EDGAR 10-K Filing

Company CIK: 105132
Filing Year: 2022
Filename: 105132_10-K_2022_0000105132-22-000038.json

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ITEM 1. BUSINESS
Item 1. Business
Overview
WD-40 Company 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 was founded in 1953 and is headquartered in San Diego, California.
For more than four decades, we sold only one product, WD-40® Multi-Use Product, a maintenance product which acts as a lubricant, rust preventative, penetrant and moisture displacer. Over the last several decades, we have evolved and expanded our product offerings through both research and development activities and through the acquisition of several brands worldwide. As a result, we have built a family of brands and product lines that deliver high quality performance at a good value to our end users.
We currently market and sell our products in more than 176 countries and territories worldwide 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.
Our sales come from two product groups - maintenance products and homecare and cleaning products. Maintenance products are sold worldwide in markets throughout North, Central and South America, Asia, Australia, Europe, the Middle East and Africa. Homecare and cleaning products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia.
Our strategic initiatives are the areas where we will continue to focus our time, talent and resources in future periods. Our strategic initiatives include:
(i) building a business for the future;
(ii) attracting, developing and engaging outstanding tribe members;
(iii) striving for operational excellence;
(iv) growing WD-40 Multi-Use Product;
(v) growing WD-40 Specialist product line; and
(vi) expanding and supporting portfolio opportunities that help us grow.
Our top priority is to build an enduring business that we will be proud to pass onto the next generation by using our purpose and values as a decision-making filter. Our desired outcome for this top strategic initiative is to further align and integrate our business decisions with Environmental, Social, and Governance (“ESG”) factors and considerations. We understand that we cannot achieve this without attracting, developing and engaging outstanding people, whom we refer to collectively as a tribe, that strive for operational excellence daily. The principal driver of our growth continues to be taking the blue and yellow can with the little red top, to new users in global markets. We continue to be focused and committed to innovation and renovation of our products.
We see innovation and renovation as important factors to the long-term growth of our brands and product lines, and intend to continue to work on future products, product lines, product packaging, and product delivery systems, as well as promotional innovations and renovations in order to expand our product portfolio to help us grow. We are also focused on expanding our current brands in existing markets with new product development. Our product development teams support new product development and current product improvement for our brands. Over the years, our research and development team has made an impact on most of our brands through our innovation activities. Key innovations for our products include, but are not limited to, WD-40 EZ-Reach ® Flexible Straw, WD-40 Smart Straw®, WD-40 Trigger Pro®, WD-40 Specialist®, WD-40 BIKE®, 3-IN-ONE RVcare® and 3-IN-ONE® Professional Garage Door Lube.
Our homecare and cleaning products, particularly those in the U.S., are considered harvest brands which continue to provide positive returns, but are becoming a smaller part of the business as sales of the maintenance products grow with the execution of our strategic initiatives. Although we have evaluated strategic alternatives for certain of our homecare and cleaning products, particularly those in the U.S., we have continued to sell products within these brands but with a reduced level of marketing investment.
Human Capital Resources
Our success is the result of the engagement and commitment of our people, whom we refer to as tribe members. We believe that a tribe is a group of people who come together to feed and defend one another in order to fulfill a common purpose. Our purpose can only be achieved with the efforts of our 583 tribe members who create positive lasting memories for our stakeholders, including our end users as they work to ensure that our products solve problems in factories, workshops, and homes around the world. Our workforce is distributed globally in 15 countries, with approximately 34% in the Americas, 42% in EMEA, 15% in Asia-Pacific, and 9% corporate employees. Women make up approximately 46% of our global tribe. The average tenure of our global tribe is 8 years.
A foundational strategic initiative is to attract, develop and engage outstanding tribe members. We believe that our ability to attract, develop, engage, and retain outstanding tribe members is the result of our inclusive, purpose-driven, learning focused and values guided culture. This strategic initiative guides our commitment to develop tribe members throughout the organization. One of the primary responsibilities of our leaders, whom we refer to as coaches, is to tailor individual development plans to support the needs of our tribe members to achieve their performance goals. We also offer various internal training programs to our tribe members and encourage attendance at external training programs that allow tribe members to grow from both a technical and leadership standpoint. As a result of the culture we have nurtured and evolved, we have increased employee engagement over time while expanding the size of our tribe to support our growing business. Our most recent biennial global employee engagement survey, which was conducted in January 2022 by an independent third-party, resulted in a very high employee engagement level of 93%.
Consistently living our company values grants each of us the freedom and agility to make autonomous decisions yet remain aligned as we act in the best interest of all our stakeholders across the globe. Our approach to diversity and inclusion focuses on what unites us: a common purpose as a tribe. Our diverse global tribe, hired primarily within local markets, contains an array of talent and experiences, work collaboratively to solve problems and bring meaning to our work life. Our tribe is comprised of talented and dedicated members, many of whom work together with their international peers in the areas of: marketing, sales, customer service, finance and accounting, legal, information technology, human resources, supply chain and logistics, innovation, R&D, quality, and other technical fields.
We believe our culture is a competitive advantage, and we prioritize it as such. Understanding the views, perspectives and experiences of our end-users and tribe members is foundational in maintaining and growing the WD-40 Company brand and business. Our language, norms, artifacts, and traditions result in psychological safety, learning, and goal achievement. This includes a total rewards strategy that ensures each tribe member can sustain their well-being today and into the future.
The recent and ongoing global pandemic has reinforced the importance of our priority to maintain the safety, health, and well-being of every tribe member. During various stages of the COVID-19 pandemic, much of our workforce worked remotely, in accordance with public health and safety guidance. The pandemic inspired us to launch what we call “Work from Where”, a philosophy to support the work-life integration of our global tribe members. This “Work from Where” philosophy enables our coaches and tribe members to align on where work is completed.
The Compensation Committee of our Board of Directors provides oversight of our relevant people-management practices. Our approach to compensation attempts to align the interests of every tribe member with the creation of company value over time. We completed a study in February 2020 to examine gender pay differences to determine if there were occasions of compensation decisions not being based on job-related criteria. This study identified no biased decision-making, as any differences were explainable by job-related criteria. The next study will be completed in calendar year 2023. We will continue to conduct equitable pay studies going forward and will include results from those studies in our future ESG reports. We invite you to review our ESG
Report (located on our Internet site at www.wd40company.com) for more information about corporate responsibility, our tribe, programs, and initiatives. Nothing on our website shall be deemed incorporated by reference into this Annual Report on Form 10-K.
Products
Maintenance Products
Included in our maintenance products are both multi-purpose maintenance products and specialty maintenance products. These maintenance products are sold worldwide and they provide end users with a variety of product and delivery system options.
Our signature product is WD-40 Multi-Use Product in the blue and yellow can with the little red top. It is included within the maintenance product category and accounts for a significant majority of our sales. We have various products and product lines which we currently sell under the WD-40 Brand and they are as follows:
WD-40 Multi-Use Product - The WD-40 Multi-Use Product is a market leader in many countries among multi-purpose maintenance products and is sold as an aerosol spray with various unique delivery systems, a non-aerosol trigger spray and in liquid-bulk form through mass retail stores, hardware stores, warehouse club stores, automotive parts outlets, online retailers and industrial distributors and suppliers. The WD-40 Multi-Use Product is sold worldwide in North, Central and South America, Asia, Australia, Europe, the Middle East and Africa. WD-40 Multi-Use Product has a wide variety of consumer uses in, for example, household, marine, automotive, construction, repair, sporting goods and gardening applications, in addition to numerous industrial applications.
WD-40 Specialist product line - WD-40 Specialist consists of a line of professional-grade specialty maintenance products that include penetrants, degreasers, corrosion inhibitors, greases, lubricants and rust removers that are aimed at professionals and consumer enthusiasts. The WD-40 Specialist product line is sold primarily in the U.S. and many countries in Europe, as well as parts of Canada, Latin America, Australia and Asia. Within the WD-40 Specialist product line, we also sell bike-specific products across all our segments, motorbike-specific products in Europe, lawn and garden specific products in Australia, and automotive specific products in Asia.
We also have the following additional brands which are included within our maintenance products group:
3-IN-ONE® - The 3-IN-ONE brand consists of multi-purpose drip oil, specialty drip oils, and spray lubricant products, as well as other specialty maintenance products. The multi-purpose drip oil is a lubricant with unique spout options that allow for precise applications to small mechanisms and assemblies, tool maintenance and threads on screws and bolts. 3-IN-ONE Oil is the market share leader among drip oils in many countries. It also has wide industrial applications in such areas as locksmithing, HVAC, marine, farming and construction. In addition to the drip oil line of products, the 3-IN-ONE brand also includes professional-grade aerosol maintenance products, such as 3-IN-ONE RVcare products, 3-IN-ONE Garage Door Lubricant and 3-IN-ONE Lock Dry Lube. The long legacy, brand awareness and high quality of the 3-IN-ONE brand and its established distribution network have enabled these products to gain international acceptance. 3-IN-ONE products are sold primarily in the U.S., Europe, Canada, Latin America and Australia.
GT85® - The GT85 brand is a multi-purpose bike maintenance product line that consists of professional spray maintenance products and lubricants which are sold primarily in the bike market through the automotive and industrial channels in the United Kingdom. This brand was acquired by our U.K. subsidiary in September 2014 and it has helped build upon our strategy to develop new product categories for WD-40 Specialist and WD-40 BIKE.
Homecare and Cleaning Products
We sell our homecare and cleaning products in certain locations worldwide and they include a portfolio of well-known brands as follows:
2000 Flushes® - The 2000 Flushes brand is a line of long-lasting automatic toilet bowl cleaners. It includes a variety of formulas, including the Bleach and Blue plus Bleach that has a unique EPA-approved “kills bacteria” claim. 2000 Flushes is sold primarily in the U.S. and Canada through grocery and mass retail channels as well as through online retailers.
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Spot Shot® - The Spot Shot brand is sold as an aerosol and a liquid trigger carpet stain and odor eliminator. The brand also includes environmentally friendly products such as Spot Shot Instant Carpet Stain & Odor Eliminator and Spot Shot Pet Instant Carpet Stain & Odor Eliminator, which are non-toxic and biodegradable. Spot Shot products are sold primarily through grocery and mass retail channels, online retailers, warehouse club stores and hardware and home center stores in the U.S., Canada and the United Kingdom. Spot Shot products are sold in the U.K. under the 1001® brand name.
Carpet Fresh® - The Carpet Fresh brand is a line of room and rug deodorizers sold as powder and aerosol quick-dry foam products. These products are sold primarily through grocery, mass, and value retail channels as well as through online retailers in the U.K. and Australia. Although Carpet Fresh brand products are also sold in the U.S., they are sold by a third-party under a licensing agreement. In the U.K., these products are sold under the 1001 brand name. In Australia, they are sold under the no vac® brand name.
1001® - The 1001 brand includes carpet and household cleaners and rug and room deodorizers which are sold primarily through mass retail, grocery and home center stores in the U.K.
Lava®/Solvol® - The Lava and Solvol brands consist of heavy-duty hand cleaner products which are sold in bar soap and liquid form through hardware, grocery, industrial, automotive and mass retail channels as well as through online retailers. Lava is sold primarily in the U.S., while Solvol is sold exclusively in Australia.
X-14® - The X-14 brand is a line of quality automatic toilet bowl cleaners. X-14 is sold primarily in the U.S. through grocery and mass retail channels as well as through online retailers.
Sales and Marketing
Our sales do not reflect any significant degree of seasonality. However, it is common for our sales to fluctuate from period to period or year to year due to various factors including, but not limited to, new or lost distribution, the number of product offerings carried by a customer and the level of promotional activities and programs being run at customer locations. New or lost distribution occurs when we gain or lose customers, when we gain or lose store count for a customer or when our products are added to new locations within a store or removed from existing locations. From time to time, as part of new product offering launches, we may gain access to entirely new distribution channels. The number of product offerings refers to the number of brands and/or the number of products within each of those brands that our customers offer for sale to end user customers. The level of promotional activities and programs relates to the number of events or volumes of purchases by customers in support of off-shelf or promotional display activities. Changes in any one of these three factors or a combination of them can cause our sales levels to increase or decrease from period to period. It is also common and/or possible that we could lose distribution or product offerings and experience a decrease in promotional activities and programs in one period and subsequently regain this business in a future period. We are accustomed to such fluctuations and manage this as part of our normal business activities.
Manufacturing
We outsource our finished goods manufacturing directly or through our marketing distributors to various third-party manufacturers. The Company or its marketing distributors use contract manufacturers in the U.S., Canada, Mexico, Brazil, Argentina, Colombia, the U.K., Italy, Poland, Australia, China, South Korea and India. Although we have definitive minimum purchase obligations included in the contract terms with certain contract manufacturers, when such obligations have been included, they have either been immaterial or the minimum amounts have been such that they are below the volume of goods that we have historically purchased. Supply needs are communicated by us to our contract manufacturers, and we are committed to purchase the products manufactured based on orders and short-term projections, ranging from two months to six months, provided to the contract manufacturers. We also formulate and manufacture concentrate used in our WD-40 products at certain of our own facilities and at third-party contract manufacturers.
In addition to the commitments to purchase products from contract manufacturers described above, we may also enter into commitments with other manufacturers from time to time to purchase finished goods and components to support innovation and renovation initiatives and/or supply chain initiatives.
Sources and Availability of Components and Raw Materials
We rely on a limited number of third-party contract manufacturers and component suppliers, including single or sole-sourced suppliers, for certain of our raw materials, packaging, product components and other necessary supplies. Where possible and where it makes business sense, we work with secondary or multiple suppliers to qualify additional supply and, historically, we have been able to obtain adequate capacity and raw materials. However, during the COVID-19 pandemic, we have experienced certain constraints, particularly in our Americas supply chain. These challenges include general aerosol-related production capacity constraints primarily due to increased demand at third-party manufacturers along with shortages of certain other raw
materials and freight services. The primary components and raw materials for most of our products include specialty chemicals and aerosol cans, which are manufactured from commodities that are subject to market price fluctuations. The availability of these components and raw materials is affected by a variety of supply and demand factors, including global market conditions, plant capacity utilization, and natural disasters. We have been experiencing input cost inflation that has impacted the cost of certain raw materials and freight services over the last couple of years. Actions that we are taking to increase prices with our customers and cost savings initiatives that are currently underway will mitigate some of these inflationary pressures. Our business results depend on the effective management and remedy of any supply disruptions. We expect these components and raw materials to continue to be readily available in the future and we have developed sourcing alternatives and risk mitigation plans. We expect some level of market constraints to persist in fiscal year 2023, as described above.
