Company Quick10K Filing
Quick10K
WD-40
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$163.97 14 $2,260
10-Q 2019-02-28 Quarter: 2019-02-28
10-Q 2018-11-30 Quarter: 2018-11-30
10-K 2018-08-31 Annual: 2018-08-31
10-Q 2018-05-31 Quarter: 2018-05-31
10-Q 2018-02-28 Quarter: 2018-02-28
10-Q 2017-11-30 Quarter: 2017-11-30
10-K 2017-08-31 Annual: 2017-08-31
10-Q 2017-05-31 Quarter: 2017-05-31
10-Q 2017-02-28 Quarter: 2017-02-28
10-Q 2016-11-30 Quarter: 2016-11-30
10-K 2016-08-31 Annual: 2016-08-31
10-Q 2016-05-31 Quarter: 2016-05-31
10-Q 2016-02-29 Quarter: 2016-02-29
10-Q 2015-11-30 Quarter: 2015-11-30
10-K 2015-08-31 Annual: 2015-08-31
10-Q 2015-05-31 Quarter: 2015-05-31
10-Q 2015-02-28 Quarter: 2015-02-28
10-Q 2014-11-30 Quarter: 2014-11-30
10-K 2014-08-31 Annual: 2014-08-31
10-Q 2014-05-31 Quarter: 2014-05-31
10-Q 2014-02-28 Quarter: 2014-02-28
10-Q 2013-11-30 Quarter: 2013-11-30
8-K 2019-04-09
8-K 2019-03-22
8-K 2019-01-25
8-K 2019-01-25
8-K 2019-01-09
8-K 2018-12-17 Shareholder Vote
8-K 2018-10-18
8-K 2018-08-16
8-K 2018-07-10
8-K 2018-04-05
8-K 2018-02-27
JOBS 51Job 5,210
LPSN Liveperson 1,840
DSX Diana Shipping 335
EXPR Express 248
ICCH ICC Holdings 50
EMAN Emagin 26
IGLD Internet Gold Golden Lines 12
COSM Cosmos Holdings 0
AFSI Amtrust Financial Services 0
VGRBF VGrab 0
WDFC 2019-02-28
Note 1. The Company
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Note 3. Inventories
Note 4. Property and Equipment
Note 5. Goodwill and Other Intangible Assets
Note 6. Accrued and Other Liabilities
Note 7. Debt
Note 8. Share Repurchase Plan
Note 9. Earnings per Common Share
Note 10. Revenue Recognition
Note 11. Related Parties
Note 12. Commitments and Contingencies
Note 13. Income Taxes
Note 14. Business Segments and Foreign Operations
Note 15. Subsequent Events
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II — Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.A wdfc-20190228xex31_a.htm
EX-31.B wdfc-20190228xex31_b.htm
EX-32.A wdfc-20190228xex32_a.htm
EX-32.B wdfc-20190228xex32_b.htm

WD-40 Earnings 2019-02-28

WDFC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 wdfc-20190228x10q.htm 10-Q 5 Q2 FY19 10Q_Final

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

(Mark One)

 



 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended February 28, 2019

 



 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from              to             

Commission File Number: 000-06936

WD-40 COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

95-1797918

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

9715 Businesspark Avenue, San Diego, California

 

92131

(Address of principal executive offices)

 

(Zip code)



Registrant’s telephone number, including area code: (619) 275-1400



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer          Accelerated filer    Non-accelerated filer         Smaller reporting company  

Emerging growth company         

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      No  

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of April 3, 2019 was 13,797,294.

1

 


 



WD-40 COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended February 28, 2019



TABLE OF CONTENTS



 

 



 

 

PART I — FINANCIAL INFORMATION

 



 

Page

Item 1.

Financial Statements (Unaudited)

 



Condensed Consolidated Balance Sheets



Condensed Consolidated Statements of Operations



Condensed Consolidated Statements of Comprehensive Income



Condensed Consolidated Statement of Shareholders’ Equity



Condensed Consolidated Statements of Cash Flows



Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47 

Item 4.

Controls and Procedures

47 



 

PART II —  OTHER INFORMATION

 



 

 

Item 1.

Legal Proceedings

48 

Item 1A.

Risk Factors

48 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48 

Item 6.

