7%, primarily due to the increase in Latin America of $14.8 million, or 40%.

Sales in Latin America were favorably impacted by the transition to a direct marketing model in Brazil in the second half of fiscal year 2024, which resulted in an increase of net sales of $6.7 million from period to period.

In addition, sales in other Latin American markets increased $8.1 million, or 23% due to increased sales volume from the timing of customer orders, successful promotional programs, and increased distribution of WD-40 Smart Straw.

Sales in Latin America were favorably impacted by the changes in foreign currency exchange rates from period to period.

End-user demand remained relatively constant in the U.S.

and resulted in a slight increase in sales of $0.5 million from period to period.

These favorable impacts to net sales were slightly offset by a decrease in sales in Canada of $1.2 million.

• WD-40 Specialist sales increased $1.9 million, or 6%, primarily due to new distribution and increased demand across all regions.

Canada, in particular, saw an increase in sales of $0.8 million, or 46% from period to period primarily due to premiumization of the Specialist product line in the region.

• Other maintenance product sales remained relatively constant from period to period.

• Homecare and cleaning product sales decreased $1.6 million, or 10%, primarily due to reduced demand in the U.S.

as a result of a lower level of advertising and promotional activities associated with these brands, as we focus on increasing sales of maintenance products in support of our four-by-four strategic framework.

For the Americas segment, 73% of sales came from the U.S., and 27% of sales came from Canada and Latin America combined for the fiscal year ended August 31, 2024 compared to the prior fiscal year when 78% of sales came from the U.S., and 22% of sales came from Canada and Latin America combined.

T he following table summarizes net sales by pr oduct line for the EMEA segment (in thousands, except percentages):

T he following table summarizes net sales by pr oduct line for the EIMEA segment (in thousands, except percentages):

Fiscal Year Ended August 31,

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Dollars Percent

Maintenance products $ 181,501 $ 196,524 $ (15,023) (8) %

Homecare and cleaning products 9,317 8,164 1,153 14 %

Total $ 190,818 $ 204,688 $ (13,870) (7) %

WD-40 Multi-Use Product 168,450 142,965 25,485 18 %

WD-40 Specialist 30,876 27,029 3,847 14 %

Other maintenance products 12,741 11,507 1,234 11 %

Total maintenance products 212,067 181,501 30,566 17 %

HCCP 8,978 9,317 (339) (4) %

Total net sales 221,045 190,818 30,227 16 %

% of consolidated net sales 37 % 36 %

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(1) Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.

The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the EMEA segment (in millions):

The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the EIMEA segment (in millions):

Change from Prior Year

Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year

Increase in average selling price (1)

$ 9.5 $ 11.1 $ 9.7 $ 6.0 $ 36.3

Decrease in sales volume (1) – Russian markets

Increase (decrease) in average selling price (1)

$ 0.7 $ 0.0 $ (1.2) $ (0.7) $ (1.2)

Decrease in sales volume (1) – All other markets

Increase in sales volume (1)

3.7 5.1 6.5 8.0 23.3

Currency impact on current period – non-GAAP 3.6 2.4 1.6 0.5 8.1

(Decrease) increase in net sales $ (16.7) $ (7.3) $ 3.0 $ 7.1 $ (13.9)

Increase in net sales $ 8.0 $ 7.5 $ 6.9 $ 7.8 $ 30.2

(1) Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period.

The countries and regions in Europe where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain and Portugal) and the Germanics sales region (which includes Austria, Denmark, Switzerland, Belgium and the Netherlands).

The regions in the EMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and Northern Europe.

EMEA Sales – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Net sales decreased in the EMEA segment due to the following drivers:

Direct Markets – EMEA (72% of net sales YTD FY2023 vs 67% YTD FY2022)

• Sales in our direct markets decreased $1.6 million, or 1%.

Changes in foreign currency exchange rates unfavorably impacted net sales by $10.6 million as a result of the weakening of the Pound Sterling, the functional currency of our U.K.

subsidiary, against the U.S.

• In addition, decreases in sales volume in most direct markets within Europe unfavorably impacted sales period to period.

These volume decreases were due to reduced demand compared to the prior period, driven by weaker market and economic conditions as well as a lower level of customer orders and promotional programs as customers adjust to the price increases implemented in late fiscal year 2022 and the first half of fiscal year 2023.

These unfavorable impacts due to volume declines in Europe were offset by increases in sales volumes within the United Kingdom.

• The unfavorable impacts were partially offset by price increases across all direct markets.

Distributor Markets – EMEA (28% of net sales YTD FY2023 vs 33% YTD FY2022)

• Distributor market sales decreased $12.3 million, or 18%, in EMEA.

• Sales in Russia decreased $8.3 million from period to period due to the ongoing effects of the Russian military action in Ukraine.

See The Impact of Russian Military Action in Ukraine described in the “Significant Developments” section above for further information regarding the suspension of our sales to Russian markets.