Research and Development
We recognize the importance of innovation and renovation to our long-term success and are focused on and committed to research and new product development activities, primarily in our maintenance product group. Our product development team engages in consumer research, product development, current product improvement and testing activities. The product development team also leverages its development capabilities by partnering with a network of outside resources including our current and prospective outsource suppliers. In addition, the research and development team engages in activities and product development efforts which are necessary to ensure that we meet all regulatory requirements for the formulation of our products. Our research and development team currently conducts global testing at a laboratory facility that we lease in New Jersey.
Competition
The markets for our products, particularly those related to our homecare and cleaning products, are highly competitive. Our products compete both within their own product classes as well as within product distribution channels, competing with many other products for store placement and shelf space. Competition in international markets varies by country. We are aware of many competing products, some of which sell for lower prices or are produced and marketed by companies with greater financial resources than those of our Company. We rely on the awareness of our brands among consumers, the value offered by those brands as perceived by consumers, product innovation and renovation and our multiple channel distributions as our primary strategies. New products typically encounter intense competition, which may require advertising and promotional support and activities. When or if a new product achieves consumer acceptance, ongoing advertising and promotional support may be required in order to maintain its relative market position.
Trademarks and Patents
We own a number of patents, but rely primarily upon our established trademarks, brand names and marketing efforts, including advertising and sales promotions, to compete effectively. The WD-40 brand, 3-IN-ONE, Lava, Solvol, X-14, 2000 Flushes, Carpet Fresh and no vac, Spot Shot, GT85, and 1001 trademarks are registered or have pending registrations in various countries throughout the world.
Financial Information about Foreign and Domestic Operations
For detailed information about our foreign and domestic operations, including net sales by reportable segment and long-lived assets by geography, refer to Note 16 - Business Segments and Foreign Operations of the consolidated financial statements, included in Item 15 of this report.
Access to SEC Filings
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available through the Investors section of our website at www.wd40company.com. These reports can be accessed free of charge from our website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (“SEC”). Information contained on our website is not included as a part of, or incorporated by reference into, this report. The SEC also maintains an internet site (www.sec.gov) that contains our reports.
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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
The following risks and uncertainties, as well as other factors described elsewhere in this report or in other SEC filings by the Company, could adversely affect the Company’s business, financial condition and results of operations.
Global economic conditions may negatively impact our financial condition and results of operations.
Adverse developments in the global economy or a reduction in industrial outputs, consumer spending or confidence could significantly decrease purchases of our products by our customers and end users. Consumer purchases of discretionary items, which could include our maintenance products and homecare and cleaning products, may decline during periods where disposable income is reduced or there is economic uncertainty, and this may negatively impact our financial condition and results of operations. During unfavorable or uncertain economic times, end users may also increase purchases of lower-priced or non-branded products and our competitors may increase their level of promotional activities to maintain sales volumes, both of which may negatively impact our financial condition and results of operations.
In addition, our sales and operating results may be affected by uncertain or changing economic and market conditions, including inflation, deflation, prolonged weak consumer demand, political instability, public health crises or other changes that may affect the principal markets, trade channels, and industrial segments in which we conduct our business. Public health crises, including epidemics or pandemics, may affect the principal markets, trade channels, and industrial segments in which we conduct our business. For example, the impact of the ongoing COVID-19 pandemic has caused a significant disruption to global financial markets and supply chains beginning in early calendar year 2020. Certain ongoing direct and indirect impacts of the pandemic have continued to affect recent periods. Supply chains at many companies globally continue to be strained due to increased competition for production line capacity, freight and logistics resources, as well as labor shortages, and shortages of certain materials. These constraints have sometimes impacted the ability of our third-party manufacturers to procure certain raw materials needed to manufacture our products and this has periodically resulted in us not being able to meet the demand for our products from customers and end-users in certain markets. In addition, global supply chain issues and other macroeconomic factors have resulted in an inflationary environment that has led to increased raw material costs and other input costs. The additional costs resulting from this inflationary environment and the constraints in our supply chain and distribution networks may continue to unfavorably impact our gross margin and operating results in future periods for as long as such constraints and challenges exist.
The severity and duration of the COVID-19 pandemic, as well as the current inflationary environment, remain uncertain and it is difficult to predict the extent to which these conditions will impact our financial results and operations in future periods. It is also uncertain how changes in the pandemic or inflationary conditions will impact demand from our customers and end-users. If demand from our customers and end-users decreases in future periods, this could adversely impact our financial results.
If economic or market conditions in certain of our key global markets deteriorate, we may experience material adverse effects on our business, financial condition and results of operations. Adverse economic and market conditions could also harm our business by negatively affecting the parties with whom we do business, including our customers, retailers, distributors and wholesalers, and third-party contract manufacturers and suppliers. These conditions could impair the ability of our customers to pay for products they have purchased from us. As a result, allowances for doubtful accounts and write-offs of accounts receivable from our customers may increase. In addition, our third-party contract manufacturers and their suppliers may experience financial difficulties or business disruptions that could negatively affect their operations and their ability to supply us with finished goods and the raw materials, packaging, and components required for our products.
Our financial results could suffer if we are unable to implement and successfully manage our strategic initiatives or if our strategic initiatives do not achieve the intended results.
There is no assurance that we will be able to implement and successfully manage our strategic initiatives, including our six core strategic initiatives, or that the strategic initiatives will achieve the intended results. Our six core strategic initiatives include: (i) building a business for the future; (ii) attracting, developing and engaging outstanding tribe members; (iii) striving for operational excellence; (iv) growing WD-40 Multi-Use Product; (v) growing WD-40 Specialist product line; and (vi) expanding and supporting portfolio opportunities that help us grow. An important part of our success depends on our continuing ability to attract, engage and develop highly qualified people. Our future performance depends in significant part on maintaining high levels of employee engagement and nurturing our values and culture. We believe that our company culture is a critical driver of our success and we invest substantial time and resources in building, maintaining and evolving our culture. Any failure to preserve and evolve our culture could negatively affect our future success, including our ability to retain and recruit employees. Our success also depends on the continued service of our executive officers, key employees and other talented people. Further, our ability to successfully execute organizational changes, including succession planning and the transition of our executive officers and key employees, is critical to the continued success of our business. The unexpected loss of the services of key employees or executive officers could have a material adverse effect on our business and prospects. In addition current economic conditions have led to an unusually competitive labor market in which experienced personnel are in high demand. Since the competition for such talent
is intense there can be no assurance that we can retain our key employees or attract, assimilate and retain employees who are fully engaged in the future. If we are unable to implement and successfully manage our strategic initiatives in accordance with our business plans, our business and financial results could be adversely affected. Moreover, we cannot be certain that the implementation of our strategic initiatives will necessarily advance our business or financial results as intended.
If the success and reputation of one or more of our leading brands erodes, our business, financial condition and results of operations could be negatively impacted.
Our financial success is directly dependent on the success and reputation of our brands, particularly our WD-40 Brand. The success and reputation of our brands can suffer if marketing plans or product development and improvement initiatives, including the release of new products or innovative packaging, do not have the desired impact on the brands’ image or do not attract customers as intended. Our brands can also be adversely impacted due to the activities and pressures placed on them by our competitors. Further, our business, financial condition and results of operations could be negatively impacted if one of our leading brands suffers damage to its reputation due to real or perceived quality or safety issues. Quality issues, which can lead to large scale recalls of our products, can be due to items such as product contamination, regulatory non-compliance, packaging errors, incorrect ingredients or components in our product or low-quality ingredients in our products due to suppliers delivering items that do not meet our specifications. Product quality issues, which could include lower product efficacy due to formulation changes attributable to regulatory requirements, could also result in decreased customer confidence in our brands and a decline in product quality could result in product liability claims. In addition, our brand value depends on our ability to maintain a positive consumer perception of our corporate integrity and brand culture. Negative claims or publicity involving us, our products, or any of our key employees could damage our reputation and brand image, regardless of whether such claims are accurate. This risk is compounded by the increasing use of social and digital media by consumers and the speed by which information and opinions are shared. If we are unable to anticipate and respond to sudden challenges in the marketplace, trends in the market and changing consumer demands and sentiment, our financial results may be negatively impacted. Although we make every effort to prevent brand erosion and preserve our reputation and the reputation of our brands, there can be no assurance that such efforts will be successful.
Sales unit volume growth may be difficult to achieve.
Our ability to achieve sales volume growth will depend on our ability to (i) execute certain of our strategic initiatives, (ii) drive growth in new markets by making targeted end users aware of our products and making them easier to buy, (iii) drive growth within our existing markets through innovation, renovation and enhanced merchandising and marketing of our established brands, and (iv) capture market share from our competitors. It is more difficult for us to achieve sales volume growth in developed markets where our products are widely used as compared to in developing or emerging markets where our products have been newly introduced or are not as well known by consumers. In order to protect our existing market share or capture additional market share from our competitors, we may need to increase our expenditures related to promotions and advertising or introduce and establish new products or product lines. In addition, we also periodically implement sales price increases within certain markets or for certain product lines in response to increased costs associated with components, raw materials, manufacturing and distribution. For example, we implemented significant sales price increases during fiscal year 2022 in response to the current inflationary environment that has significantly increased our cost of goods sold. Sales price increases may slow sales volume growth or create declines in volume in the short term as customers and end users adjust to sales price increases or purchase alternative products at lower prices. In addition, the continued prominence and growth of the online retail sales channel has presented both us and our customers that sell our products online with the challenge of balancing online and physical store retailing methods. As a result of the COVID-19 pandemic and changes in end-user preference, some sales are shifting more to these online retail sales channels, and this may present a challenge in our markets where we have a less developed e-commerce business. Although we are engaged in e-commerce with respect to our products, if we are not successful in expanding sales in such alternative retail channels or we experience challenges with operating in such channels, our financial condition and results of operations may be negatively impacted. In addition, a change in the strategies of our existing customers, including shelf simplification, the discontinuation of certain product offerings or the shift in shelf space to competitors’ products could reduce our sales and potentially offset sales volume increases achieved as a result of other sales growth initiatives. If we are unable to increase market share in our existing product lines by developing product improvements, investing adequately in our existing brands, building usage among new customers, developing, acquiring or successfully launching new products or product line extensions, or successfully penetrating emerging and developing markets and sales channels globally, we may not achieve our sales volume growth objectives.
Cost increases or cost volatility in finished goods, components, raw materials, transportation and other necessary supplies or services could harm or impact our financial condition and results of operations.
Increases in the cost of finished goods, which may be driven by higher costs for components, raw materials and third-party manufacturing fees, as well as increases in the cost of transportation and other necessary supplies or services may harm our financial condition and results of operations. Specialty chemicals and aerosol cans, which constitute a significant portion of the
costs for many of our maintenance products, have experienced significant price volatility in the past, and may continue to do so in the future. In particular, volatility in the price of oil impacts the cost of specialty chemicals, many of which are indexed to the price of regional crude oil or related refined products. Fluctuations in oil and diesel fuel prices have also historically impacted our cost of transporting our products, compounded recently by increased regulations imposed on the freight industry and additional macroeconomic factors which have resulted in increased freight costs. For example, the COVID-19 pandemic has resulted in global supply chain constraints and transportation disruptions that have led to increased competition for freight resources, higher fees charged by our third-party manufacturers, increased raw material costs and other input costs that have negatively impacted our results of operations. In addition, other macroeconomic factors have recently resulted in an inflationary environment that has compounded these impacts and led to further increases in raw material costs, manufacturing and distribution costs, and other input costs. When there are significant increases in the costs of components, raw materials, third-party manufacturing fees and other expenses, and we are not able to increase the prices of our products or achieve other cost savings to an extent that they will offset such cost increases, our gross margin and operating results will be negatively impacted.
In addition, if we increase our sales prices in response to increases in the cost of such raw materials, and those raw material costs later decline significantly, we may not be able to sustain our sales prices at these higher levels. As component and raw material costs are the principal contributors to the cost of goods sold for all of our products, any significant fluctuation in the costs of components and raw materials could have a material impact on the gross margins realized on our products. Sustained increases in the cost of raw materials, components, fees from our third-party contract packagers, transportation and other necessary supplies or services, or significant volatility in such costs, could have a material adverse effect on our financial condition and results of operations.
Reliance on a limited base of third-party contract manufacturers, logistics providers and suppliers of raw materials and components may result in disruption to our business and this could adversely affect our financial condition and results of operations.
We rely on a limited number of third-party contract manufacturers, logistics providers and suppliers, including single or sole source suppliers for certain raw materials, packaging, product components and other necessary supplies. We do not have direct control over the management or business of these third parties, except indirectly through terms negotiated in service or supply contracts. As a result, we currently face, and will continue to face, substantial risks associated with our reliance on third-party manufacturers, suppliers, and/or logistics providers, including but not limited to the following areas:
Changes to the terms of doing business with these providers or the production capacity they allocate to our products;
Disagreements or the inability to maintain good relationships with these providers, including the failure of these providers to be aligned with our company values;
Financial difficulties experienced by these providers;
Consolidation of third-party packagers, which could result in the acquiring company not being interested in manufacturing our products;
Significant disruptions in the production or transportation of our products due to events having regional or global impacts on economic activity, such as the COVID-19 pandemic or extreme weather conditions; or
Significant disruptions in the production or transportation of our products due to competition for materials, components, labor or services from third-party vendors.