Exhibits

49 



 

 















2

 


 





 

 

 

 

 



 

 

 

 

 

PART 1 - FINANCIAL INFORMATION



 

 

 

 

 

Item 1. Financial Statements



 

 

 

 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

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



 

 

 

 

 



February 28,

 

August 31,



2019

 

2018

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

31,596 

 

$

48,866 

Short-term investments

 

224 

 

 

219 

Trade accounts receivable, less allowance for doubtful

 

 

 

 

 

accounts of $295 and $340 at February 28, 2019

 

 

 

 

 

and August 31, 2018, respectively

 

75,239 

 

 

69,025 

Inventories

 

44,207 

 

 

36,536 

Other current assets

 

8,079 

 

 

13,337 

Total current assets

 

159,345 

 

 

167,983 

Property and equipment, net

 

39,475 

 

 

36,357 

Goodwill

 

95,710 

 

 

95,621 

Other intangible assets, net

 

12,165 

 

 

13,513 

Deferred tax assets, net

 

514 

 

 

511 

Other assets

 

3,066 

 

 

3,074 

Total assets

$

310,275 

 

$

317,059 



 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

21,244 

 

$

19,115 

Accrued liabilities

 

19,424 

 

 

26,240 

Accrued payroll and related expenses

 

9,635 

 

 

14,823 

Short-term borrowings

 

25,948 

 

 

23,600 

Income taxes payable

 

824 

 

 

2,125 

Total current liabilities

 

77,075 

 

 

85,903 

Long-term borrowings

 

63,379 

 

 

62,800 

Deferred tax liabilities, net

 

12,148 

 

 

11,050 

Other long-term liabilities

 

1,788 

 

 

1,817 

Total liabilities

 

154,390 

 

 

161,570 



 

 

 

 

 

Commitments and Contingencies (Note 12)

 

 

 

 

 



 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

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

 

 

 

 

 

19,770,339 and 19,729,774 shares issued at February 28, 2019 and

 

 

 

 

 

August 31, 2018, respectively; and 13,820,294 and 13,850,413 shares

 

 

 

 

 

outstanding at February 28, 2019 and August 31, 2018, respectively

 

20 

 

 

20 

Additional paid-in capital

 

154,394 

 

 

153,469 

Retained earnings

 

364,116 

 

 

351,266 

Accumulated other comprehensive loss

 

(28,954)

 

 

(27,636)

Common stock held in treasury, at cost ― 5,950,045 and 5,879,361

 

 

 

 

 

shares at February 28, 2019 and August 31, 2018, respectively

 

(333,691)

 

 

(321,630)

Total shareholders' equity

 

155,885 

 

 

155,489 

Total liabilities and shareholders' equity

$

310,275 

 

$

317,059 



 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 

3

 


 































 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)



 

 

 

 

 

 

 

 

 

 

 



Three Months Ended February 28,

 

Six Months Ended February 28,



 

2019

 

 

2018

 

 

2019

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

Net sales

$

101,335 

 

$

101,256 

 

$

202,617 

 

$

198,853 

Cost of products sold

 

45,177 

 

 

45,498 

 

 

90,628 

 

 

88,898 

Gross profit

 

56,158 

 

 

55,758 

 

 

111,989 

 

 

109,955 



 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

30,591 

 

 

30,437 

 

 

63,322 

 

 

61,654 

Advertising and sales promotion

 

5,184 

 

 

5,212 

 

 

11,150 

 

 

10,327 

Amortization of definite-lived intangible assets

 

668 

 

 

741 

 

 

1,401 

 

 

1,470 

Total operating expenses

 

36,443 

 

 

36,390 

 

 

75,873 

 

 

73,451 



 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

19,715 

 

 

19,368 

 

 

36,116 

 

 

36,504 



 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

45 

 

 

131 

 

 

96 

 

 

264 

Interest expense

 

(685)

 

 

(1,002)

 

 

(1,395)

 

 

(1,843)

Other income (expense), net

 

497 

 

 

(281)

 

 

873 

 

 

(153)

Income before income taxes

 

19,572 

 

 

18,216 

 

 

35,690 

 

 

34,772 

Provision for income taxes

 

3,666 

 

 

3,398 

 

 

6,505 

 

 

7,324 

Net income

$

15,906 

 

$

14,818 

 

$

29,185 

 

$

27,448 



 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.15 

 

$

1.05 

 

$

2.10 

 

$

1.95 

Diluted

$

1.14 

 

$

1.05 

 

$

2.09 

 

$

1.95 



 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

13,828 

 

 

13,967 

 

 

13,837 

 

 

13,972 

Diluted

 

13,857 

 

 

13,995 

 

 

13,869 

 

 

14,003 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 

 

 

 

 

 

 































 



 

4

 


 







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)



 

 

 

 