• In addition, sales in our distributor markets were unfavorably impacted by $4.3 million due to the weakening of the Pound Sterling, the functional currency of our U.K.

subsidiary, against the U.S.

However, this unfavorable impact to sales in distributor markets was partially offset by the favorable impact of certain sales denominated other than in Pound Sterling, which strengthened against the Pound Sterling from period to period.

• Sales in distributor markets also decreased due to lower sales volumes of maintenance products in most distributor markets, particularly India, Kuwait, Poland, and Pakistan which were down $1.5 million, $1.2 million, $0.7 million and $0.6 million, respectively.

• The decreases in distributor market sales were partially offset by price increases implemented over the last twelve months and favorable changes in sales mix.

The countries and regions in Europe where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain and Portugal), DACH (which includes Germany, Austria and Switzerland) and Benelux (which includes Belgium, the Netherlands and Luxembourg).

The regions in the EIMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and Northern Europe.

EIMEA Sales – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Net sales increased in the EIMEA segment from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $25.5 million, or 18%, primarily due to higher sales volume.

Volumes in the comparative period were unfavorably impacted by price increases that we implemented in the fourth quarter

of fiscal year 2022 and first quarter of fiscal year 2023, which resulted in reduced demand as customers adjusted to those price increases.

The combination of recovering volumes and increased selling prices resulted in higher sales across most regions.

Sales increased most significantly for our direct markets in France, the DACH and Benelux regions, and Iberia, which were up $5.2 million, $5.0 million and $2.1 million, respectively.

In addition, marketing distributor sales in Northern Europe and the Middle East increased $5.5 million and $4.1 million, respectively.

• WD-40 Specialist and other maintenance product sales increased $3.8 million, or 14%, and $1.2 million, or 11%, respectively, primarily due to the combined impact of higher sales volume across most regions due to increased distribution and stronger levels of demand after customers adjusted to price increases.

• Homecare and cleaning product sales remained relatively constant from period to period.

• Net sales were favorably impacted $8.1 million across our various brands as a result of favorable changes in foreign currency exchange rates.

On a constant currency basis, sales in EIMEA would have increased 12%.

Asia-Pacific Sales

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Dollars Percent

Maintenance products $ 71,709 $ 65,332 $ 6,377 10 %

Homecare and cleaning products 7,956 8,567 (611) (7) %

Total $ 79,665 $ 73,899 $ 5,766 8 %

WD-40 Multi-Use Product 67,706 62,056 5,650 9 %

WD-40 Specialist 10,096 8,630 1,466 17 %

Other maintenance products 1,143 1,023 120 12 %

Total maintenance products 78,945 71,709 7,236 10 %

HCCP 8,684 7,956 728 9 %

Total net sales 87,629 79,665 7,964 10 %

% of consolidated net sales 15 % 14 %

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Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year

Increase in average selling price (1)

Increase (decrease) in average selling price (1)

$ 1.6 $ 1.4 $ (0.1) $ — $ 2.9

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Currency impact on current period – non-GAAP (0.4) (0.3) (0.4) — (1.1)

Increase (decrease) in net sales $ 5.2 $ (0.9) $ 5.3 $ (3.8) $ 5.8

Increase in net sales $ 1.5 $ 0.8 $ 2.5 $ 3.2 $ 8.0

Asia-Pacific Sales – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Net sales in the Asia-Pacific segment increased due to the following drivers:

• Asia distributor markets sales increased $4.0 million, or 13%, primarily due to higher sales in the fiscal year 2023 due to the absence of COVID-19 lockdown measures, that had severely limited the production of our products by our third-party manufacturer located in Shanghai, China.

In addition, sales increased as a result of successful promotional programs and customers that purchased product in advance of price increases implemented in the first half of fiscal year 2023, all of which resulted in increased demand and higher sales volumes in most countries in the region early in fiscal year 2023.

Sales were also favorably impacted by price increases implemented over the last twelve months.

• China sales increased $2.4 million, or 12%, due to the success of promotional programs in fiscal year 2023, which increased sales volume from period to period.

In addition, sales were favorably impacted by price increases during the prior fiscal year as well as the easing of COVID-19 lockdown measures in Shanghai during the comparative period that severely limited the production of our products by our third-party manufacturer located in the region.

These favorable impacts were partially offset by unfavorable changes in foreign currency exchange rates.

On a constant currency basis, sales in China would have increased $4.3 million, or 21%.

• Australia sales decreased $0.6 million, or 3% primarily due to the unfavorable impact of changes in foreign currency exchange rates and lower sales volumes, primarily due to lower demand of homecare and cleaning products in the region.

On a constant currency basis, sales in Australia would have increased $1.1 million, or 5% due to the favorable impact of price increases.

The following general information is important when assessing our gross margin:

Net sales in the Asia-Pacific segment increased from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $5.7 million, or 9%.