In addition, if we are unable to contract with third-party manufacturers or suppliers for the quantity and quality levels needed for our business, we could experience disruptions in production and our financial results could be adversely affected. In particular, the COVID-19 pandemic, extreme weather events and other macroeconomic factors have resulted in significant supply chain constraints and transportation disruptions that have periodically arisen. Some of the challenges that we have experienced include general aerosol-related production capacity constraints and competition for such capacity by other companies who utilize the same third-party manufacturers for their aerosol production. These challenges have periodically resulted in us not being able to meet the demand for our products by customers and end-users in certain markets where demand for aerosols has, for certain products, outpaced the available production capacity in the region. We have been actively working on various initiatives in partnership with our third-party manufacturers and we are also identifying and onboarding new third-party manufacturers in order to increase the capacity and resilience of our supply chain to meet strong end-user demand. When we onboard new third-party manufacturers, it comes with inherent risks and in the current economic environment, it also potentially comes with higher costs. In addition, actions we have taken to increase inventory levels of certain raw materials and finished goods, given the current challenges within supply chain and increased lead times required by suppliers, has also come with higher transportation, storage and distribution costs. We are not able to estimate the degree of the impact or the costs associated with potential future disruptions within our supply chain and distribution networks as these supply chain issues are being resolved.
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Global operations outside the U.S. expose us to uncertain conditions, foreign currency exchange rate risk and other risks in international markets.
Our sales outside of the U.S. were approximately 66% of consolidated net sales in fiscal year 2022. As a result, our ability to execute our strategic initiatives will continue to face substantial risks associated with having increased global operations outside the U.S., including:
economic or political instability in any of our global markets;
challenges associated with conducting business in foreign jurisdictions, including those related to our understanding of and compliance with business laws and regulations in such foreign jurisdictions;
increasing tax complexity or changes in tax law associated with operating in multiple tax jurisdictions;
a dispersed employee base and requirements for compliance with varied employment regulations and labor laws, including health and safety regulations and wage and hour laws, in countries outside the U.S.;
varying and complex privacy laws in foreign jurisdictions; and
the imposition of tariffs or trade restrictions and costs, burdens and restrictions associated with other governmental actions.
These risks could have a significant impact on our ability to sell our products on a competitive basis in global markets outside the United States. In addition, continued developments in global political climates have introduced greater uncertainty with respect to tax policies, trade relations, tariffs and government regulations affecting trade between the U.S. and other countries. For example, 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. These geopolitical tensions have continued and it is uncertain when conditions will improve or whether additional governmental sanctions will be enacted in future periods. The direct and indirect impacts of this evolving situation and its effect on global economies in future periods are difficult to predict. We suspended selling our products to markets in Russia and Belarus beginning in March 2022, which has had an unfavorable impact on our sales. In addition, we are currently unable to sell our products in Ukraine due to the disruption in the country. 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 duration and severity of the recent increases in the price of crude oil are highly unpredictable and may unfavorably impact our cost of goods sold for as long as these conditions exist. These developments, as well as the risks outlined above, could have a material adverse effect on our business, financial condition and results of operations.
Approximately 49% of our revenues in fiscal year 2022 were generated in currencies other than the U.S. Dollar, which is our reporting currency. In addition, all of our foreign operating subsidiaries have functional currencies other than the U.S. Dollar and our largest subsidiary is located in the U.K. and generates significant sales in Pound Sterling and Euro. As a result, we are exposed to foreign currency exchange rate risk with respect to our sales, expenses, profits, cash and cash equivalents, other assets and liabilities denominated in currencies other than the U.S. Dollar. In particular, our financial results are negatively impacted when the foreign currencies in which our subsidiary offices operate weaken relative to the U.S. Dollar. Although we use instruments to hedge certain foreign currency risks, primarily those associated with our U.K. subsidiary and net assets denominated in non-functional currencies, we are not fully protected against foreign currency fluctuations and, therefore, our reported earnings may be affected by changes in foreign currency exchange rates. Moreover, any favorable impacts to profit margins or financial results from fluctuations in foreign currency exchange rates are likely to be unsustainable over time.
Additionally, our global operations outside the U.S. are subject to risks relating to appropriate compliance with legal and regulatory requirements in local jurisdictions, potential difficulties in staffing and managing local operations, potentially higher incidence of fraud or corruption, credit risk of local customers and distributors and potentially adverse tax consequences. As we further develop and grow our business operations outside the U.S., we are exposed to additional complexities and risks, particularly in China and other emerging markets. In many foreign countries, particularly in those with developing economies, business practices that are prohibited by the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act or other applicable anti-corruption laws and regulations may be prevalent. Evolving privacy laws and regulations in Europe, the U.S. and other jurisdictions present additional risks. Any failure to comply with these laws, even if inadvertent, could result in significant penalties or otherwise harm our reputation and business. Although we have adopted policies and contract terms to mandate compliance with these laws, there can be no assurance that all of our employees, contractors and agents will comply with our requirements. Violations of these laws could be costly and disrupt our business, which could have a material adverse effect on our business, financial condition and results of operations.
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Malfunctions or implementation issues related to the critical information systems that we use for the daily operations of our business, cyberattacks and data breaches could adversely affect our ability to conduct business.
To conduct our business, we rely extensively on information technology systems, networks and services, many of which are managed, hosted and provided by third-party service providers. We cannot guarantee that our security measures will prevent cyberattacks resulting in breaches of our own or our third-party service providers’ databases and systems. Techniques used in these attacks change frequently and may be difficult to detect for periods of time. Although we have policies and procedures in place governing (i) the timely investigation of cybersecurity incidents, (ii) the timely disclosure of any related material nonpublic information resulting from a material cybersecurity incident, and (iii) the safeguarding against insider trading of directors, officers, and other corporate insiders between the period of investigation and the public disclosure of such an incident; cybersecurity incidents themselves, such as the release of sensitive data from our databases and systems, could adversely affect our business, financial condition and results of operations. The increasing number of information technology security threats and the development of more sophisticated cyberattacks, including ransomware, pose a potential risk to the security of our information technology systems and networks, as well as to the confidentiality, availability and integrity of our data. In addition, the increased use of remote work infrastructures also increases the possible cybersecurity risks. Further, such incidents could also materially increase the costs that we already incur to protect against such risks. While we maintain cyber insurance, our coverage may not be adequate for liabilities or costs actually incurred, and we cannot be certain that any insurer will not deny coverage of a future claim. We also cannot be certain that such insurance will continue to be available to us on economically reasonable terms, or at all, in future periods.
In addition, system failure, malfunction or loss of data that is housed in the Company’s or its third-party service providers’ critical information systems could disrupt our ability to timely and accurately process transactions and produce key financial reports, including information on our operating results, financial position and cash flows. Our information systems could be damaged or cease to function properly due to a number of other reasons as well, including catastrophic events and power outages. Although we have certain business continuity plans in place to address such service interruptions, there is no guarantee that these business continuity plans will provide alternative processes in a timely manner. As a result, we may experience interruptions in our ability to manage our daily operations and this could adversely affect our business, financial condition and results of operations.
The information system that the U.S. office uses for its business operations is a market-specific application that is not widely used by other companies. This system is also used by three of our other regional offices: our Canada, Australia and Malaysia offices. The company that owns and supports this application may not be able to provide the same level of support as that of larger information systems. If the company that owns and supports this application in the U.S. were to cease its operations or were unable to provide continued support for this application, it could adversely affect our daily operations or our business, financial condition and results of operations.
Management determined that it is appropriate to replace this information system so we are currently in the process of implementing a new information system that will be used at all of these offices. We are currently configuring the system based on our design work to date and have been performing various stages of testing. We are also in the process of determining our implementation rollout strategy and timing for the offices transitioning to this new information system. This information system, along with other integrated software platforms, will be used to process all of the daily transactions and to produce key financial reports for all of these offices. If we encounter difficulties in completing this critical information system implementation, or if the implementation takes longer than intended, we may experience interruptions in our ability to manage our daily operations and report financial results and we may experience significant incremental costs, which could adversely affect our business, financial condition and results of operations.
Our ability to achieve our environmental, social and governance and sustainability initiatives are subject to emerging risks and the outcomes may not achieve the anticipated benefits or align with new regulations and stakeholders’ expectations.
There has been an increasing focus from stakeholders and regulators related to environmental, social and governance (“ESG”) matters across all industries in recent years. ESG standard setting and stakeholder expectations continue to evolve. Criteria used to evaluate ESG practices and metrics may change rapidly in future periods, which could result in increased expectations of public companies and may cause us to undertake costly initiatives to satisfy any new requirements. Non-compliance with these emerging regulations or a failure to address stakeholder and societal expectations may result in potential cost increases, litigation, fines, penalties, production and sales restrictions, brand or reputational damage, loss of customers, failure to retain and attract talent, lower valuation and higher investor activism activities.
The increased attention directed towards publicly traded companies surrounding ESG matters includes the recent release of proposed rules by the SEC that would require companies to enhance and standardize disclosures related to climate change, specifically those associated with physical risks and transitional risks. Physical risks include acute risks associated with extreme weather events or chronic risks associated with gradual shifts in climate or weather. Transition risks are the risks that may arise from the adoption of climate-related regulatory policies, including those that may be necessary to achieve the national climate
goals in the United States and other countries, or risks associated with changing stakeholder expectations and demands. Our first strategic initiative, “building a business for the future”, was developed to further align and integrate our business decisions with ESG factors and considerations and we anticipate achieving compliance with current and future ESG expectations and standards, as well as ESG expectations from our stakeholders. We are expecting to publish our next ESG Report in November 2022, which will include certain ESG and sustainability objectives. However, any failure or perceived failure, whether or not valid, to pursue and fulfill our ESG initiatives and objectives or to satisfy various ESG reporting standards timely could increase the risk of litigation and this could negatively impact our financial condition and results of operations.
Government laws and regulations, including environmental laws and regulations, could result in material costs or otherwise adversely affect our financial condition and results of operations.
The manufacturing, chemical composition, packaging, storage, distribution and labeling of our products and the manner in which our business operations are conducted must comply with an extensive array of federal, state and international laws and regulations. If we are not successful in complying with the requirements of all such regulations, we could be fined or other actions could be taken against us by the applicable governing body, including the possibility of a required product recall. Any such regulatory action could adversely affect our financial condition and results of operations. It is also possible that governments and regulatory agencies will increase regulation, including the adoption of further regulations relating to the transportation, storage or use of certain chemicals, to enhance homeland security or protect the environment and such increased regulation could negatively impact our ability to obtain raw materials, components and/or finished goods or could result in increased costs.
Some of our products have chemical compositions that are controlled by various state, federal and international laws and regulations that are subject to change. We are required to comply with these laws and regulations and we seek to anticipate regulatory developments that could impact our ability to continue to produce and market our products. We invest in research and development to maintain product formulations that comply with such laws and regulations. There can be no assurance that we will not be required to alter the chemical composition of one or more of our products in a way that will have an adverse effect upon the product’s efficacy or marketability. A delay or other inability of the Company to complete product research and development and successfully reformulate our products in response to any such regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.
We are subject to an SEC rule mandated by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires management to conduct annual due diligence to determine whether certain minerals and metals, known as “conflict minerals”, are contained in our products and, if so, whether they originate from the Democratic Republic of Congo or adjoining countries. Although we have concluded that our current products do not contain such “conflict minerals” in our annual evaluations to date, if we were to conclude that these materials exist within our products in future periods, we may have difficulty verifying the origin of such materials for purposes of disclosures required by the SEC rules.
We are also subject to numerous environmental laws and regulations that impose various environmental controls on our business operations, including, among other things, the discharge of pollutants into the air and water, the handling, use, treatment, storage and clean-up of solid and hazardous wastes and the investigation and remediation of soil and groundwater affected by hazardous substances. Such laws and regulations may otherwise relate to various health and safety matters that impose burdens upon our operations. These laws and regulations also impose strict, retroactive and joint and several liability for the costs of, and damages resulting from, cleaning up current sites, past spills, disposals and other releases of hazardous substances. We believe that our expenditures related to environmental matters have not had, and are not currently expected to have, a material adverse effect on our financial condition, results of operations or cash flows. However, the environmental laws under which we operate are complicated, often become increasingly more stringent and may be applied retroactively. Accordingly, there can be no assurance that we will not be required to incur additional expenditures to remain in or to achieve compliance with environmental laws in the future or that any such additional expenditures will not have a material adverse effect on our business, financial condition or results of operations.
In addition, certain countries and other jurisdictions in which we operate have data protection laws that impose strict regulations on the Company. Non-compliance with any of these regulations may result in significant penalties being imposed on us. Many international and local governmental authorities are considering increased legislative and regulatory requirements concerning protection of personal data which may impact us and increase our costs to comply with these requirements in future periods.
Additional laws and regulations require that we carefully manage our supply chain for the production, distribution and sale of goods. Our failure to comply with any of these regulations or our inability to adequately predict the manner in which these local regulations are interpreted and applied to our business by the applicable enforcement agencies could have a materially adverse effect on our business, financial condition and results of operations.
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Failure to maximize or to successfully assert our intellectual property rights or infringement by the Company on the intellectual property rights of others could impact our competitiveness or otherwise adversely affect our financial condition and results of operations.
We rely on trademark, trade secret protection, patent and copyright laws to protect our intellectual property rights. Although we maintain a global enforcement program to protect our intellectual property rights, there can be no assurance that these intellectual property rights will be maximized or that they can be successfully asserted. If other companies or entities infringe on our intellectual property rights or take part in counterfeiting activities, they may dilute the value of our brands in the marketplace, which could diminish the value that consumers associate with our brands and harm our sales.
There is a risk that we will not be able to obtain and protect our own intellectual property rights or, where appropriate, license intellectual property rights necessary to support new product introductions or product lines dependent upon such licensed rights. We cannot be certain that these rights, if obtained, will not be withdrawn, invalidated, circumvented or challenged in the future, and we could incur significant costs in connection with legal actions to defend and preserve our intellectual property rights. In addition, even if such rights are obtained in the U.S., the laws of some of the other countries in which our products are or may be sold might not protect intellectual property rights to the same extent as the laws of the United States, or they may be difficult to enforce. Our failure to protect or successfully assert our intellectual property rights or failure to protect our other proprietary information could make us less competitive and this could have a material adverse effect on our business, financial condition and results of operations.
