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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

 þ

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

For the quarterly period ended May 31, 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

Commission Company Name: WD 40 CO

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  þ    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  þ     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  þ        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.¨  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common stock, par value $0.001 per share

WDFC

NASDAQ

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

Yes  ¨    No  þ

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of July 3, 2019 was 13,728,723.

1


WD-40 COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended May 31, 2019

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Page

Item 1.

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Comprehensive Income

5

Condensed Consolidated Statement of Shareholders’ Equity

6

Condensed Consolidated Statements of Cash Flows

8

Notes to Condensed Consolidated Financial Statements

9

Item 2.

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

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

Item 4.

Controls and Procedures

46

PART II OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 6.

Exhibits

48


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)

May 31,

August 31,

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

35,741

$

48,866

Short-term investments

-

219

Trade accounts receivable, less allowance for doubtful

accounts of $351 and $340 at May 31, 2019

and August 31, 2018, respectively

75,992

69,025

Inventories

43,077

36,536

Other current assets

6,097

13,337

Total current assets

160,907

167,983

Property and equipment, net

41,947

36,357

Goodwill

95,487

95,621

Other intangible assets, net

11,381

13,513

Deferred tax assets, net

497

511

Other assets

3,104

3,074

Total assets

$

313,323

$

317,059

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

19,973

$

19,115

Accrued liabilities

17,221

26,240

Accrued payroll and related expenses

12,347

14,823

Short-term borrowings

34,880

23,600

Income taxes payable

465

2,125

Total current liabilities

84,886

85,903

Long-term borrowings

61,208

62,800

Deferred tax liabilities, net

11,985

11,050

Other long-term liabilities

1,817

1,817

Total liabilities

159,896

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 May 31, 2019 and

August 31, 2018, respectively; and 13,758,794 and 13,850,413 shares

outstanding at May 31, 2019 and August 31, 2018, respectively

20

20

Additional paid-in capital

154,983

153,469

Retained earnings

373,896

351,266

Accumulated other comprehensive loss

(31,458)

(27,636)

Common stock held in treasury, at cost ― 6,011,545 and 5,879,361

shares at May 31, 2019 and August 31, 2018, respectively

(344,014)

(321,630)

Total shareholders' equity

153,427

155,489

Total liabilities and shareholders' equity

$

313,323

$

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 May 31,

Nine Months Ended May 31,

2019

2018

2019

2018

Net sales

$

113,989

$

107,025

$

316,606

$

305,878

Cost of products sold

51,906

48,367

142,534

137,265

Gross profit

62,083

58,658

174,072

168,613

Operating expenses:

Selling, general and administrative

31,956

30,082

95,278

91,736

Advertising and sales promotion

6,270

5,501

17,420

15,828

Amortization of definite-lived intangible assets

655

746

2,056

2,216

Total operating expenses

38,881

36,329

114,754

109,780

Income from operations

23,202

22,329

59,318

58,833

Other income (expense):

Interest income

27

107

123

371

Interest expense

(567)

(1,205)

(1,962)

(3,048)

Other (expense) income, net

(45)

66

828

(87)

Income before income taxes

22,617

21,297

58,307

56,069

Provision for income taxes

4,478

5,167

10,983

12,491

Net income

$

18,139

$

16,130

$

47,324

$

43,578

Earnings per common share:

Basic

$

1.30

$

1.15

$

3.40

$

3.10

Diluted

$

1.30

$

1.15

$

3.39

$

3.10

Shares used in per share calculations:

Basic

13,790

13,905

13,821

13,949

Diluted

13,820

13,937

13,853

13,981

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 May 31,

Nine Months Ended May 31,

2019

2018

2019

2018

Net income

$

18,139

$

16,130

$

47,324

$

43,578

Other comprehensive (loss) income:

Foreign currency translation adjustment

(2,406)

(8,381)

(3,724)

3,273

Total comprehensive income

$

15,733

$

7,749

$

43,600

$

46,851

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 

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 

Stock-based compensation

589 

589 

Cash dividends ($0.61 per share)

(8,457)

(8,457)

Acquisition of treasury stock

61,500 

(10,323)

(10,323)

Foreign currency translation adjustment

(2,406)

(2,406)

Cumulative effect of change in accounting principle

98 

(98)

-

Net income

18,139 

18,139 

Balance at May 31, 2019

19,770,339 

$

20