Sales in the Asia distributor markets increased $4.3 million, or 13%, primarily due to successful promotional programs across most countries in the region, in particular Indonesia, Korea and Taiwan.

Increases in the average selling price in these distributor markets also increased net sales from period to period.

In addition, sales in China increased $1.6 million, or 8%, due to increased sales volume from successful promotional programs and marketing activities throughout fiscal year 2024.

• WD-40 Specialist sales increased $1.5 million, or 17%, primarily due to increased sales volume in China due to successful promotional programs and marketing activities as well as increased sales volume due to distribution of a motorbike product line new to the region.

• Homecare and cleaning product sales increased $0.7 million or 9%.

The increase was due to higher sales volume in Australia attributable to successful promotional activities and improved packaging.

• Net sales were unfavorably impacted $1.1 million across our various brands as a result of changes in foreign currency exchange rates.

On a constant currency basis, sales in Asia-Pacific would have increased 11%.

The following general information is important when assessing fluctuations in our gross margin:

• There is often a delay before changes in costs of raw materials, such as specialty chemicals used in the formulation of our products, impact cost of products sold due to production and inventory life cycles.

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Advertising, promotional and other discounts that are given to our customers are recorded as a reduction to sales, whereas advertising and sales promotional costs associated with promotional activities that we pay to third parties are recorded as advertising and sales promotion expenses.

• In the EMEA segment, the majority of our cost of goods sold is denominated in Pound Sterling whereas sales are generated in Pound Sterling, Euro and the U.S.

• In the EIMEA segment, the majority of our cost of goods sold is denominated in Pound Sterling whereas sales are generated in Pound Sterling, Euro and the U.S.

The strengthening or weakening of the Euro and U.S.

Dollar against the Pound Sterling may result in foreign currency related changes to the gross margin percentage in the EMEA segment from period to period;

• Our gross profit and gross margin may not be comparable to those of other consumer product companies, since some of these companies include all costs related to distribution of their products in cost of products sold, whereas we exclude the portion associated with amounts paid to third parties for shipment to our customers from our distribution centers and contract manufacturers and include these costs in selling, general and administrative expenses.

Dollar against the Pound Sterling may result in foreign currency related changes to the gross margin percentage in the EIMEA segment from period to period.

These costs totaled $17.3 million and $17.1 million for the fiscal years ended August 31, 2024 and 2023, respectively.

• For further information pertaining to recent trends and economic conditions affecting gross margin, please see the section titled “Significant Developments” .

The following table summarizes gross margin and gross profit (in thousands, except percentages):

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Gross Margin – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Gross margin increased 190 bps primarily due to the following favorable impacts, significantly offset by unfavorable impacts:

Favorable/(Unfavorable) Explanations

720 bps Sales price increases implemented in all three segments at varying times during the current and prior fiscal year.

60 bps Changes in foreign currency exchange rates in the EMEA segment.

(290) bps Higher costs of aerosol cans.

(260) bps Higher costs of specialty chemicals used in the formulation of our products.

(90) bps Higher filling fees paid to our third-party contract manufacturers, primarily in the Americas segment.

Gross margin increased 240 bps primarily due to the following favorable impacts:

Favorable Explanations

130 bps Favorable sales mix and other miscellaneous mix impacts

80 bps Lower costs of specialty chemicals used in the formulation of our products

80 bps Lower warehousing, distribution and freight costs, primarily in the Americas segment

Selling, General and Administrative (“SG&A”) Expenses

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SG&A Expenses – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

The increase in SG&A expenses was primarily due to increases in employee-related costs of $13.0 million due to increased headcount and annual compensation increases, as well as higher incentive compensation accruals.

Travel and meeting expense also increased SG&A by $4.2 million due to the reduction in travel restrictions related to COVID-19 from period to period.

In addition, professional services fees increased $3.4 million in support of the initiatives associated with our strategic framework in the Americas and EMEA segments, including the ongoing implementation of our new information system and increased cloud-based software usage and license fees.

In addition, sales commissions increased $0.5 million primarily due to higher sales in the Americas segment.

Other miscellaneous expenses increased $0.9 million, primarily as a result of higher overhead expenses.

These increases to SG&A expenses were partially offset by favorable changes in foreign currency exchange rates, which reduced SG&A expenses by $5.0 million.

In addition, freight expense decreased $1.0 million from period to period.

We continued our research and development investment, the majority of which is associated with our maintenance products, in support of our focus on innovation and renovation of our products.

The increase in SG&A expenses was primarily due to increases in employee-related costs of $16.1 million primarily due to an increase in accrued incentive compensation of $8.8 million, as well as annual compensation increases and higher headcount.

Professional services fees increased $6.1 million in support of our strategic initiatives in the Americas and EIMEA segments.