Trade secret protection, particularly for our most valuable product formulation for the WD-40 Multi-Use Product, requires specific agreements, policies and procedures to assure the secrecy of information classified as a trade secret. If such agreements, policies and procedures are not effective enough to maintain the secrecy of our trade secrets or if chemical disclosure regulations do not allow for continued protection of essential elements of our trade secret formulations, the loss of trade secret protection could have an adverse effect on our business, financial condition or results of operations.
If we are found to have violated the trademark, copyright, patent or other intellectual property rights of others, such a finding could result in the need to cease the use of a trademark, trade secret, copyrighted work or patented invention in our business and an obligation to pay a substantial amount for past infringement. It could also be necessary to pay a substantial amount in the future if the holders of such rights are willing to permit us to continue to use the intellectual property rights. Either having to cease use or pay such amounts could make the Company less competitive and could have a material adverse impact on our business, financial condition and results of operations.
Our operating results and financial performance may not meet expectations, which could adversely affect our stock price.
We cannot be sure that our operating results and financial performance, which include sales, net income, earnings per common share, gross margin and cash flows, will meet expectations. If our assumptions and estimates are incorrect or if we do not achieve all of our key goals or strategic initiatives, then our actual performance could vary materially from our internal expectations and those of the market. Failure to meet or exceed these expectations could cause the market price of our stock to decline. In addition, the trading market for our common stock is influenced by the research and reports that securities analysts, industry analysts and other third parties publish about us or our business. We do not have any control over these reports or analysts. If securities or industry analysts adversely change their recommendations regarding our common stock or if any of these analysts cease coverage of us in their reports, our stock price and trading volume could decline. Our operating results and financial performance may be negatively influenced by a number of factors, many of which are discussed in this Item 1A “Risk Factors”.
In addition, sales volume growth, whether due to acquisitions or internal growth, can place burdens on management resources and financial controls that, in turn, can have a negative impact on our operating results and financial condition. To some extent, we plan our expense levels in anticipation of future revenues. If actual revenues fall short of these expectations, operating results may be adversely affected by reduced operating margins or operating profits due to actual expense levels that are higher than might otherwise have been appropriate.
We face competition in our markets which could lead to reduced sales and profitability.
We encounter competition from similar and alternative products, many of which are produced and marketed by major national or multinational companies. In addition, we frequently discover products in certain markets that are counterfeit reproductions of our WD-40 products as well as products otherwise bearing an infringing trade dress. The availability of counterfeits and other infringing products, particularly in China and other emerging markets, could adversely impact our sales and potentially damage the value and reputation of our brands.
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Our products generally compete on the basis of product performance, brand recognition, price, quality or other benefits to consumers and meeting end users’ needs. Advertising, promotions, merchandising and packaging also have a significant impact on consumer purchasing decisions. A newly introduced consumer product, whether improved or recently developed, usually encounters intense competition requiring substantial expenditures for advertising, sales and consumer promotion. If a product gains consumer acceptance, it normally requires continued advertising, promotional support and product improvements in order to maintain its relative market position.
Some of the competitors for our homecare and cleaning products are larger and have financial resources greater than ours. These competitors may be able to spend more aggressively on advertising and promotional activities, introduce competing products more quickly and respond more effectively to changing business and economic conditions than us.
Competitive activity may require us to increase our investment in marketing or reduce our sales prices and this may lead to reduced profit margins, a loss of market share or loss of distribution, each of which could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that the Company will be able to compete successfully against current and future competitors or that competitive pressures faced by us or the infringement of our products and brands will not have a material adverse effect on our business, financial condition and results of operations.
Dependence on key customers could adversely affect our business, financial condition and results of operations.
We sell our products through a network of domestic and international mass retail, trade supply and consumer retailers as well as through industrial distributors and suppliers. The retail industry has historically been the subject of consolidation, and as a result, the development of large chain stores has taken place. Today, the retail channel is comprised of several of these large chain stores that capture the bulk of the market share. Since many of our customers have been part of consolidations in the retail industry, these limited customers account for a large percentage of our net sales. Although we expect that a significant portion of our revenues will continue to be derived from this limited number of customers, there was no individual customer that contributed to more than 10% of our consolidated net sales in fiscal year 2022. However, changes in the strategies of our largest customers, including shelf simplification, a reduction in the number of brands they carry or a shift in shelf space to “private label” or competitors’ products, may harm our sales. The loss of, or reduction in, orders from any of our most significant customers could have a material adverse effect on our brand values, business, financial condition and results of operations. Large customers may seek price reductions, added support or promotional concessions. If we agree to such customer demands and/or requests, it could negatively impact our ability to maintain existing profit margins.
In addition, our business is based primarily upon individual sales orders, and we typically do not enter into long-term contracts with our customers. Accordingly, these customers could reduce their purchasing levels or cease buying products from us at any time and for any reason. We are also subject to changes in customer purchasing patterns or the level of promotional activities. These types of changes may result from changes in the manner in which customers purchase and manage inventory levels, or display and promote products within their stores. Other potential factors such as customer disputes regarding shipments, fees, merchandise condition or related matters may also impact operating results. If we cease doing business with a significant customer or if sales of our products to a significant customer materially decrease, our business, financial condition and results of operations may be harmed.
We may not successfully develop, introduce and/or establish new products and line extensions.
Our future performance and growth depend, in part, on our ability to successfully develop, introduce and/or establish new products as both brand extensions and/or line extensions. We cannot be certain that we will successfully achieve those goals. We compete in several product categories where there are frequent introductions of new products and line extensions and such product introductions often require significant investment and support. Our ability to understand end user needs and preferences is key to maintaining and improving the competitiveness of our product offerings. The development and introduction of new products, as well as the renovation of current products and product lines, require substantial and effective research, development and marketing expenditures, which we may be unable to recoup if the new or renovated products do not gain widespread market acceptance. There are inherent risks associated with new product development and marketing efforts, including product development or launch delays, product performance issues during development, changing regulatory frameworks that affect the new products in development and the availability of key raw materials included in such products. These inherent risks could result in the failure of new products and product line extensions to achieve anticipated levels of market acceptance, additional costs resulting from failed product introductions and the product not being first to market. As we continue to focus on innovation and renovation of our products, our business, financial condition or results of operations could be adversely affected in the event that we are not able to effectively develop and introduce new or renovated products and line or brand extensions.
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Changes in marketing distributor relationships that are not managed successfully by us could result in a disruption in the affected markets.
We distribute our products throughout the world in one of two ways: the direct distribution model, in which products are sold directly by us to wholesalers and retailers in the U.S., Canada, Mexico, Australia, China, the U.K. and a number of other countries, including those throughout Europe; and the marketing distributor model, in which products are sold to marketing distributors who in turn sell to wholesalers and retailers. The marketing distributor model is generally used in countries where we do not have direct Company-owned operations. Instead, we partner with local companies who perform the sales, marketing and distribution functions. We invest time and resources into these relationships. Should our relationship with a marketing distributor change or terminate, our sales within such a marketing distributor’s territory could be adversely impacted until such time as a suitable replacement can be found and our key marketing strategies are implemented. There is a risk that changes in such marketing distributor relationships, including a change in key marketing distributor personnel or a transition to the direct distribution model, if not managed successfully, could result in a disruption in the affected markets and that such a disruption could have a material adverse effect on our business, financial condition and results of operations. Additionally, in some countries, local laws may require substantial payments to terminate existing marketing distributor relationships, which could also have a material adverse effect on our business, financial condition and results of operations.
Product liability claims and other litigation and/or regulatory action could adversely affect our sales and operating results.
While we make every effort to ensure that the products we develop and market are safe for consumers and comply with all applicable regulations, the use of our products may expose us to liability claims resulting from such use and potential enforcement actions, including the risk of recall. Claims could be based on allegations that, among other things, our products are improperly labeled or that statements we make on our labels are not accurate, contain contaminants, provide inadequate instructions regarding their use or inadequate warnings concerning their use or interactions with other substances. Product liability claims could result in negative publicity that could harm our sales and operating results. We maintain product liability insurance to protect us from loss attributable to product liability claims but the extent of such loss could exceed available limits of insurance or could arise out of circumstances under which such insurance coverage would be unavailable. Other business activities may also expose us to litigation risks, including risks that may not be covered by insurance such as contract disputes. If successful claims are asserted by regulatory agencies or third parties against us for non-compliance or uninsured liabilities or liabilities in excess of applicable limits of insurance coverage, our business, financial condition and results of operations may be adversely affected. In addition, if one of our products was determined to be defective, we could be required to recall the product, which could result in adverse publicity, loss of revenues and significant expenses.
Additionally, our products may be associated with competitor products or other products in the same category that may be alleged to have caused harm to consumers. As a result of this association, we may be named in unwarranted legal actions. The potential costs to defend such claims may materially affect our business, financial condition and results of operations.
Resolution of income tax matters may impact our financial condition and results of operations.
Significant judgment is required in determining our effective income tax rate and in evaluating tax positions, particularly those related to uncertain tax positions. We provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the accounting standard for uncertain tax positions. Changes in uncertain tax positions or other adjustments resulting from tax audits and settlements with taxing authorities, including related interest and penalties, impact our effective tax rate. When particular tax matters arise, a number of years may elapse before such matters are audited and finally resolved. Favorable or unfavorable resolution of such matters would be recognized as a reduction to our effective tax rate in the year of resolution. Any resolution of a tax matter may require the adjustment of tax assets or tax liabilities or the use of cash in the year of resolution. For additional information on such matters, see Part IV - Item 15, “Exhibits, Financial Statement Schedules” Note 13 - Income Taxes, included in this report.
Changes in tax rules may also materially affect, either adversely or favorably, our future financial results or the way management conducts its business. For example, on August 16, 2022, President Biden signed the “Inflation Reduction Act” (the “IRA”) into law. Although we do not at this time foresee this new law having a material impact on the Company, the new law is under evaluation as to how it might affect the Company’s future results and decisions of management. Previously, on December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act”) was signed into law and became effective beginning January 1, 2018. The Tax Act significantly changed U.S. tax law and tax rates, as well as mandated the application of a one-time “toll tax” on unremitted foreign earnings, among other things.
International tax changes that occur in locations where we operate can also materially affect future financial results or operations. For example, we have significant operations in Europe that are subject to income tax rates and laws in multiple jurisdictions. A significant portion of European income is subject to taxation in the U.K as a result of our European subsidiary being
headquartered in the United Kingdom. In June of 2021 an Act of Parliament received Royal Assent, changing the U.K. corporate tax rate from 19% to 25% effective on April 1, 2023 and this change may have a material impact on our future financial results.
In addition, we are required to make assertions on whether our foreign subsidiaries will invest their undistributed earnings indefinitely and these assertions are based on the capital needs of the foreign subsidiaries. Generally, unremitted earnings of our foreign subsidiaries are not considered to be indefinitely reinvested. However, there are exceptions regarding specific statutory remittance restrictions imposed on our China subsidiary. Costs associated with repatriating unremitted foreign earnings, including U.S. state income taxes and foreign withholding taxes, are immaterial to our consolidated financial statements. For additional information on income tax matters, see Part IV-Item 15, “Exhibits, Financial Statement Schedules” Note 13 - Income Taxes, included in this report.
Although many impacts of the Tax Act have been favorable for us both in the near term and long term and the IRA may have a negligible effect, the Tax Act and IRA have also authorized the U.S. Department of the Treasury to issue regulations with respect to the new provisions. We cannot predict how subsequent changes in the Tax Act, and IRA, regulations, or other guidance issued under each, including conforming or non-conforming state tax rules, might affect our business, financial condition and results of operations. In addition, there can be no assurance that U.S. tax laws, including the corporate income tax rate, will not undergo significant additional changes in the future.
Our business development activities may not be successful.
We may increase growth through business development activities such as acquisitions, joint ventures, licensing and/or other strategic partnerships in the U.S. and internationally. However, if we are not able to identify, acquire and successfully integrate acquired products or companies or successfully manage joint ventures or other strategic partnerships, we may not be able to maximize these opportunities. The failure to properly manage business development activities because of difficulties in the assimilation of operations and products, the diversion of management’s attention from other business concerns, the loss of key employees or other factors could have a material adverse effect on our business, financial condition and results of operations. In addition, there can be no assurance that our business development activities will be profitable at their inception or that they will achieve sales levels and profitability that justify the investments made.
Future acquisitions, joint ventures or strategic partnerships could also result in the incurrence of debt, potentially dilutive issuances of equity securities, contingent liabilities, amortization expenses related to certain intangible assets, unanticipated regulatory complications and/or increased operating expenses, all of which could adversely affect our results of operations and financial condition. In addition, to the extent that the economic benefits associated with any of our business development activities diminish in the future, we may be required to record impairments to goodwill, intangible assets or other assets associated with such activities, which could also adversely affect our business, financial condition and results of operations.
Goodwill and intangible assets are subject to impairment risk.
In accordance with the authoritative accounting guidance on goodwill and intangibles, we assess the potential impairment of our existing goodwill during the second quarter of each fiscal year and otherwise when events or changes in circumstances indicate that an impairment condition may exist. We also assess our definite-lived intangible assets for potential impairment when events and circumstances indicate that the carrying amount of the asset may not be recoverable or its estimated remaining useful life may no longer be appropriate. Indicators such as underperformance relative to historical or projected future operating results, changes in our strategy for our overall business or use of acquired assets, unexpected negative industry or economic trends, decline in our stock price for a sustained period, decreased market capitalization relative to net book values, unanticipated technological change or competitive activities, loss of key distribution, change in consumer demand, loss of key personnel and acts by governments and courts may signal that an asset has become impaired.
The assessment for possible impairment of our goodwill and intangible assets requires management to make judgments on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, sales growth rates, cost containment and margin expansion and expense levels for advertising and promotions and general overhead, all of which must be developed from a market participant standpoint. We may be required to record a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets is identified and this could negatively impact our financial condition and results of operations. Changes in management estimates and assumptions as they relate to valuation of goodwill and intangible assets could affect our financial condition or results of operations in the future. Our review of events and circumstances during fiscal year 2022 included consideration of the ongoing COVID-19 pandemic, the current inflationary environment, and the impact of Russian military action against Ukraine. For additional information, see Part IV - Item 15, “Exhibits, Financial Statement Schedules” Note 5 - Goodwill and Other Intangible Assets, included in this report.