 

 

 

 

 

 

 



Three Months Ended February 28,

 

Six Months Ended February 28,



 

2019

 

 

2018

 

 

2019

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

Net income

$

15,906 

 

$

14,818 

 

$

29,185 

 

$

27,448 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

313 

 

 

7,827 

 

 

(1,318)

 

 

11,654 

Total comprehensive income

$

16,219 

 

$

22,645 

 

$

27,867 

 

$

39,102 



 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 

 

 

 

 

 

 





























 

5

 


 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

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



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 



 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

Total



Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

Treasury Stock

 

Shareholders'



Shares

 

Amount

 

Capital

 

Earnings

 

Income (Loss)

 

Shares

 

Amount

 

Equity

Balance at August 31, 2018

19,729,774 

 

$

20 

 

$

153,469 

 

$

351,266 

 

$

(27,636)

 

5,879,361 

 

$

(321,630)

 

$

155,489 

Issuance of common stock under share-based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation plan, net of shares withheld for taxes

24,062 

 

 

 

 

 

(2,425)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,425)

Stock-based compensation

 

 

 

 

 

 

1,965 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,965 

Cash dividends ($0.54 per share)

 

 

 

 

 

 

 

 

 

(7,522)

 

 

 

 

 

 

 

 

 

 

(7,522)

Acquisition of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,184 

 

 

(6,863)

 

 

(6,863)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

(1,631)

 

 

 

 

 

 

 

(1,631)

Cumulative effect of change in accounting principle

 

 

 

 

 

 

 

 

 

(324)

 

 

 

 

 

 

 

 

 

 

(324)

Net income

 

 

 

 

 

 

 

 

 

13,279 

 

 

 

 

 

 

 

 

 

 

13,279 

Balance at November 30, 2018

19,753,836 

 

$

20 

 

$

153,009 

 

$

356,699 

 

$

(29,267)

 

5,920,545 

 

$

(328,493)

 

$

151,968 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under share-based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation plan, net of shares withheld for taxes

16,503 

 

 

 

 

 

(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

(8)

Stock-based compensation

 

 

 

 

 

 

1,393 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,393 

Cash dividends ($0.61 per share)

 

 

 

 

 

 

 

 

 

(8,489)

 

 

 

 

 

 

 

 

 

 

(8,489)

Acquisition of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,500 

 

 

(5,198)

 

 

(5,198)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

313 

 

 

 

 

 

 

 

313 

Cumulative effect of change in accounting principle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 -

Net income

 

 

 

 

 

 

 

 

 

15,906 

 

 

 

 

 

 

 

 

 

 

15,906 

Balance at February 28, 2019

19,770,339 

 

$

20 

 

$

154,394 

 

$

364,116 

 

$

(28,954)

 

5,950,045 

 

$

(333,691)

 

$

155,885 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





6

 


 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

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



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 



 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

Total



Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

Treasury Stock

 

Shareholders'



Shares

 

Amount

 

Capital

 

Earnings

 

Income (Loss)

 

Shares

 

Amount

 

Equity

Balance at August 31, 2017

19,688,238 

 

$

20 

 

$

150,692 

 

$

315,764 

 

$

(28,075)

 

5,704,055 

 

$

(299,014)

 

$

139,387 

Issuance of common stock under share-based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation plan, net of shares withheld for taxes

32,279 

 

 

 

 

 

(1,548)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,548)

Stock-based compensation

 

 

 

 

 

 

1,777 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,777 

Cash dividends ($0.49 per share)

 

 

 

 

 

 

 

 

 

(6,888)

 

 

 

 

 

 

 

 

 

 

(6,888)

Acquisition of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,250 

 

 

(3,893)

 

 

(3,893)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

3,827 

 

 

 

 

 

 

 

3,827 

Cumulative effect of change in accounting principle

 

 

 

 

 

 

189 

 

 

(128)

 

 

 

 

 

 

 

 

 

 

61 

Net income

 

 

 

 

 

 

 

 

 

12,630 

 

 

 

 

 

 

 

 

 

 

12,630 

Balance at November 30, 2017

19,720,517 

 

$

20 

 

$

151,110 

 

$

321,378 

 

$

(24,248)

 

5,739,305 

 

$

(302,907)

 

$

145,353 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under share-based

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation plan, net of shares withheld for taxes

8,875 

 

 

 

 

 

(35)

 

 

 

 

 

 

 

 

 

 

 

 

 

(35)

Stock-based compensation

 

 

 

 

 

 