The increase in professional service costs includes a $2.7 million increase in computer-related costs, primarily associated with the ERP system we recently implemented in the U.S.

and the amortization of cloud computing implementation costs associated with this system.

In addition, professional services fees increased due to costs associated with the development of a direct market in Brazil.

Travel and meeting expense increased SG&A expense by $2.5 million primarily as a result of increased travel related to geographic expansion and other initiatives aligned with our strategic framework.

Unfavorable changes in foreign currency exchange rates increased SG&A expenses by $2.1 million from period to period.

We continued our research and development investment, the majority of which is associated with our maintenance products, including efforts focused on sustainability as well as our focus on innovation and renovation of our products.

Research and development costs for the fiscal years ended August 31, 2024 and 2023 were $8.0 million and $6.2 million, respectively.

Our research and development team engages in consumer research, product development, current product improvements and testing activities.

Our research and development team engages in consumer research, environmental and sustainability initiatives, product development, product improvements and testing activities.

This team leverages its development capabilities by collaborating with a network of outside resources including our current and prospective third-party contract manufacturers.

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A&P Expenses – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

The increase in A&P expenses was primarily due to a higher level of promotional programs and marketing support in the Americas segment.

This increase was also partially attributable to us investing more in the promotion of new product innovations such as WD-40 Specialist Degreaser & Cleaner EZ-Pods and WD-40 Precision Pen.

Total promotional costs recorded as a reduction to sales were $29.1 million and $28.1 million for the fiscal years ended August 31, 2023 and 2022, respectively.

Therefore, our total investment in A&P activities totaled $57.9 million and $55.4 million for the fiscal years ended August 31, 2023 and 2022, respectively.

The increase in A&P expenses was primarily due to a higher level of promotional programs and marketing support, particularly in the Americas and EIMEA segments.

Changes in foreign currency exchange rates primarily in EIMEA segment had a $0.9 million unfavorable impact on A&P expenses from period to period.

Total promotional costs recorded as a reduction to sales were $32.7 million and $29.1 million, or 5.5% and 5.4% of net sales, for the fiscal years ended August 31, 2024 and 2023, respectively.

Therefore, our total expenditure on A&P activities totaled $66.6 million and $57.9 million or 11.2% and 10.8% of net sales, for the fiscal years ended August 31, 2024 and 2023, respectively.

Income from Operations by Segment

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Americas $ 65,037 $ 60,797 $ 4,240 7 %

EMEA 39,456 42,058 (2,602) (6) %

EIMEA 46,809 39,456 7,353 19 %

Asia-Pacific 29,714 25,888 3,826 15 %

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Income from operations for the Americas increased to $65.0 million, up $4.2 million, or 7%, due to a $15.1 million increase in sales and a higher gross margin, partially offset by higher operating expenses.

Gross margin for the Americas segment increased from 47.3% to 48.9% primarily due to the favorable impact of price increases implemented during the last twelve months, offset by increases in the costs of petroleum-based specialty chemicals and concentrate costs at our third-party manufacturers due to inflationary impacts.

Operating expenses increased $10.4 million due to higher employee-related costs as a result of increased headcount and higher accrued incentive compensation.

In addition, operating expenses increased due to a higher level of professional services expense, travel and meeting expense and A&P expense.

Gross margin for the Americas segment increased from 48.9% to 50.9% primarily due to the favorable impact of price increases and decreases to costs of petroleum-based specialty chemicals as well as lower warehousing, distribution and freight costs from period to period.

These favorable impacts were partially offset by increases in the costs of aerosol cans and filling fees at our third-party manufacturers.

Operating expenses increased $8.6 million due to higher employee-related costs as a result of increased headcount and annual compensation increases.

Operating expenses also increased due to to a higher level of A&P expenses and travel and meeting expense in support of our strategic framework.

Operating income as a percentage of net sales increased from 22.8% to 23.1% period over period.

EMEA Operating Income – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Income from operations for the EMEA segment decreased to $39.5 million, down $2.6 million, or 6%, primarily due to a $13.9 million decrease in sales, which was slightly offset by a higher gross margin.

Gross margin for the EMEA segment increased from 49.6% to 52.2% primarily due to price increases that were implemented over the last twelve months, significantly offset by the increased costs of aerosol cans and petroleum-based specialty chemicals.

Operating expenses increased $0.6 million as higher travel and meeting expense and higher employee-related costs were mostly offset by lower level of A&P and freight expenses.

EIMEA Operating Income – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Income from operations for the EIMEA segment increased to $46.8 million, up $7.4 million, or 19%, primarily due to a $30.2 million increase in sales and a higher gross margin, which was partially offset by higher operating expenses.

Gross margin for the EIMEA segment increased from 52.2% to 54.7% primarily due to favorable changes from foreign currency exchange rates and changes in sales mix and market mix, as well as the combined impact of decreases in the costs of petroleum-based specialty chemicals and aerosol cans from period to period.