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We may also divest certain of our assets, businesses or brands that do not align with our strategic initiatives. Any divestiture could negatively impact our profitability as a result of losses that may result from such a sale, the loss of sales and operating income or a decrease in cash flows subsequent to the divestiture. We may also be required to recognize impairment charges as a result of a divestiture.
We may not have sufficient cash to service our indebtedness or to pay cash dividends.
Our debt consists of fixed rate senior notes and a revolving credit facility. We use income from operations to make interest and principal payments required by the terms of our borrowing agreements. In addition, our borrowing agreements include covenants to maintain certain financial ratios and to comply with other financial terms, conditions and covenants. Also, we have historically paid out a large part of our earnings to stockholders in the form of regular quarterly cash dividends.
We may incur substantial debt in the future for general business and development activities. In addition, we may continue to use available cash balances to execute share repurchases under approved share buy-back plans. To the extent that we are required to seek additional financing to support certain of these activities, such financing may not be available in sufficient amounts or on terms acceptable to us. If we are unable to obtain such financing or to service our existing or future debt with our operating income, or if available cash balances are affected by future business performance, unstable global economic conditions, liquidity, capital needs, alternative investment opportunities or debt covenants, we could be required to reduce, suspend or eliminate our dividend payments to our stockholders. We may also elect to suspend share repurchases depending on available cash balances or concerns that we may have on future cash balances.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Americas
We own and occupy an office located in San Diego, California which houses both corporate employees and employees in our Americas segment. We also lease a regional sales office in Miami, Florida, a research and development office and laboratory in Pine Brook, New Jersey and office space in Toronto, Ontario, Canada and Monterrey, Nuevo León, Mexico.
EMEA
We own and occupy an office as well as a plant facility located in Milton Keynes, United Kingdom. In addition, we lease space for our branch offices in Germany, France, Italy, Spain, Portugal and the Netherlands.
Asia-Pacific
We lease office space in Epping, New South Wales, Australia; Shanghai, China; and Kuala Lumpur, Malaysia.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
The information required by this item is incorporated by reference to the information set forth in Item 15 of Part IV, “Exhibits, Financial Statement Schedules” Note 12 - Commitments and Contingencies, in the accompanying notes to the consolidated financial statements included in this report.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
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PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the NASDAQ Global Select Market under the trading symbol WDFC. On October 17, 2022, the last reported sales price of our common stock on the NASDAQ Global Select Market was $173.52 per share, and there were 13,579,926 shares of common stock outstanding held by approximately 570 holders of record.
Dividends
We have historically paid regular quarterly cash dividends on our common stock. In December 2021, the Board of Directors declared an 8% increase in the regular quarterly cash dividend, increasing it from $0.72 per share to $0.78 per share. On October 11, 2022, our Board of Directors declared a cash dividend of $0.78 per share payable on October 31, 2022 to shareholders of record on October 21, 2022.
Our Board of Directors presently intends to continue the payment of regular quarterly cash dividends on our common stock. Our ability to pay dividends could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and debt covenants.
Purchases of Equity Securities By the Issuer and Affiliated Purchasers
On April 8, 2020, we elected to suspend repurchases under our previously approved share buy-back plan, which subsequently expired on August 31, 2020. We made this election in order to preserve cash while we continued to monitor the long-term impacts of the COVID-19 pandemic. No repurchase transactions were made during fiscal year 2021.
On October 12, 2021, our Board of Directors approved a new share buy-back plan. Under the plan, which became effective on November 1, 2021, we are authorized to acquire up to $75.0 million of our outstanding shares through August 31, 2023. The timing and amount of repurchases are based on terms and conditions as may be acceptable to our Chief Executive Officer and Chief Financial Officer, subject to present loan covenants and in compliance with all laws and regulations applicable thereto.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
Reserved pursuant to amendments in SEC Release No. 33-10890 that eliminate the selected financial data requirements under Item 301 of Regulation S-K.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide the reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. 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. 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.
Use of Non-GAAP Constant Currency
In order to show the impact of changes in foreign currency exchange rates on our results of operations, we have included constant currency disclosures, where necessary, in the Overview and Results of Operations sections which follow. Constant currency disclosures represent the translation of our current fiscal year revenues, expenses and net income from the functional currencies of our subsidiaries to U.S. Dollars using the exchange rates in effect for the corresponding period of the prior fiscal year. 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 GAAP. 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. GAAP.
Overview
The Company
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. We own a wide range of well-known 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.
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. 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.
Highlights
The following summarizes the financial and operational highlights for our business during the fiscal year ended August 31, 2022:
Consolidated net sales increased $30.7 million, or 6%, for fiscal year 2022 compared to the prior fiscal year. Changes in foreign currency exchange rates had an unfavorable impact of $8.3 million on consolidated net sales for fiscal year 2022. Thus, on a constant currency basis, net sales would have increased by $39.0 million, or 8%, for fiscal year 2022 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 39% of our consolidated sales for the fiscal year ended August 31, 2022.
Gross profit as a percentage of net sales decreased to 49.1% for fiscal year 2022 compared to 54.0% for the prior fiscal year, primarily due to ongoing global supply chain challenges, including the increased cost of raw materials and constraints related to the ongoing COVID-19 pandemic. These ongoing challenges have resulted in increased inflation rates globally. See the Impact of COVID-19 on Our Business section which follows for details, including actions we are taking in response to these challenges.
Consolidated net income decreased $2.9 million, or 4%, for fiscal year 2022 compared to the prior fiscal year. Changes in foreign currency exchange rates had an unfavorable impact of $0.8 million on consolidated net income for fiscal year 2022. Thus, on a constant currency basis, net income would have decreased by $2.1 million, or 3%, for fiscal year 2022 compared to the prior fiscal year.
Diluted earnings per common share for fiscal year 2022 were $4.90 versus $5.09 in the prior fiscal year.
Our strategic initiatives and the areas where we will continue to focus our time, talent and resources in future periods include: (i) building a business for the future; (ii) attracting, developing and engaging outstanding tribe members; (iii) striving for operational excellence; (iv) growing WD-40 Multi-Use Product; (v) growing WD-40 Specialist product line; and (vi) expanding and supporting portfolio opportunities that help us grow.
‎
Significant Developments Impact of COVID-19 on Our Business
Our financial results and operations continue to be impacted by the COVID-19 pandemic that began during our fiscal year 2020. The ongoing COVID-19 pandemic has impacted global economies, the rate of inflation, supply chains, distribution networks and consumer behavior around the world. We have experienced both favorable and unfavorable impacts to our financial results and our operations as a result of the direct and indirect effects of the COVID-19 pandemic. For example, sales have been negatively impacted at varying times in the regions in which we operate due to health and safety restrictions required by local governmental authorities; such restrictions most recently impacted our Asia-Pacific segment when COVID-19 lockdowns were in place in China sporadically during the second half of fiscal year 2022. These negative sales impacts since the start of the pandemic have been offset in certain periods by increased demand for our products, particularly in fiscal year 2021, as a result of the shift in consumer spending patterns due to increased renovation and maintenance activities. However, 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. These increased costs started to negatively impact our gross margin and financial results in fiscal year 2021. This inflationary environment worsened during fiscal year 2022 resulting in lower gross margins compared to the corresponding periods of the prior fiscal year.
Some of the increasing supply chain challenges that we have experienced include general aerosol production capacity constraints and competition for such capacity by other companies who also utilize third-party manufacturers for their aerosol production. Supply chains at many companies globally are being strained due to shortages of certain materials and this is impacting the ability of our third-party manufacturers to procure certain raw materials needed to manufacture our products. These challenges have periodically resulted in us not being able to meet the high level of demand for our products by customers and end-users in certain markets, most significantly those markets in our Americas segment where demand for aerosols has periodically outpaced the available production capacity in the region. We are continuing to actively manage periodic supply chain constraints and transportation disruptions. We have been actively working on various initiatives with our existing third-party manufacturers and we are also identifying and onboarding new third-party manufacturers, particularly in the Americas and EMEA segments. In addition, we have taken actions to increase inventory levels of certain raw materials and finished goods, given the current challenges within supply chain and increased lead times required by suppliers. As a result of these initiatives, we have begun to see increases in the capacity and flexibility of our supply chain throughout fiscal year 2022, particularly in the Americas segment. When we onboard new third-party manufacturers, it comes with inherent risks and in the current economic environment, it also potentially comes with higher costs. Although we are not able to estimate the costs or impacts associated with potential future supply chain disruptions, we believe that the changes we continue to implement as a result of the pandemic will have a positive lasting impact on our ability to better manage any future disruptions. However, some of the additional costs resulting from these recent supply chain constraints, including costs resulting from maintenance of higher inventory levels, as well as the inflationary environment that is impacting our raw material costs, are expected to unfavorably impact our cost of goods sold for as long as such conditions exist.
To offset these unfavorable impacts to gross margin, significant price increases have been implemented across all of our markets and geographies in fiscal year 2022 and further price increases may be implemented in certain regions in fiscal year 2023. Although we are beginning to see the favorable impacts of these price increases, it will take additional time before the full impact of these price increases is reflected in our reported results, especially those in some of our largest markets which we implemented late in the third quarter and in the fourth quarter of fiscal year 2022. However, it is possible that sales volumes may be impacted unfavorably in the short term as customers and end users adjust to increased sales prices. The severity and duration of the COVID-19 pandemic and its 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.
We have continued to follow a variety of measures to promote the safety and security of our employees during the pandemic, support the communities in which we operate and ensure the availability and functioning of our critical infrastructure. These measures have included allowing for or requiring remote working arrangements for employees in some regions and the imposition of various travel restrictions. In addition, we continue to develop and monitor plans to support a safe working environment for our employees in the various office locations in which we operate around the world. These plans vary by region based on the evolving situations within those regions. In connection with these plans, we have put in place our “Work from Where” philosophy to support work-life integration, and enable management and employees to align on where work is completed.
See our risk factors disclosed in Part I-Item 1A, “Risk Factors,” for further information on risks associated with pandemics, including COVID-19.
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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. These geopolitical tensions continued throughout the remainder of the fiscal year and it is uncertain when conditions will improve or whether additional governmental sanctions will be enacted in future periods. The direct and indirect impacts of this evolving situation and its effect on global economies in future periods are difficult to predict. We suspended selling our products to markets in Russia and Belarus beginning in March 2022, which had an unfavorable impact on our sales. In addition, we are currently unable to sell our products in Ukraine due to the disruption in the country. Our net sales to the regions that are directly impacted were approximately 3% of consolidated net sales for fiscal year 2021 and approximately 4% of consolidated net sales for the first half of fiscal year 2022, prior to the suspension of sales in these regions. As a result of this event that impacted the second half of our fiscal year, sales in these regions decreased 38% for the fiscal year ended August 31, 2022 compared to the prior fiscal year. We do not have facilities, third-party manufacturing partners, employees or inventory 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 increases in the price of crude oil are highly unpredictable and may unfavorably impact our cost of goods sold for as long as these conditions exist.
‎
Results of Operations
Fiscal Year Ended August 31, 2022 Compared to Fiscal Year Ended August 31, 2021
Operating Items
The following table summarizes operating data for our consolidated operations (in thousands, except percentages and per share amounts):
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
Net sales:
Maintenance products
$
485,326
$
448,817
$
36,509
8%
Homecare and cleaning products
33,494
39,292
(5,798)
(15)%
Total net sales
518,820
488,109
30,711
6%
Cost of products sold
264,055
224,370
39,685
18%
Gross profit
254,765
263,739
(8,974)
(3)%
Operating expenses
167,435
174,898
(7,463)
(4)%
Income from operations
$
87,330
$
88,841
$
(1,511)
(2)%
Net income
$
67,329
$
70,229
$
(2,900)
(4)%
Earnings per common share - diluted
$
4.90
$
5.09
$
(0.19)
(4)%
Net Sales by Segment
The following table summarizes net sales by segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
Americas
$
240,233
$
214,601
$
25,632
12%
EMEA
204,688
208,252
(3,564)
(2)%
Asia-Pacific
73,899
65,256
8,643
13%
Total
$
518,820
$
488,109
$
30,711
6%
‎
Americas Sales
The following table summarizes net sales by product line for the Americas segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
Maintenance products
$
223,470
$
194,295
$
29,175
15%
Homecare and cleaning products
16,763
20,306
(3,543)
(17)%
Total
$
240,233
$
214,601
$
25,632
12%
% of consolidated net sales
47%
44%
CC Net sales - non-GAAP (1)
$
240,190
$
214,601
$
25,589
12%
(1)Current fiscal year constant currency (“CC”) 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
Americas Sales - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Net sales of maintenance products in the Americas segment increased due primarily to the following:
U.S. sales increased $15.3 million, or 10%, due to increased sales of WD-40 Multi-Use Product and WD-40 Specialist of $7.1 million, or 6%, and $7.7 million, or 51%, respectively. The increase for WD-40 Multi-Use Product was primarily due to price increases that went into effect during the last twelve months and supply chain improvements we made during fiscal year 2022 which resulted in increased product availability. These increases were offset by lower demand, partially due to unusually high levels of renovation and maintenance activities exhibited by our end-users during the prior fiscal year 2021 in earlier stages of the COVID-19 pandemic. WD-40 Specialist sales increased primarily due to significantly higher product availability. WD-40 Specialist products are sourced at certain third-party manufacturers that were significantly impacted by global supply chain constraints in fiscal year 2021. However, adjustments we have made in our supply chain to increase the production capacity of our most significant products, including WD-40 Specialist, improved the availability of these products throughout fiscal year 2022. In addition, WD-40 Specialist also benefited from price increases we implemented over the last 12 months.
Latin America sales increased $11.8 million, or 35%, primarily due to higher sales throughout many markets in the region, including in our direct market in Mexico. Sales were favorably impacted by price increases, increased product availability, successful promotional programs, and the continued momentum of achieving new distribution in our direct market in Mexico. In addition, sales were favorably impacted in the fourth quarter of fiscal year 2022 due to marketing distributors purchasing product in advance of additional price increases which were implemented late in fiscal year 2022.