1,461 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,461 

Cash dividends ($0.54 per share)

 

 

 

 

 

 

 

 

 

(7,598)

 

 

 

 

 

 

 

 

 

 

(7,598)

Acquisition of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,150 

 

 

(7,484)

 

 

(7,484)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

7,827 

 

 

 

 

 

 

 

7,827 

Cumulative effect of change in accounting principle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 -

Net income

 

 

 

 

 

 

 

 

 

14,818 

 

 

 

 

 

 

 

 

 

 

14,818 

Balance at February 28, 2018

19,729,392 

 

$

20 

 

$

152,536 

 

$

328,598 

 

$

(16,421)

 

5,800,455 

 

$

(310,391)

 

$

154,342 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

































 

7

 


 











 

 

 

 

 



 

 

 

 

 

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)



 

 

 

 

 



Six Months Ended February 28,



2019

 

2018

Operating activities:

 

 

 

 

 

Net income

$

29,185 

 

$

27,448 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

Depreciation and amortization

 

3,825 

 

 

3,886 

Net gains on sales and disposals of property and equipment

 

(15)

 

 

(96)

Deferred income taxes

 

411 

 

 

(7,184)

Stock-based compensation

 

3,358 

 

 

3,238 

Unrealized foreign currency exchange losses

 

460 

 

 

284 

Provision for bad debts

 

35 

 

 

28 

Changes in assets and liabilities:

 

 

 

 

 

Trade accounts receivable

 

(6,378)

 

 

(7,147)

Inventories

 

(7,189)

 

 

(3,752)

Other assets

 

5,318 

 

 

2,539 

Accounts payable and accrued liabilities

 

(5,239)

 

 

(260)

Accrued payroll and related expenses

 

(5,251)

 

 

(4,329)

Other long-term liabilities and income taxes payable

 

(1,294)

 

 

6,499 

Net cash provided by operating activities

 

17,226 

 

 

21,154 



 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(5,006)

 

 

(9,247)

Proceeds from sales of property and equipment

 

124 

 

 

246 

Purchase of intangible assets

 

 -

 

 

(175)

Purchases of short-term investments

 

 -

 

 

(84,181)

Maturities of short-term investments

 

 -

 

 

83,967 

Net cash used in investing activities

 

(4,882)

 

 

(9,390)



 

 

 

 

 

Financing activities:

 

 

 

 

 

Treasury stock purchases

 

(12,061)

 

 

(11,377)

Dividends paid

 

(16,011)

 

 

(14,486)

Proceeds from issuance of common stock

 

 -

 

 

215 

Proceeds from issuance of long-term senior notes

 

 -

 

 

20,000 

Repayments of long-term senior notes

 

(400)

 

 

 -

Net proceeds (repayments) of revolving credit facility

 

2,407 

 

 

(6,780)

Shares withheld to cover taxes upon conversions of equity awards

 

(2,433)

 

 

(1,797)

 Net cash used in financing activities

 

(28,498)

 

 

(14,225)

Effect of exchange rate changes on cash and cash equivalents

 

(1,116)

 

 

1,879 

Net decrease in cash and cash equivalents

 

(17,270)

 

 

(582)

Cash and cash equivalents at beginning of period

 

48,866 

 

 

37,082 

Cash and cash equivalents at end of period

$

31,596 

 

$

36,500 



 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 

















 

8

 


 

WD-40 COMPANY



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Note 1.  The Company



WD-40 Company (“the 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. The Company markets its maintenance products and its homecare and cleaning products under the following well-known brands: WD-40®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and Solvol®. Currently included in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-40 BIKE® product lines



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



Note 2.  Basis of Presentation and Summary of Significant Accounting Policies



Basis of Consolidation



The condensed consolidated financial statements included herein have been prepared by the Company, without audit, according to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The August 31, 2018 year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.



In the opinion of management, the unaudited financial information for the interim periods shown reflects all adjustments necessary for a fair statement thereof and such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2018, which was filed with the SEC on October 22, 2018.



The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.



Use of Estimates



The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.



Foreign Currency Forward Contracts



In the normal course of business, the Company employs established policies and procedures to manage its exposure to fluctuations in foreign currency exchange rates. The Company’s U.K. subsidiary, whose functional currency is Pound Sterling, utilizes foreign currency forward contracts to limit its exposure to net asset balances held in non-functional currencies, which include the Euro and the U.S. Dollar. The Company regularly monitors its foreign currency exchange rate exposures to ensure the overall effectiveness of its foreign currency hedge positions. While the Company engages in foreign currency hedging activity to reduce its risk, for accounting purposes, none of its foreign currency forward contracts are designated as hedges. The Company significantly reduced or eliminated its use of Euro foreign currency forward contracts

9

 


 

starting in the second quarter of fiscal year 2019 since the Euro draws that its U.K. subsidiary made on the line of credit with Bank of America in January 2019 reduced the net asset balances held in Euros.   See Note 7 – Debt for additional information on the Euro line of credit.