Operating expenses increased $14.0 million primarily due to higher employee-related costs as a result of higher accrued incentive compensation, annual compensation increases and increased headcount.

In addition, operating expenses increased due to higher A&P expenses, as well as higher level of professional service costs and travel and meeting expenses in support of our strategic framework.

Operating income as a percentage of net sales increased from 20.7% to 21.2% period over period.

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Income from operations for the Asia-Pacific segment increased to $29.7 million, up $3.8 million, or 15%, primarily due to a $8.0 million increase in sales and a higher gross margin, partially offset by an increase in operating expenses.

Gross margin for the Asia-Pacific segment increased from 53.6% to 55.3% primarily due to the favorable impact of price increases that were implemented during the current and prior fiscal year, partially offset by the increased cost of petroleum-based specialty chemicals and higher fill fees paid to our third-party contract manufacturers.

Operating expenses increased $1.2 million from period to period primarily due to higher A&P expenses and travel and meetings expense.

Gross margin for the Asia-Pacific segment increased from 55.3% to 58.0% primarily due to changes in sales mix and market mix across most regions from period to period, as well as the favorable impact of price increases, particularly in Australia and Asia distributor markets.

Operating expenses increased $3.0 million from period to period primarily due to higher employee-related costs, including increased accrued incentive compensation.

In addition, operating expenses increased as a result of a higher level of A&P expenses, professional service costs and travel and meeting expenses.

Operating income as a percentage of net sales increased from 32.5% to 33.9% period over period.

Unallocated Corporate

Unallocated Corporate Expenses – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Unallocated Corporate expenses increased to $45.2 million, up $8.8 million, or 24%, primarily due to increased accrued incentive compensation and higher employee-related costs as a result of increased headcount and annual compensation increases.

In addition, operating expenses increased as a result of higher costs associated with the ERP system we recently implemented in the United States.

Non-Operating Items

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Interest Expense

Interest expense increased primarily due to an increased weighted average outstanding balance on our revolving credit facility and higher interest rates related to draws on this credit facility.

Interest expense decreased $1.3 million primarily due to a decrease in weighted average outstanding balance on our revolving credit facility slightly offset by higher interest rates related to draws on this credit facility.

Other (Expense) Income, Net

Other income (expense), net changed by $1.4 million from period to period which was primarily due to net foreign currency losses during fiscal year 2022 as compared to net foreign currency exchange gains in fiscal year 2023 due to fluctuations in the foreign currency exchange rates for both the U.S.

Other (expense) income, net changed by $1.9 million from period to period which was primarily due to net foreign currency gains during fiscal year 2023 as compared to net foreign currency exchange losses in fiscal year 2024 due to fluctuations in the foreign currency exchange rates for both the U.S.

Dollar and the Euro against the Pound Sterling.

Provision for Income Taxes

The provision for income taxes was 22.5% of income before income taxes for the fiscal year ended August 31, 2023 compared to 19.9% for the prior fiscal year.

The increase in the effective income tax rate from period to period was primarily due to higher tax rates in certain foreign jurisdictions, as well as tax shortfalls from the settlements of stock-based equity awards and increases in interest expense related to uncertain tax positions.

The increase was partially offset by a decrease in nondeductible performance-based compensation expense.

The provision for income taxes was 23.9% and 22.5% of income before income taxes for the fiscal years ended August 31, 2024 and 2023, respectively.

Descriptions of impacts on our effective income tax rate are incorporated by reference to Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 14 – Income Taxes, included in this report.

Net income was $69.6 million, or $5.11 per common share on a fully diluted basis, for fiscal year 2024 compared to $66.0 million, or $4.83 per common share on a fully diluted basis, for the prior fiscal year.

Changes in foreign currency exchange rates year over year had an unfavorable impact of $2.4 million on net income for fiscal year 2023.

Changes in foreign currency exchange rates year over year had a favorable impact of $1.5 million on net income for fiscal year 2024.

Thus, on a constant currency basis, net income for fiscal year 2024 would have been $68.2 million.

Results of Operations

Fiscal Year Ended August 31, 2023 Compared to Fiscal Year Ended August 31, 2022

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In managing our business operations and assessing our financial performance, we supplement the information provided by our financial statements with certain non-GAAP performance measures.

These performance measures are part of our current 55/30/25 business model, which includes gross margin, cost of doing business, and earnings before interest, income taxes, depreciation and amortization (“EBITDA”), the latter two of which are non-GAAP performance measures.

Cost of doing business is defined as total operating expenses less amortization of definite-lived intangible assets, impairment

charges related to intangible assets and depreciation in operating departments, and EBITDA is defined as net income before interest, income taxes, depreciation and amortization.

We target our gross margin to be 55% of net sales, our cost of doing business to be 30% of net sales, and our EBITDA to be 25% of net sales.