Canada sales increased $2.1 million, or 16%, primarily due to demand in the industrial channel in Western Canada as a result of increased activity levels of end-users in the oil industry. In addition, price increases we implemented over the last twelve months, increased promotional activities and new distribution also had a favorable impact on sales.
Net sales of homecare and cleaning products in the Americas decreased due to the following:
Challenges in our Americas supply chain, primarily in the U.S., resulted in decreased product availability and lower net sales for most homecare and cleaning product brands. While we have been actively working to increase the capacity and flexibility of our supply chain in recent periods, the adjustments we have made to date have been more heavily focused on our most significant products, primarily our maintenance products.
While each of our homecare and cleaning products have continued to generate positive cash flows, we have experienced flat or decreased sales for many of these products in recent periods.
For the Americas segment, 74% of sales came from the U.S., and 26% of sales came from Canada and Latin America combined for the fiscal year ended August 31, 2022 compared to the prior fiscal year when 77% of sales came from the U.S., and 23% of sales came from Canada and Latin America combined.
‎
EMEA Sales
The following table summarizes net sales by product line for the EMEA segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
Maintenance products
$
196,524
$
198,309
$
(1,785)
(1)%
Homecare and cleaning products
8,164
9,943
(1,779)
(18)%
Total (1)
$
204,688
$
208,252
$
(3,564)
(2)%
% of consolidated net sales
39%
43%
CC Net sales - non-GAAP (2)
$
212,319
$
208,252
$
4,067
2%
(1)While our reporting currency is the U.S. Dollar, the functional currency of our U.K. subsidiary, the entity in which the EMEA results are generated, is Pound Sterling. Although the functional currency of this subsidiary is Pound Sterling, approximately 50% of its sales are generated in Euro and approximately 15% are generated in U.S. Dollar. As a result, the Pound Sterling sales and earnings for the EMEA segment can be negatively or positively impacted from period to period upon translation from these currencies depending on whether the Euro and U.S. Dollar are weakening or strengthening against the Pound Sterling.
(2)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.
EMEA Sales - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Net sales decreased in the EMEA segment due to the following drivers:
Direct Markets - EMEA (67% of net sales YTD FY2022 vs 68% YTD FY2021)
Direct markets decreased $4.5 million, or 3%, primarily due to decreased sales in the U.K of $8.4 million, or 21%, offset by increases in our other EMEA direct markets, when combined, of $3.9 million, or 4%. Sales in our direct markets were unfavorably impacted by the weakening of the Pound Sterling, the functional currency of our U.K subsidiary, against the U.S. Dollar. On a constant currency basis, sales would have increased $1.0 million in our direct markets in fiscal year 2022 as compared to the prior fiscal year.
Decreased sales in the U.K. direct market were primarily due to a lower level of demand, as renovation, maintenance and homecare and cleaning activities exhibited by our end-users in the U.K. during the COVID-19 pandemic resulted in particularly strong demand in fiscal year 2021. In addition, sales were unfavorably impacted by changes in foreign currency exchange rates. These decreases were partially offset by price increases we have implemented over the last twelve months. Although these price increases positively impacted sales, the overall impact was partially offset by a lower level of customer orders and promotional programs as customers adjust to these price increases.
Sales in EMEA direct markets, excluding the U.K., increased from period to period primarily due to new distribution and sales price increases, as well as successful promotional programs that occurred during fiscal year 2022. These favorable impacts were partially offset by lower demand and reduced renovation and maintenance activities exhibited by our end-users, as discussed above, as well as unfavorable impacts due to changes in foreign currency exchange rates.
Distributor Markets - EMEA (33% of net sales YTD FY2022 vs 32% YTD FY2021)
Sales increased $0.9 million, or 1%, in EMEA markets wherein we utilize a marketing distributor model (“distributor markets”), in which products are sold to marketing distributors who in turn sell to wholesalers and retailers. The increase was primarily due to increased sales in India, the Middle East, Poland and the Czech Republic of $2.5 million, $1.5 million, $1.0 million, and $0.9 million, respectively. The increases in the distributor market sales were significantly offset by decreased sales in Russia and Turkey of $4.8 million and $0.9 million, respectively. The sales decrease in Russia was primarily 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.
Sales were positively impacted in the distributor markets due to strong demand, new distribution and price increases we have implemented over the last twelve months.
‎
Asia-Pacific Sales
The following table summarizes net sales by product line for the Asia-Pacific segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
Maintenance products
$
65,332
$
56,213
$
9,119
16%
Homecare and cleaning products
8,567
9,043
(476)
(5)%
Total
$
73,899
$
65,256
$
8,643
13%
% of consolidated net sales
14%
13%
CC Net sales - non-GAAP (1)
$
74,621
$
65,256
$
9,365
14%
(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
Asia-Pacific Sales - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Net sales in the Asia-Pacific segment increased due to the following drivers:
Sales in the Asia distributor markets increased $5.9 million, or 23%, primarily due to the success of promotional programs and the continued easing of COVID-19 lockdown measures throughout the fiscal year, which resulted in increased demand and higher sales in most countries, as well as the timing of customer orders in response to price increases.
Sales in China increased $2.3 million, or 13%, primarily due to a higher level of promotional activities during the first half of fiscal year 2022, as well as customers purchasing product in advance of anticipated price increases. These increases in sales were partially offset by decreased sales due to COVID-19 lockdowns in Shanghai and other cities, primarily in the third quarter, that severely limited the production of our products by our third-party manufacturer located in the region. In addition, these lockdowns and the severe restrictions placed on various regions in China during certain periods in the second half of fiscal year 2022 negatively impacted logistics networks in the country.
Australia sales increased $0.5 million, or 2%, primarily due to the ongoing growth of the base business, increased promotional activities and price increases that went into effect in February 2022. Changes in foreign currency exchange rates had an unfavorable impact on sales in Australia. On a constant currency basis, sales in Australia would have increased $1.5 million, or 7%.
Gross Profit
The following general information regarding the timing and nature of our product costs is important when assessing fluctuations in our gross margin from period to period:
There is often a delay of one quarter or more 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;
In general, the timing of advertising, promotional and other discounts may cause fluctuations in gross margin from period to period. 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. Dollar. 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; and
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. These costs totaled $18.6 million and $16.5 million for the fiscal year ended August 31, 2022 and 2021, 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):
Fiscal Year Ended August 31,
Change from
‎Prior Year
Gross profit
$
254,765
$
263,739
$
(8,974)
Gross margin
49.1%
54.0%
(490)
bps (1)
(1)Basis points (“bps”) change in gross margin.
Gross Margin - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Gross margin decreased 490 bps primarily due to the following unfavorable impacts, partially offset by favorable impacts:
(Unfavorable)/Favorable
Explanations
(430) bps
Higher costs of specialty chemicals used in the formulation of our products.
(180) bps
Higher costs of aerosol cans.
(110) bps
Higher warehousing, distribution and freight costs associated with supply chain constraints as a result of the ongoing COVID-19 pandemic, the worsening inflationary environment and initiatives to increase production capacity while these constraints exist.
(100) bps
Higher filling fees paid to our third-party contract manufacturers, primarily in the Americas segment.
(50) bps
Changes in foreign currency exchange rates in the EMEA segment.
390 bps
Sales price increases implemented in all three segments at varying times during the last 12 months.
Selling, General and Administrative (“SG&A”) Expenses
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
SG&A expenses
$
138,658
$
145,493
$
(6,835)
(5)%
% of net sales
26.7%
29.8%
SG&A Expenses - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
The decrease in SG&A expenses from period to period was primarily due lower employee-related costs, which decreased $11.5 million due to lower incentive compensation accruals of $15.2 million, which were partially offset by higher salary and other employee costs of $3.7 million primarily due to increased headcount and annual compensation increases. Changes in foreign currency exchange rates from period to period also resulted in a decrease of $2.0 million in SG&A expenses. These decreases to SG&A expense were partially offset by higher travel and meeting expense, which increased $3.5 million due to the reduction in travel restrictions related to COVID-19, resulting in a higher level of travel and meetings by employees. Additionally, freight costs increased $2.5 million primarily due to carrier price increases associated with supply chain constraints and limited capacity in the global distribution networks. Miscellaneous costs also increased $0.7 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. Research and development costs for the fiscal years ended August 31, 2022 and 2021 were $5.1 million and $5.6 million, respectively. Our research and development team engages in consumer research, product development, current 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. The level and types of expenses incurred within research and development can vary from period to period depending upon the types of activities being performed.
Advertising and Sales Promotion (“A&P”) Expenses
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
A&P expenses
$
27,343
$
27,956
$
(613)
(2)%
% of net sales
5.3%
5.7%
A&P Expenses - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Changes in foreign currency exchange rates had a favorable impact of $0.6 million on advertising and sales promotion expenses from period to period. On a constant currency basis, A&P expenses would have been relatively constant.
As a percentage of net sales, A&P expenses may fluctuate period to period based upon the type of marketing activities we employ and the period in which the costs are incurred. Total promotional costs recorded as a reduction to sales were $28.1 million and $24.8 million for the fiscal years ended August 31, 2022 and 2021, respectively. Therefore, our total investment in A&P activities totaled $55.4 million and $52.8 million for the fiscal years ended August 31, 2022 and 2021, respectively.
Income from Operations by Segment
The following table summarizes income from operations by segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Change from
‎Prior Year
Dollars
Percent
Americas
$
54,198
$
51,591
$
2,607
5%
EMEA
42,058
53,003
(10,945)
(21)%
Asia-Pacific
22,590
19,121
3,469
18%
Unallocated corporate (1)
(31,516)
(34,874)
3,358
(10)%
Total
$
87,330
$
88,841
$
(1,511)
(2)%
(1)Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the business segments. These expenses are reported separate from our identified segments and are included in Selling, General and Administrative expenses on our consolidated statements of operations.
Americas
Americas Operating Income - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Income from operations for the Americas increased to $54.2 million, up $2.6 million, or 5%, primarily due to a $25.6 million increase in sales and slightly lower operating expenses, significantly offset by a lower gross margin. Gross margin for the Americas segment decreased from 52.0% to 47.3% primarily due to increases in the costs of specialty chemicals and aerosol cans. In addition, gross margin was unfavorably impacted by increased warehousing, distribution and freight costs and higher costs at our third-party manufacturers due to supply chain constraints and inflationary impacts, as well as unfavorable changes in sales mix and higher overhead costs. These unfavorable impacts to gross margin were partially offset by the favorable impacts of price increases that were implemented during the previous 12 months. Although operating expenses decreased due to lower accrued incentive compensation, these decreases were almost entirely offset by higher outbound freight costs primarily due to higher freight rates, increased headcount and salaries, and higher travel and meeting expenses. Operating income as a percentage of net sales decreased from 24.0% to 22.6% period over period.
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EMEA
EMEA Operating Income - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Income from operations for the EMEA segment decreased to $42.1 million, down $10.9 million, or 21%, primarily due to a lower gross margin and a $3.6 million decrease in sales, partially offset by a decrease in operating expenses. Gross margin for the EMEA segment decreased from 55.6% to 49.6% primarily due to increases in the costs of specialty chemicals and aerosol cans. In addition, gross margin was also unfavorably impacted by fluctuations in exchange rates as well as increased warehousing, distribution and freight costs due to supply chain constraints and inflationary impacts. These unfavorable impacts to gross margin were partially offset by price increases that were implemented over the last twelve months. Operating expenses decreased $3.2 million primarily due to lower accrued incentive compensation, partially offset by increased headcount and salaries, higher travel and meeting expenses and higher outbound freight costs. Operating income as a percentage of net sales decreased from 25.5% to 20.5% period over period.
Asia-Pacific
Asia-Pacific Operating Income - Fiscal Year Ended - August 31, 2022 Compared to August 31, 2021
Income from operations for the Asia-Pacific segment increased to $22.6 million, up $3.5 million, or 18%, primarily due to a $8.6 million increase in sales, partially offset by a lower gross margin. Gross margin for the Asia-Pacific segment decreased from 55.8% to 53.6% primarily due to combined unfavorable impacts of increases to the cost of specialty chemicals and aerosol cans. These unfavorable impacts to gross margin were partially offset by price increases that were implemented during the previous 12 months. Operating income as a percentage of net sales increased from 29.3% to 30.6% period over period.
Non-Operating Items
The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):
Fiscal Year Ended August 31,
Change
Interest income
$
$
$
Interest expense
$
2,742
$
2,395
$
Other (expense) income, net
$
(582)
$
(28)
$
(554)
Provision for income taxes
$
16,779
$
16,270
$
Interest Income
Interest income was not significant for both the fiscal years ended August 31, 2022 and 2021.
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.
Other (Expense) Income, Net
Other (expense) income, net was $0.6 million for the fiscal year ended 2022 and was not significant for the corresponding period of the prior fiscal year. The $0.6 million change from period to period was primarily due to net foreign currency losses during fiscal year 2022 as a result of 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 19.9% of income before income taxes for the fiscal year ended August 31, 2022 compared to 18.8% for the prior fiscal year. The increase in the effective income tax rate from period to period was primarily due to an increase in non-deductible performance-based compensation expense.
‎
Net Income
Net income was $67.3 million, or $4.90 per common share on a fully diluted basis, for fiscal year 2022 compared to $70.2 million, or $5.09 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 $0.8 million on net income for fiscal year 2022. Thus, on a constant currency basis, net income for fiscal year 2022 would have been $68.1 million.
Results of Operations
Fiscal Year Ended August 31, 2021 Compared to Fiscal Year Ended August 31, 2020
For discussion related to changes in financial condition and the results of operations for fiscal year 2021 compared to fiscal year 2020, refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2021, which was filed with the SEC on October 22, 2021.