Foreign currency forward contracts are carried at fair value, with net realized and unrealized gains and losses recognized currently in other income (expense) in the Company’s consolidated statements of operations. Cash flows from settlements of foreign currency forward contracts are included in operating activities in the consolidated statements of cash flows. Foreign currency forward contracts in an asset position at the end of the reporting period are included in other current assets, while foreign currency forward contracts in a liability position at the end of the reporting period are included in accrued liabilities in the Company’s consolidated balance sheets. At February 28, 2019, the Company had a notional amount of $6.3 million outstanding in foreign currency forward contracts, which matured in March 2019. Unrealized net gains and losses related to foreign currency forward contracts were not significant at February 28, 2019 and 2018. Realized gains related to foreign currency forward contracts were $0.3 million for the three months ended February 28, 2019, while realized net gains and losses for such contracts were not significant for each of the three months ended February 28, 2018.  Realized net gains and losses related to foreign currency forward contracts were not significant for the six months ended February 28, 2019 while realized gains for such contracts were $0.4 million for the six months ended February 28, 2018.  Both unrealized and realized net gains and losses are recorded in other income (expense), net on the Company’s consolidated statements of operations.



Fair Value Measurements



Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes its financial assets and liabilities measured at fair value into a hierarchy that categorizes fair value measurements into the following three levels based on the types of inputs used in measuring their fair value



Level 1:  Observable inputs such as quoted market prices in active markets for identical assets or liabilities;

Level 2:  Observable market-based inputs or observable inputs that are corroborated by market data; and

Level 3:  Unobservable inputs reflecting the Company’s own assumptions.



Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of February 28, 2019, the Company had no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, with the exception of the foreign currency forward contracts which are classified as Level 2 within the fair value hierarchy. The carrying values of cash equivalents, short-term investments and short-term borrowings are recorded at cost, which approximates their fair values primarily due to their short-term maturities and are classified as Level 2 within the fair value hierarchy. In addition, the carrying value of borrowings held under the Company’s revolving credit facility approximates fair value due to the variable nature of underlying interest rates, which generally reflect market conditions and such borrowings are classified as Level 2 within the fair value hierarchy. The Company’s fixed rate long-term borrowings consist of senior notes which are also classified as Level 2 within the fair value hierarchy and are recorded at carrying value. The Company estimates that the fair value of its senior notes was approximately $18.7 million as of February 28, 2019, which was determined based on a discounted cash flow analysis using current market interest rates for instruments with similar terms, compared to its carrying value of $19.2 million. During the six months ended February 28, 2019, the Company did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.



Recently Adopted Accounting Standards



In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASC 606”), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”. The core principle of this updated guidance and related amendments is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires additional disclosures to enable users of the financial statements to better understand the nature, amount, timing, risks, and judgments related to revenue recognition from contracts with customers. On September 1, 2018, the Company adopted ASC 606 on a modified retrospective basis and the Company recognized a reduction of $0.3 million to opening retained earnings as the cumulative effect of adopting the new

10

 


 

revenue standard. This adjustment did not have a material impact on the Company’s consolidated financial statements.  See Note 10 – Revenue Recognition for additional information and incremental disclosures related to the adoption of this standard



Recently Issued Accounting Standards



In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The updated guidance also requires an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement and includes expanded disclosure requirements for such costs. This guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted and the guidance may be applied either retrospectively or prospectively. The Company has evaluated the potential impacts of this updated guidance, and it does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures. The Company plans to early adopt this new guidance on a prospective basis during the third quarter of fiscal year 2019.



In February 2018, the FASB issued ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, to optionally allow entities to reclassify stranded tax effects, resulting from the Tax Act, from accumulated other comprehensive income to retained earnings. Since the amendments within this guidance only relate to the reclassification of the income tax effects associated with the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. The amendments in this updated guidance should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. corporate federal income tax rate in the Tax Act is recognized. The Company has evaluated the potential impacts of this updated guidance, and it does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures, as such stranded tax effects are immaterial. The Company plans to early adopt this guidance during fiscal year 2019 and will reclassify these stranded tax effects from accumulated other comprehensive income to retained earnings on March 1, 2018.