These performance measures are part of our current 55/30/25 business model, which includes gross margin, cost of doing business, and earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”), the latter two of which are non-GAAP performance measures.

Cost of doing business is defined as total operating expenses less amortization of definite-lived intangible assets, impairment charges related to intangible assets, amortization of implementation costs associated with cloud computing arrangements (“cloud computing amortization”) and depreciation in operating departments.

Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization of definite-lived intangible assets, and cloud computing amortization.

Beginning in fiscal year 2024, cloud computing amortization is included in our of cost of doing business and Adjusted EBITDA calculations.

We have placed a new cloud-based enterprise resource planning system into service in the U.S., which we began to amortize in the second quarter of fiscal year 2024.

Implementation of such systems is related to initiatives associated with our strategic framework to help us achieve greater operational efficiencies.

Cloud computing amortization is recognized in selling, general and administrative expenses in our consolidated statements of operations.

We target our gross margin to be 55% of net sales, our cost of doing business to be 30% of net sales, and our Adjusted EBITDA to be 25% of net sales.

Results for these performance measures may vary from period to period depending on various factors, including economic conditions such as the inflationary environment we have experienced in the last several fiscal years, and our level of investment in activities for the future such as those related to quality assurance, regulatory compliance, information technology, sustainability, and intellectual property protection in order to safeguard our WD-40 brand.

Our targets for gross margin and these other performance measures are long-term in nature and we expect to make progress towards them over time.

For more detailed information pertaining to recent trends and economic conditions and the actions we are taking to respond to them, please see the section titled “Significant Developments”.

Given the anticipated divestiture of certain of our household brands, progression on certain aspects of our business model may be challenged if the potential divestiture occurs.

However, we intend to focus our resources and investments from the potential sale of those brands on growing our higher growth and higher gross margin core business.

The following table summarizes the results of these performance measures:

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Cost of doing business as a percentage of net sales – non-GAAP 36 % 33 % 31 %

EBITDA as a percentage of net sales – non-GAAP (1)

Adjusted EBITDA as a percentage of net sales – non-GAAP (1)

18 % 18 % 18 %

(1) Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on our consolidated statement of operations are not included as an adjustment to earnings in the EBITDA calculation.

(1) Percentages may not aggregate to Adjusted EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on our consolidated statement of operations are not included as an adjustment to earnings in the Adjusted EBITDA calculation.

We use the performance measures above to establish financial goals and to gain an understanding of our comparative performance from period to period.

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Total operating expenses – GAAP $ 218,876 $ 184,496 $ 167,435

Amortization of definite-lived intangible assets (1,005) (1,434) (1,449)

Amortization (1)

(2,327) (1,005) (1,434)

Depreciation (in operating departments) (4,112) (4,147) (4,369)

Cost of doing business – non-GAAP $ 179,344 $ 161,632 $ 169,138

Cost of doing business $ 212,437 $ 179,344 $ 161,632

Net sales $ 590,557 $ 537,255 $ 518,820

Cost of doing business as a percentage of net sales – non-GAAP 36 % 33 % 31 %

EBITDA (in thousands, except percentages):

(1) Includes amortization of definite-lived intangible assets and cloud computing amortization.

Adjusted EBITDA (in thousands, except percentages):

Fiscal Year Ended August 31,

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Interest expense 4,287 5,614 2,742

Amortization of definite-lived intangible assets 1,005 1,434 1,449

Amortization (1)

2,327 1,005 1,434

Depreciation 8,350 7,146 6,860

EBITDA $ 98,697 $ 95,042 $ 95,832

Adjusted EBITDA $ 105,998 $ 98,697 $ 95,042

Net sales $ 590,557 $ 537,255 $ 518,820

EBITDA as a percentage of net sales – non-GAAP 18 % 18 % 20 %

Adjusted EBITDA as a percentage of net sales – non-GAAP 18 % 18 % 18 %

(1) Includes amortization of definite-lived intangible assets and cloud computing amortization.

Liquidity and Capital Resources

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Our principal sources of liquidity are cash generated from operations and cash currently available from our existing unsecured revolving credit facility under the Credit Agreement with Bank of America, N.A.

We use proceeds of the revolving credit facility primarily for our general working capital needs.

We use the revolving credit facility primarily for our general working capital needs.

We also hold borrowings under the Note Agreement.

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We have historically held a balance of outstanding draws on our line of credit in either U.S.

Dollars in the Americas segment or in Euros and Pounds Sterling in the EMEA segment.

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

Dollars in the Americas segment or in Euros and Pounds Sterling in the EIMEA segment.

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

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

We regularly convert many of our draws on our line of credit to new draws with new maturity dates and interest rates.

We have the ability to refinance any draws under the line of credit with successive short-term borrowings through the September 30, 2025 maturity date of the Credit Agreement.

We have the ability to refinance any draws under the line of credit with successive short-term borrowings through the April 30, 2029 maturity date of the Credit Agreement.