Performance Measures and Non-GAAP Reconciliations
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 at or above 55% of net sales, our cost of doing business to be at 30% of net sales, and our EBITDA to be at or above 25% of net sales. Results for these performance measures may vary from period to period depending on various factors, including economic conditions and our level of investment in activities for the future such as those related to quality assurance, regulatory compliance, and intellectual property protection in order to safeguard our WD-40 brand. Our financial results and operations continue to be impacted by increased global supply chain constraints and an inflationary environment, both of which have significantly lowered our gross margin percentage over the last twelve months and moved us well below our target of 55%. Although we have been implementing strategic sales price increases across all segments at varying times in response to increased costs, it will take time before the full impact of these sales price increases are reflected in our reported results. In addition, it is difficult to determine how long these supply chain and inflationary conditions will exist and if they will worsen or improve over time. However, the targets for gross margin and these other performance measures are long-term in nature and we expect to make progress towards achieving 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”.
The following table summarizes the results of these performance measures:
Fiscal Year Ended August 31,
Gross margin - GAAP
49%
54%
55%
Cost of doing business as a percentage of net sales - non-GAAP
31%
35%
34%
EBITDA as a percentage of net sales - non-GAAP (1)
18%
20%
21%
(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.
We use the performance measures above to establish financial goals and to gain an understanding of our comparative performance from period to period. We believe that these measures provide our shareholders with additional insights into how we run our business. We believe these measures also provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. These non-GAAP financial measures are supplemental in nature and should not be considered in isolation or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of our performance or operations. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.
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Reconciliations of these non-GAAP financial measures to our financial statements as prepared in accordance with GAAP are as follows:
Cost of Doing Business (in thousands, except percentages):
Fiscal Year Ended August 31,
Total operating expenses - GAAP
$
167,435
$
174,898
$
145,797
Amortization of definite-lived intangible assets
(1,434)
(1,449)
(2,211)
Depreciation (in operating departments)
(4,369)
(4,311)
(4,095)
Cost of doing business - non-GAAP
$
161,632
$
169,138
$
139,491
Net sales
$
518,820
$
488,109
$
408,498
Cost of doing business as a percentage of net sales - non-GAAP
31%
35%
34%
EBITDA (in thousands, except percentages):
Fiscal Year Ended August 31,
Net income - GAAP
$
67,329
$
70,229
$
60,710
Provision for income taxes
16,779
16,270
14,805
Interest income
(102)
(81)
(93)
Interest expense
2,742
2,395
2,439
Amortization of definite-lived
intangible assets
1,434
1,449
2,211
Depreciation
6,860
5,570
5,490
EBITDA
$
95,042
$
95,832
$
85,562
Net sales
$
518,820
$
488,109
$
408,498
EBITDA as a percentage of net sales - non-GAAP
18%
20%
21%
Liquidity and Capital Resources
Overview
Our financial condition and liquidity remain strong. Although there continues to be uncertainty related to the ongoing and anticipated impact of the current COVID-19 pandemic on our future results, we believe our efficient business model and the steps that we have taken position us to manage our business through the situation as it continues to develop. We continue to manage all aspects of our business including, but not limited to, monitoring our liquidity, the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies and developing new opportunities for growth
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. We use proceeds of the revolving credit facility primarily for our general working capital needs. We also hold borrowings under the Note Agreement. See Note 8 - Debt for additional information on these agreements.
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 Pound Sterling in the EMEA segment. Euro and Pound Sterling denominated draws will 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. 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, 2022, $39.5 million of the outstanding balance under our line of credit resides in the EMEA segment and is denominated in Euros and Pound Sterling and classified long-term, whereas $38.4 million is denominated in U.S. Dollar and classified as short-term. In the United States, we held $68.4 million in fixed rate long-term borrowings as of August 31, 2022, consisting of senior notes under our Note Agreement. We paid $0.8 million in principal payments on our Series A Notes during fiscal year 2022. There were no other letters of credit outstanding or restrictions on the
amount available on our line of credit or notes. Per the terms of both the Note Agreement and the Credit Agreement, our consolidated leverage ratio cannot be greater than three and a half to one and our consolidated interest coverage ratio cannot be less than three to one. See Note 8 - Debt for additional information on these financial covenants. At August 31, 2022, we were in compliance with all material debt covenants. We continue to monitor our compliance with all debt covenants and, at the present time, we believe that the likelihood of being unable to satisfy all material covenants is remote. At August 31, 2022, we had a total of $37.8 million in cash and cash equivalents. 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 of Directors approved a new share repurchase plan. Under the plan, which became effective on November 1, 2021, we are authorized to acquire up to $75.0 million of our outstanding shares through August 31, 2023, of which $45.8 million remains available for the repurchase of common shares as of August 31, 2022.
Cash Flows
The following table summarizes our cash flows by category for the periods presented (in thousands):
Fiscal Year Ended August 31,
Net cash provided by operating activities
$
2,604
$
84,714
$
72,664
Net cash used in investing activities
(7,691)
(14,460)
(18,945)
Net cash used in financing activities
(38,011)
(40,749)
(26,709)
Effect of exchange rate changes on cash and cash equivalents
(5,020)
(6)
2,219
Net (decrease) increase in cash and cash equivalents
$
(48,118)
$
29,499
$
29,229
Operating Activities
Net cash provided by operating activities decreased $82.1 million to $2.6 million for fiscal year 2022. 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, 2022 was net income of $67.3 million, which decreased $2.9 million from period to period. Changes in our working capital significantly decreased net cash provided by operating activities, primarily due to increases in inventory, most significantly in the Americas segment but also in the EMEA segment. This increase in inventory was due to actions we took to stock certain raw materials and finished goods to increase the flexibility and capacity within our supply chain, as well as the higher carrying value of inventory due to higher raw material costs and other input costs from period to period. Net cash provided by operating activities was further decreased due to higher earned incentive payouts in the first quarter of fiscal year 2022 compared to the same period of the prior fiscal year as well as lower level of earned incentive accruals from period to period. Additionally, net cash provided by operating activities decreased from period to period due to lower increases in accounts payable and accrued liabilities, as well as increases in other assets primarily due to capitalized costs related to the new cloud-based ERP system which we are currently implementing.
Investing Activities
Net cash used in investing activities decreased $6.8 million to $7.7 million for fiscal year 2022, primarily due to a lower level of manufacturing-related capital expenditures within the United States and the United Kingdom. Some of this manufacturing equipment is still under construction and will be located at our third-party manufacturers in the United States and the United Kingdom once completed.
Financing Activities
Net cash used in financing activities decreased $2.8 million to $38.0 million for fiscal year 2022. This change was primarily due to the resumption of treasury stock purchases in November 2021, resulting in increased treasury stock purchases of $29.2 million. In addition, increases in dividends paid to our shareholders of $3.8 million and increases in shares withheld to cover taxes on conversion of equity rewards of $0.8 million resulted in higher cash outflows from period to period. These increases in cash outflows from period to period were significantly offset by $36.4 million in higher proceeds provided by the Company’s debt agreements, primarily due to $38.4 million in proceeds from our line of credit in fiscal year 2022. In fiscal year 2021, we repaid $50.0 million of borrowings outstanding under our line of credit using $52.0 million in proceeds that we received from the issuance and sale of senior notes. This net borrowing activity resulted in a $2.0 million cash inflow during fiscal year 2021 related to our debt agreements compared to the $38.4 million in net proceeds during fiscal year 2022.
Effect of Exchange Rate Changes
All of our foreign subsidiaries currently operate in currencies other than the U.S. 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 Pound 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. Dollar at the end of each reporting period. The net effect of exchange rate changes on cash and cash equivalents, when expressed in U.S. Dollar terms was a decrease in cash of $5.0 million in fiscal year 2022, while such changes were not significant in fiscal year 2021 and resulted in an increase in cash of $2.2 million for fiscal year 2020. 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. Dollar.
Cash Flows
Fiscal Year Ended August 31, 2021 Compared to Fiscal Year Ended August 31, 2020
For discussion related to changes in the consolidated statements of cash flows for fiscal year 2021 compared to fiscal year 2020, refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2021, which was filed with the SEC on October 22, 2021.
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.
Dividends
We have historically paid regular quarterly cash dividends on our common stock. In December 2021, the Board of Directors declared an 8% increase in the regular quarterly cash dividend, increasing it from $0.72 per share to $0.78 per share. On October 11, 2022, our Board of Directors declared a cash dividend of $0.78 per share payable on October 31, 2022 to shareholders of record on October 21, 2022. Our ability to pay dividends could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants.
Contractual Obligations
We hold borrowings under our Note Purchase and Private Shelf Agreement with fixed repayment requirements and under a Revolving Credit Facility that has variable underlying interest rates. For additional details on these borrowings, including ability and intent assessment on our credit facility agreement with Bank of America, refer to the information set forth in Part IV-Item 15, “Exhibits, Financial Statement Schedules”, Note 8 - Debt.
Additionally, we have ongoing relationships with various third-party suppliers (contract manufacturers) that manufacture our products and third-party distribution centers which warehouse and ship our products to customers. The contract manufacturers maintain title and control of certain raw materials and components, materials utilized in finished products, and of the finished products themselves until shipment to our customers or third-party distribution centers in accordance with agreed upon shipment terms. Although we have definitive minimum purchase obligations in the contract terms with certain of our contract manufacturers, when such obligations have been included, they have either been immaterial or the minimum amounts have been such that they are well below the volume of goods that we have historically purchased. In addition, in the ordinary course of business, we communicate supply needs to our contract manufacturers based on orders and short-term projections, ranging from two to six months. We are committed to purchase the products produced by the contract manufacturers based on the projections provided. Upon the termination of contracts with contract manufacturers, we obtain certain inventory control rights and are obligated to work with the contract manufacturer to sell through all product held by or manufactured by the contract manufacturer on our behalf during the termination notification period. If any inventory remains at the contract manufacturer at the termination date, we are 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, we may also enter into commitments with other manufacturers to purchase finished goods and components to support innovation initiatives and/or supply chain initiatives. As of August 31, 2022, no such commitments were outstanding.
At August 31, 2022, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was approximately $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 to $0.2 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.
Critical Accounting Policies and 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. Preparation of financial statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. 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. Our financial results may have varied from those reported had different assumptions been used or other conditions prevailed.
Revenue Recognition
Sales are recognized as revenue at a point in time upon transferring control of the product to the customer. This typically occurs when products are shipped or delivered, depending on when risks of loss and title have passed to the customer per the terms of the contract. 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 determine an average time of transit of product to our customers, and this is used to estimate the time of delivery and whether revenue should be recognized during the current 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 refund or adjustment related to variable consideration to determine the net consideration to which we expect to be entitled. We record estimates of variable consideration, which primarily includes rebates/other discounts (cooperative marketing programs, volume-based discounts, shelf price reductions and allowances for shelf space, charges from customers for services they provided to us related to the sale and penalties/fines charged to us by our customers for failing to adhere to contractual obligations), coupon offers, cash discount allowances, and sales returns, as a reduction of sales in the consolidated statements of operations. These estimates are based on the expected value method considering all reasonably available information, including current and past trade promotion spending patterns, status of trade promotion activities and the interpretation of historical spending trends by customer and category, customer agreements and/or currently known factors that arise in the normal course of business. We review our assumptions and adjust these estimates accordingly on a quarterly basis. Our consolidated financial statements could be materially impacted if the actual promotion rates are different from the estimated rates. If our accrual estimates for sales incentives at August 31, 2022 were to differ by 10%, the impact on net sales would be approximately $1.0 million.
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. Based on changes in the related tax law as well as forecasted results, a valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. In addition to valuation allowances, we provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.
We are required to make assertions on whether our foreign subsidiaries will invest their undistributed earnings indefinitely and these assertions are based on the capital needs of the foreign subsidiaries. Generally, unremitted earnings of our foreign subsidiaries are not considered to be indefinitely reinvested. 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. state income taxes and foreign withholding taxes, are immaterial to our consolidated financial statements. For additional
information on income tax matters, see Part IV-Item 15, “Exhibits, Financial Statement Schedules” Note 13 - Income Taxes, included in this report.
Recently Issued Accounting Standards
Information on Recently Issued Accounting Standards that could potentially impact our consolidated financial statements and related disclosures is incorporated by reference to Part IV-Item 15, “Exhibits, Financial Statement Schedules” Note 2 - Basis of Presentation and Summary of Significant Accounting Policies, included in this report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Risk
We are exposed to a variety of risks, including foreign currency exchange rate fluctuations. In the normal course of business, we employ established policies and procedures to manage our exposure to fluctuations in foreign currency values.
All of our international subsidiaries operate in functional currencies other than the U.S. Dollar. As a result, we are exposed to foreign currency related risk when the financial statements of our international subsidiaries are translated for consolidation purposes from functional currencies to U.S. Dollars. This foreign currency risk can affect sales, expenses and profits as well as assets and liabilities that are denominated in currencies other than the U.S. Dollar. We do not enter into any hedging activities to mitigate this foreign currency translation risk.
Our U.K. subsidiary, whose functional currency is Pound Sterling, utilizes foreign currency forward contracts to limit our exposure to net asset balances held in non-functional currencies. We regularly monitor our foreign exchange exposures to ensure the overall effectiveness of our foreign currency hedge positions. While we engage in foreign currency hedging activity to reduce our risk, for accounting purposes, none of our foreign currency forward contracts are designated as hedges.
Commodity Price Risk
Specialty chemicals and aerosol cans constitute a significant portion of the cost of many of our maintenance products. Volatility in the price of oil directly impacts the cost of specialty chemicals which are indexed to the price of crude oil. If there are significant increases in the costs of crude oil, our gross margins and operating results will be negatively impacted. We do not currently have a strategy or policy to enter into transactions to hedge crude oil price volatility, but we regularly review this policy based on market conditions and other factors.