In February 2016, the FASB issued ASU No. 2016-02, “Leases” under ASC 842, which supersedes lease accounting and disclosure requirements in ASC 840. The new standard establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for leases with fixed payment obligations and terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Although early adoption is permitted, the Company has concluded that it will not adopt this guidance early and it will become effective for the Company on September 1, 2019. The Company will adopt this new guidance following the optional transition method described in ASU No. 2018-11, “Leases – Targeted Improvements” which was issued in July 2018, rather than the original modified retrospective approach that requires entities to apply the guidance at the beginning of the earliest period presented in the financial statements. Under the optional transition method, the Company will recognize any cumulative effect of initially applying the guidance as an adjustment to the opening balance of retained earnings on September 1, 2019. Therefore, the requirements of this guidance will apply only for periods presented that are after the date of adoption and will not affect comparative periods. Management is in the process of a detailed review of the Company’s lease contracts. This review is focused principally on, but not limited to, developing a complete inventory of the Company’s lease contacts and the terms and conditions contained within these contracts to appropriately account for them under the new lease model. Additionally, the Company is in the process of reviewing current accounting policies, business processes, systems and internal controls in order to determine updates that will be needed in support of adopting this new standard. Management expects the adoption of this guidance will have a material impact on the Company's consolidated balance sheets and related disclosures, although it has not yet quantified the impact. Management is currently assessing whether the adoption of this guidance will have a material impact on the consolidated statements of operations and cash flows.

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Note 3.  Inventories



Inventories consist primarily of raw materials and components, finished goods, and product held at third-party contract manufacturers. Inventories are stated at the lower of cost or market and cost is determined based on a first-in, first-out method or, for a portion of raw materials inventory, the average cost method. Inventories consisted of the following (in thousands): 



 

 

 

 

 



 

 

 

 

 



February 28,

 

August 31,



2019

 

2018

Product held at third-party contract manufacturers

$

3,122 

 

$

2,841 

Raw materials and components

 

4,208 

 

 

3,692 

Work-in-process

 

552 

 

 

448 

Finished goods

 

36,325 

 

 

29,555 

Total

$

44,207 

 

$

36,536 



 

 

 

 

 













Note 4.  Property and Equipment



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





 

 

 

 

 



 

 

 

 

 



February 28,

 

August 31,



2019

 

2018

Machinery, equipment and vehicles

$

18,378 

 

$

17,848 

Buildings and improvements

 

17,140 

 

 

17,100 

Computer and office equipment

 

5,375 

 

 

5,046 

Software

 

10,170 

 

 

9,481 

Furniture and fixtures

 

1,914 

 

 

1,820 

Capital in progress

 

11,598 

 

 

8,042 

Land

 

3,457 

 

 

3,453 

Subtotal

 

68,032 

 

 

62,790 

Less: accumulated depreciation and amortization

 

(28,557)

 

 

(26,433)

Total

$

39,475 

 

$

36,357 



 

 

 

 

 



At February 28, 2019,  capital in progress on the balance sheet included £5.8 million Pound Sterling ($7.7 million in U.S. Dollars as converted at exchange rates as of February 28, 2019) associated with capital costs related to the purchase of the Company’s new office building and related land, as well as buildout costs in Milton Keynes, England. This new office building will house employees of the Company’s EMEA segment that are based in the United Kingdom. The Company has and will continue to incur additional capital costs related to the buildout of the acquired building and for the purchase of new furniture, fixtures and equipment. Upon completion of the buildout, which is expected to occur late in fiscal year 2019 or early in fiscal year 2020,  the Company will place these assets into service and reclassify the amounts recorded in capital in progress to the respective fixed asset categories, which includes amounts attributable to the land. Since all assets associated with this new office building are denominated in Pound Sterling, amounts will fluctuate in U.S. Dollars from period to period due to changes in foreign currency exchange rates. For further information, see the Liquidity and Capital Resources section in Part I—Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

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Note 5.  Goodwill and Other Intangible Assets



Goodwill



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





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Americas

 

EMEA

 

Asia-Pacific

 

Total

Balance as of August 31, 2018

$

85,449 

 

$

8,962 

 

$

1,210 

 

$

95,621 

Translation adjustments

 

 

 

80 

 

 

 -

 

 

89 

Balance as of February 28, 2019

$

85,458 

 

$

9,042 

 

$

1,210 

 

$

95,710 



 

 

 

 

 

 

 

 

 

 

</