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

As of August 31, 2023, $42.9 million of the outstanding balance under our line of credit resides in the EMEA segment and is denominated in Euros and Pounds Sterling and classified long-term, whereas $10.0 million is denominated in U.S.

Dollars and classified as short-term.

As of August 31, 2024, $20.0 million of the facility was classified as long-term and was entirely denominated in Euros.

$7.8 million was classified as short-term and was entirely denominated in U.S.

In the United States, we held $66.8 million in fixed rate long-term borrowings as of August 31, 2024, consisting of senior notes under our Note Agreement.

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We do not foresee any ongoing issues with repaying our borrowings and we closely monitor the use of this credit facility.

We believe that our future cash from domestic and international operations, together with our access to funds available under our unsecured revolving credit facility, will provide adequate resources to fund short-term and long-term operating requirements, capital expenditures, dividend payments, acquisitions, new business development activities and share repurchases.

On October 12, 2021, our Board approved a share repurchase plan (the “2021 Repurchase Plan”).

2021 Repurchase Plan, which became effective on November 1, 2021, we were authorized to acquire up to $75.0 million of our outstanding shares through August 31, 2023.

We believe that our future cash from domestic and international operations, together with our access to funds available under our unsecured revolving credit facility, will provide adequate resources to fund short-term and long-term operating requirements, debt maturities, capital expenditures, dividend payments, acquisitions, new business development activities and share repurchases.

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

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

Under the 2023 Repurchase Plan, which became effective on September 1, 2023, we are authorized to acquire up to $50.0 million of our outstanding shares through August 31, 2025, of which $41.9 million remained available for the repurchase of shares of common stock as of August 31, 2024.

The following table summarizes our cash flows by category for the periods presented (in thousands):

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Effect of exchange rate changes on cash and cash equivalents 193 3,173 (5,020)

Net increase (decrease) in cash and cash equivalents $ 10,300 $ (48,118) $ 29,499

Net (decrease) increase in cash and cash equivalents $ (1,444) $ 10,300 $ (48,118)

Operating Activities

Net cash provided by operating activities increased $95.8 million to $98.4 million for fiscal year 2023.

Net cash provided by operating activities decreased $6.4 million to $92.0 million for fiscal year 2024.

Cash flows from operating activities depend heavily on operating performance and changes in working capital.

Our primary source of operating cash flows for fiscal year ended August 31, 2023 was net income of $66.0 million, which decreased $1.3 million from period to period.

Changes in our working capital, which increased net cash provided by operating activities, were primarily attributable to a decrease in inventory during the fiscal year 2023 compared to a significant increase in inventory in the corresponding period of the prior fiscal year, which resulted in a $72.6 million favorable impact period over period to our cash provided by operating activities.

In the prior fiscal year, we took deliberate actions to increase inventory levels of certain raw materials, components and finished goods due to challenges within supply chain and increased lead times required by suppliers.

This building of our inventory continued into the first quarter of fiscal year 2023 and we have experienced increases in the capacity and flexibility of our supply chain as a direct result of these actions.

Although our inventory levels remain at balances that are higher than historical levels, inventory has decreased since the first quarter of 2023 through the end of fiscal year 2023.

In addition, net cash provided by operating activities increased from period to period due to lower increases in other assets.

Net cash provided by operating activities also increased due to lower incentive compensation payouts in fiscal year 2023 compared to the prior fiscal year.

Our primary source of operating cash flows for fiscal year ended August 31, 2024 was net income of $69.6 million, which increased $3.7 million from period to period.

Changes in adjustments to reconcile net income to cash increased net cash provided by operating activities by $5.0 million, primarily due to net unrealized foreign currency losses during the current fiscal year compared to net unrealized foreign currency gains in the prior fiscal year and an increase in depreciation expense.

Changes in our working capital increased net cash provided by operating activities by $4.6 million for the fiscal year 2024, compared to a $19.5 million increase in the prior fiscal year.

The unfavorable net change in working capital was primarily attributable to changes in inventory and trade and other accounts receivable.

Although we decreased inventory levels throughout fiscal year 2024, decreases in inventory during fiscal year 2023 were more significant.

We took deliberate actions during fiscal year 2023 to improve capacity and flexibility of our supply chain to decrease inventory levels from the build up from prior years.

Trade and other accounts receivable increased significantly during fiscal year 2024 as a result of higher sales and timing of collection of payments from customers.

These unfavorable changes in working capital were partially offset by favorable changes in accounts payable, accrued liabilities, accrued payroll and related expenses.

Investing Activities

Net cash used in investing activities decreased $1.5 million to $6.2 million for fiscal year 2023, primarily due to a lower level of manufacturing-related capital expenditures within the U.S.

from period to period.

Net cash used in investing activities increased $3.5 million to $9.7 million for fiscal year 2024, primarily due to the purchase of our Brazilian distributor, Theron, as we shifted from an indirect distribution model to a direct model.