Interest Rate Risk
As of August 31, 2022, we had a $77.9 million outstanding balance on our existing $150.0 million revolving credit facility agreement with Bank of America. This $150.0 million revolving credit facility is subject to interest rate fluctuations. Under the terms of the credit facility agreement, we may borrow loans in U.S. dollars or in foreign currencies from time to time until September 30, 2025. In addition, we had $68.4 million in fixed rate borrowings consisting of senior notes under our note purchase agreements as of August 31, 2022. For additional details on our long-term borrowings as of August 31, 2022, refer to the information set forth in Part IV-Item 15, “Exhibits, Financial Statement Schedules” and Note 8 - Debt. Interest rates associated with this revolving credit facility are based on the following rates:
Bloomberg Short-term Bank Yield Index rate (U.S. Dollar borrowings)
Sterling Overnight Index Average Reference Rate (British Pound Sterling borrowings)
Euro Interbank Offered Rate (Euro borrowings)
Any significant increase in these rates could have a material effect on interest expense incurred on any borrowings outstanding under the credit facility.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements at August 31, 2022 and 2021 and for each of the three fiscal years in the period ended August 31, 2022, and the Report of Independent Registered Public Accounting Firm, are included in Item 15 of this report.
‎
Quarterly Financial Data (Unaudited)
Pursuant to amendments in SEC Release No. 33-10890, we have omitted historical quarterly financial data for our business over the last two fiscal year periods as there has not been any retrospective change to the information previously reported.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”). The term disclosure controls and procedures means controls and other procedures of a Company that are designed to ensure the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of August 31, 2022, the end of the period covered by this report (the Evaluation Date), and they have concluded that, as of the Evaluation Date, such controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in the Company’s reports filed under the Exchange Act. Although management believes the Company’s existing disclosure controls and procedures are adequate to enable the Company to comply with its disclosure obligations, management continues to review and update such controls and procedures. The Company has a disclosure committee, which consists of certain members of the Company’s senior management.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of its internal control over financial reporting based upon the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on that evaluation, management concluded that its internal control over financial reporting is effective as of August 31, 2022.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP, independent registered public accounting firm, who audited and reported on the consolidated financial statements of WD-40 Company included in Item 15 of this report, has audited the effectiveness of WD-40 Company’s internal control over financial reporting as of August 31, 2022, as stated in their report included in Item 15 of this report.
Changes in Internal Control over Financial Reporting
There were no changes to the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter ended August 31, 2022, that materially affected, or would be reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Certain information required by this item is set forth in sections under the headings “Security Ownership of Certain Beneficial Owners and Management,” “Director Nominees,” and “Related Party Transactions Review and Oversight” in our Proxy Statement to be filed with the Securities and Exchange Commission in connection with the 2022 Annual Meeting of Stockholders on December 13, 2022 (“Proxy Statement”), which information is incorporated by reference herein. Information regarding executive officers is also incorporated by reference to the “Information Regarding our Executive Officers” section of our Proxy Statement.
The Registrant has a code of ethics (as defined in Item 406 of Regulation S-K under the Exchange Act) applicable to its principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions. The code of ethics is represented by the Registrant’s Code of Conduct applicable to all employees and directors. A copy of the Code of Conduct may be found on the Registrant’s internet website on the Corporate Governance link from the Investors page at www.wd40company.com.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Information required by this item is incorporated by reference to sections of the Proxy Statement under the headings “Director Compensation” (and the table following such section), “Compensation Committee - Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation” (and the compensation tables following such section), “Supplemental Death Benefit Plans and Supplemental Insurance Benefits,” “Change of Control Severance Agreements” and “CEO Pay Ratio.”

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain information required by this item is incorporated by reference to the Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management.”
Equity Compensation Plan Information
The following table provides information regarding shares of our common stock authorized for issuance under equity compensation plans as of August 31, 2022:
Number of securities
remaining available for
Number of securities to
future issuance under
be issued upon exercise
Weighted-average exercise
equity compensation plans
of outstanding options,
price of outstanding options
(excluding securities
warrants and rights
warrants and rights
reflected in column (a))
(a)
(b)
(c)
Plan category
Equity compensation plans
approved by security holders
136,937
(1)
$
-
384,859
Equity compensation plans not
approved by security holders
n/a
n/a
n/a
136,937
(1)
$
-
384,859
(1) Includes 78,604 securities to be issued pursuant to outstanding restricted stock units; 37,201 securities to be issued pursuant to outstanding market share units (“MSUs”) based on 100% of the target number of MSU shares to be issued upon achievement of the applicable performance measure specified for such MSUs; 3,306 securities to be issued pursuant to outstanding deferred performance units (“DPUs”); and 17,826 securities to be issued pursuant to outstanding performance share units (“PSUs”) based on 100% of the maximum number of PSU shares to be issued upon achievement of the applicable performance measure specified for such PSUs.
‎

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item is incorporated by reference to the Proxy Statement under the headings “Director Independence” and “Audit Committee - Related Party Transactions Review and Oversight.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Information required by this item is incorporated by reference to the Proxy Statement under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm.”
‎
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
Page
(a)
Documents filed as part of this report
(1)
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial statement schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
(3) Exhibits
Exhibit
No.
Description
Articles of Incorporation and Bylaws.
3(a)
Certificate of Incorporation, incorporated by reference from the Registrant’s Form 10-K filed October 22, 2018, Exhibit 3(a) thereto.
3(b)
Amended and Restated Bylaws of WD-40 Company, incorporated by reference from the Registrant’s Form 8-K filed August 16, 2018, Exhibit 3.1 thereto.
Material Contracts.
Executive Compensation Plans and Arrangements (Exhibits 10(a) through 10(s) are management contracts and compensatory plans or arrangements required to be filed as exhibits pursuant to Item 15(b)).
10(a)
WD-40 Company 2016 Stock Incentive Plan, incorporated by reference from the Registrant’s Proxy Statement filed November 3, 2016, Appendix A thereto.
10(b)
WD-40 Directors’ Compensation Policy and Election Plan dated October 12, 2021, incorporated by reference from the Registrant’s Form 10-K filed October 22, 2021, Exhibit 10(b) thereto.
10(c)
Form of Indemnity Agreement between the Registrant and its executive officers and directors, incorporated by reference from the Registrant’s Form 10-K filed October 22, 2013, Exhibit 10(d) thereto.
10(d)
Form of Restricted Stock Unit Agreement for grants of Restricted Stock Units to Executive Officers in fiscal year 2020, incorporated by reference from the Registrant’s Form 10-K filed October 21, 2020, Exhibit 10(d) thereto.
10(e)
Form of Market Share Unit Award Agreement for grants of Market Share Units to Executive Officers in fiscal year 2020, incorporated by reference from the Registrant’s Form 10-K filed October 21, 2020, Exhibit 10(e) thereto.
10(f)
Form of Deferred Performance Unit Award Agreement for grants of Deferred Performance Units to Executive Officers incorporated by reference from the Registrant’s Form 10-K filed October 21, 2020, Exhibit 10(f) thereto.
10(g)
Form of Restricted Stock Unit Agreement for grants of Restricted Stock Units to Executive Officers in fiscal year 2021, incorporated by reference from the Registrant’s Form 10-K filed October 21, 2020, Exhibit 10(g) thereto.
10(h)
Form of Market Share Unit Award Agreement for grants of Market Share Units to Executive Officers in fiscal year 2021 incorporated by reference from the Registrant’s Form 10-K filed October 21, 2020, Exhibit 10(h) thereto.
10(i)
Form of Performance Share Unit Restricted Stock Award Agreement for grants of Performance Share Units to Executive Officers in fiscal year 2021, incorporated by reference from the Registrant’s Form 10-K filed October 21, 2020, Exhibit 10(i) thereto.
10(j)
Form of Restricted Stock Unit Agreement for grants of Restricted Stock Units to Executive Officers in fiscal year 2022, , incorporated by reference from the Registrant’s Form 10-K filed October 22, 2021, Exhibit 10(j) thereto.
10(k)
Form of Market Share Unit Award Agreement for grants of Market Share Units to Executive Officers in fiscal year 2022, incorporated by reference from the Registrant’s Form 10-K filed October 22, 2021, Exhibit 10(k) thereto.
‎
10(l)
Form of Performance Share Unit Restricted Stock Award Agreement for grants of Performance Share Units to Executive Officers in fiscal year 2022, incorporated by reference from the Registrant’s Form 10-K filed October 22, 2021, Exhibit 10(l) thereto.
10(m)
Transition and Release Agreement, dated March 11, 2022, between WD-40 Company and Garry O. Ridge, incorporated by reference from the Registrant’s Form 8-K filed March 16, 2022, Exhibit 10.1 thereto.
10(n)
FY 2022 Restricted Stock Unit Award Agreement, dated March 11, 2022, between WD-40 Company and Garry O. Ridge, incorporated by reference from the Registrant’s Form 8-K filed March 16, 2022, Exhibit 10.2 thereto.
10(o)
Form of Restricted Stock Unit Agreement for grants of Restricted Stock Units to Executive Officers in fiscal year 2023.
10(p)
Form of Market Share Unit Award Agreement for grants of Market Share Units to Executive Officers in fiscal year 2023.
10(q)
Form of Performance Share Unit Restricted Stock Award Agreement for grants of Performance Share Units to Executive Officers in fiscal year 2023.
10(r)
WD-40 Company 2017 Performance Incentive Compensation Plan, incorporated by reference from the Registrant’s Proxy Statement filed November 2, 2017, Appendix A thereto.
10(s)
Form of WD-40 Company Supplemental Death Benefit Plan applicable to certain executive officers of the Registrant, incorporated by reference from the Registrant’s Form 10-K filed October 24, 2016, Exhibit 10(i) thereto.
10(t)
Change of Control Severance Agreement between WD-40 Company and Jay W. Rembolt dated October 16, 2008, incorporated by reference from the Registrant’s Form 10-K filed October 21, 2014, Exhibit 10(h) thereto.
10(u)
Change of Control Severance Agreement between WD-40 Company and Richard T. Clampitt dated October 15, 2014, incorporated by reference from the Registrant’s Form 10-K filed October 21, 2014, Exhibit 10(i) thereto.
10(v)
Change of Control Severance Agreement between WD-40 Company and Garry O. Ridge dated February 14, 2006, incorporated by reference from the Registrant’s Form 10-K filed October 23, 2017, Exhibit 10(p) thereto.
10(w)
Change of Control Severance Agreement between WD-40 Company and Geoffrey J. Holdsworth dated February 14, 2006, incorporated by reference from the Registrant’s Form 10-K filed October 23, 2017, Exhibit 10(r) thereto.
10(x)
Change of Control Severance Agreement between WD-40 Company and William B. Noble dated February 14, 2006, incorporated by reference from the Registrant’s Form 10-K filed October 23, 2017, Exhibit 10(s) thereto.
10(y)
Change of Control Severance Agreement between WD-40 Company and Steven Brass dated June 22, 2016, incorporated by reference from the Registrant’s Form 10-Q filed January 9, 2017, Exhibit 10(c) thereto.
10(z)
Change of Control Severance Agreement between WD-40 Company and Patricia Q. Olsem dated October 8, 2019, incorporated by reference from the Registrant’s Form 10-Q filed January 9, 2020, Exhibit 10(a) thereto.
10(aa)
Change of Control Severance Agreement between WD-40 Company and Jeffrey G. Lindeman dated December 8, 2020 incorporated by reference from the Registrant's Form 10-Q filed April 8, 2021, Exhibit 10(e) thereto.
10(ab)
Change of Control Severance Agreement between WD-40 Company and Phenix Q. Kiamilev dated December 13, 2021, incorporated by reference from the Registrant’s Form 10-Q filed April 7, 2022, Exhibit 10(b) thereto.
10(ac)
Credit Agreement dated March 16, 2020 among WD-40 Company and Bank of America, incorporated by reference from the Registrant’s Form 8-K filed March 20, 2020, Exhibit 10(a) thereto.
10(ad)
Form of Acknowledgement Letter Agreement dated April 8, 2020 among WD-40 Company and Bank of America, incorporated by reference from the Registrant’s Form 10-Q filed April 9, 2020, Exhibit 10(d) thereto.
10(ae)
Libor Transition Agreement dated November 29, 2021 among the Company and Bank of America, N.A., incorporated by reference from the Registrant's Form 8-K filed December 1, 2021, Exhibit 10(a) thereto.
10(af)
First Amendment to Credit Agreement dated September 30, 2020 among WD-40 Company and Bank of America, N.A., incorporated by reference from the Registrant’s Form 8-K filed October 6, 2020, Exhibit 10(a) thereto.
10(ag)
Note Purchase and Private Shelf Agreement dated November 15, 2017 among WD-40 Company and Prudential and certain Note Purchasers, incorporated by reference from the Registrant’s Form 8-K filed November 17, 2017, Exhibit 10(a) thereto.
10(ah)
First Amendment to Note Purchase Agreement dated February 23, 2018 among WD-40 Company and Prudential and certain Note Purchasers, incorporated by reference from the Registrant’s Form 8-K filed February 27, 2018, Exhibit 10(b) thereto.
10(ai)
Second Amendment to Note Purchase and Private Shelf Agreement dated March 16, 2020 among WD-40 Company and Prudential and certain Note Purchasers, incorporated by reference from the Registrant’s Form 8-K filed March 20, 2020, Exhibit 10(b) thereto.
10(aj)
Form of Limited Consent Letter Agreement dated April 8, 2020 among WD-40 Company and Prudential and certain Note Purchasers, incorporated by reference from the Registrant’s Form 10-Q filed April 9, 2020, Exhibit 10(e) thereto.
10(ak)
Third Amendment to Note Purchase and Private Shelf Agreement dated September 30, 2020 among WD-40 Company and Prudential and certain Note Purchasers, incorporated by reference from the Registrant’s Form 8-K filed October 6, 2020, Exhibit 10(e) thereto.
10(al)
Series B Senior Notes dated September 30, 2020, incorporated by reference from the Registrant’s Form 8-K filed October 6, 2020, Exhibit 10(f) thereto.
10(am)
Series C Senior Notes dated September 30, 2020, incorporated by reference from the Registrant’s Form 8-K filed October 6, 2020, Exhibit 10(g) thereto.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm dated October 24, 2022.
31(a)
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
The following materials from WD-40 Company’s Annual report on Form 10-K for the fiscal year ended August 31, 2022 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (ii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheet, (v) the Consolidated Statements of Shareholders’ Equity, and (vi) Notes to the Consolidated Financial Statements.
The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022, formatted in iXBRL and contained in Exhibit 101.