Financing Activities

Net cash used in financing activities increased $47.0 million to $85.0 million for fiscal year 2023.

This change was primarily due to net repayments on our revolving credit facility of $28.3 million during the fiscal year, compared to net proceeds of $38.4 million in the prior fiscal year.

Increases in dividends paid to our stockholders also increased cash used in financing activities by $2.6 million.

Offsetting these increases in cash outflows from period to period was a decrease in treasury stock purchases of $18.7 million, as well as a decrease of $3.6 million in shares withheld to cover taxes on conversion of equity awards.

Net cash used in financing activities decreased $1.1 million to $83.9 million for fiscal year 2024.

This change was primarily due to lower net repayments on our revolving credit facility which was $25.4 million during the fiscal year, compared to $28.4 million in the prior fiscal year, as well as decreases in treasury stock purchases of $2.3 million during the fiscal year compared to the prior period.

Offsetting these decreases in cash outflows from period to period was an increase in dividends paid to our stockholders of $2.6 million, as well as an increase of $1.6 million in shares withheld to cover taxes on conversion of equity awards.

Effect of Exchange Rate Changes

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Dollar and a significant portion of our consolidated cash balance is denominated in these foreign functional currencies, particularly at our U.K.

subsidiary, which operates in Pounds Sterling.

As a result, our cash and cash equivalents balances are subject to the effects of the fluctuations in these functional currencies against the U.S.

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The net effect of exchange rate changes on cash and cash equivalents, when expressed in U.S.

Dollar terms was an increase in cash of $3.2 million in fiscal year 2023, while such changes resulted in a decrease in cash of $5.0 million for fiscal year 2022, and were not significant

in fiscal year 2021.

Dollar terms was not significant in fiscal year 2024, while such changes resulted in an increase in cash of $3.2 million for fiscal year 2023, and a decrease in cash of $5.0 million in fiscal year 2022.

These changes were primarily due to fluctuations in various foreign currency exchange rates from period to period, but the majority is related to the fluctuations in the Pound Sterling against the U.S.

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Share Repurchase Plans

The information required by this item is incorporated by reference to Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 9 — Share Repurchase Plans, included in this report.

The information required by this item is incorporated by reference to Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 10 — Share Repurchase Plan, included in this report.

We have historically paid regular quarterly cash dividends on our common stock.

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As of August 31, 2024, no such commitments were outstanding.

At August 31, 2023, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was approximatel y $9.3 million.

For additional details on our uncertain tax positions, refer to the information set forth in Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 13 – Income Taxes.

We have estimated that up t o $0.4 million of u nrecognized 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 .

Critical Accounting Policies and Estimates

We have also recorded a liability for uncertain tax positions.

For details on our uncertain tax positions, refer to the information set forth in Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 14 – Income Taxes.

Critical Accounting Estimates

Our results of operations and financial condition, as reflected in our consolidated financial statements, have been prepared in accordance with accounting principles generally accepted in the United States of America.

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We use historical experience and other relevant factors when developing estimates and assumptions and these estimates and assumptions are continually evaluated.

Note 2 to our consolidated financial statements included in Item 15 of this report includes a discussion of our significant accounting policies.

The accounting policies discussed below are the ones we consider to be most critical to an understanding of our consolidated financial statements because their application places the most significant demands on our judgment.

The accounting estimates discussed below are the ones we consider to be most critical to an understanding of our consolidated financial statements because their application places the most significant demands on our judgment.

Our financial results may have varied from those reported had different assumptions been used or other conditions prevailed.

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For certain of our sales we must make judgments and certain assumptions in order to determine when delivery has occurred.

Through an analysis of end-of-period shipments for these particular sales, we estimate the time of transit and delivery of product to our customers to determine whether revenue should be recognized during the current reporting period for such shipments.

reporting period for such shipments.

Differences in judgments or estimates related to the lengthening or shortening of the estimated delivery time used could result in material differences in the timing of revenue recognition.

Sales are recorded net of allowances for damaged goods and other sales returns, sales incentives, trade promotions and cash discounts.

We apply a five-step approach in determining the amount and timing of revenue to be recognized which includes the following:

(1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied.

In determining the transaction price, management evaluates whether the price is subject to refunds or adjustments related to variable consideration to determine the net consideration to which we expect to be entitled.

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Accounting for Income Taxes

Current income tax expense is the amount of income taxes expected to be payable for the current year.

A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities.

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However, there is an exception regarding specific statutory remittance restrictions imposed on our China subsidiary.

Costs associated with repatriating unremitted foreign earnings,

including U.S.

Costs associated with repatriating unremitted foreign earnings, including U.S.

state income taxes and foreign withholding taxes, are immaterial to our consolidated financial statements.

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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-K

Item 7. Management’s Discussion and Analysis