WD-40 pany(WDFC) - 2024 Q3 - Quarterly Report

Part I Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for WD-40 Company for the periods ended May 31, 2024, including balance sheets, statements of operations, comprehensive income, stockholders' equity, cash flows, and notes Condensed Consolidated Balance Sheets The balance sheet shows the company's financial position as of May 31, 2024, with total assets increasing to $443.6 million and total liabilities decreasing, leading to higher stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Account | May 31, 2024 | August 31, 2023 | | :--- | :--- | :--- | | Total current assets | $248,763 | $248,525 | | Total assets | $443,610 | $437,966 | | Total current liabilities | $105,241 | $88,842 | | Total liabilities | $221,368 | $227,788 | | Total stockholders' equity | $222,242 | $210,178 | Condensed Consolidated Statements of Operations The statement of operations details the company's financial performance, with net sales growing 10% to $434.6 million and net income increasing 7% to $52.9 million for the nine months ended May 31, 2024 Key Performance Indicators (Nine Months Ended May 31, in thousands) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $434,566 | $396,803 | +9.5% | | Gross Profit | $230,882 | $202,095 | +14.2% | | Income from Operations | $72,301 | $66,489 | +8.7% | | Net Income | $52,860 | $49,418 | +7.0% | | Diluted EPS | $3.88 | $3.62 | +7.2% | Condensed Consolidated Statements of Comprehensive Income This statement shows total comprehensive income, which was $52.8 million for the nine months ended May 31, 2024, remaining relatively flat due to foreign currency translation adjustments Comprehensive Income (in thousands) | Item | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--- | :--- | :--- | | Net Income | $52,860 | $49,418 | | Foreign currency translation adjustment | ($94) | $3,299 | | Total comprehensive income | $52,766 | $52,717 | Condensed Consolidated Statements of Stockholders' Equity This statement details changes in stockholders' equity, reflecting net income of $52.9 million, cash dividends of $35.2 million, and common stock repurchases of $8.1 million - Total stockholders' equity increased from $210.2 million at August 31, 2023, to $222.2 million at May 31, 2024[29] - During the nine months ended May 31, 2024, the company paid cash dividends totaling $35.2 million and repurchased $8.1 million of its common stock[29] Condensed Consolidated Statements of Cash Flows The cash flow statement shows net cash from operating activities of $64.8 million, with $9.1 million used in investing and $58.1 million used in financing for the nine months ended May 31, 2024 Cash Flow Summary (Nine Months Ended May 31, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $64,824 | $55,593 | | Net cash used in investing activities | ($9,103) | ($4,213) | | Net cash used in financing activities | ($58,145) | ($54,024) | | Net (decrease) increase in cash | ($2,843) | $560 | - Investing activities included $6.2 million for the acquisition of a business, net of cash acquired[53] Notes to Condensed Consolidated Financial Statements These notes provide additional detail and context for the financial statements, covering significant accounting policies, acquisitions, debt, revenue recognition, segment information, and other key financial matters - On March 4, 2024, a subsidiary acquired the company's Brazilian distributor, Theron Marketing Ltda., for total consideration of $6.9 million, resulting in $1.5 million of goodwill[86][87] - The company's Board approved a share repurchase plan effective September 1, 2023, authorizing the acquisition of up to $50.0 million of its shares through August 31, 2025; during the nine months ended May 31, 2024, 34,250 shares were repurchased for $8.1 million[130] - The effective income tax rate for the nine months ended May 31, 2024, was 23.1%, an increase from 21.5% in the prior year period, primarily due to higher tax rates in certain foreign jurisdictions[140] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the three and nine months ended May 31, 2024, highlighting a 10% increase in consolidated net sales and improvements in gross margin, alongside analysis of operating expenses and liquidity Overview This section provides a high-level summary of the company's business and financial highlights, including a 10% increase in consolidated net sales to $434.6 million and the acquisition of its Brazilian distributor - On March 4, 2024, the company acquired its Brazilian distributor, Theron, and transitioned to a direct distribution model in Brazil[174] Financial Highlights (Nine Months Ended May 31, 2024 vs 2023, in thousands) | Metric | Change | Key Drivers | | :--- | :--- | :--- | | Consolidated Net Sales | +10% | Volume increases (+$23.0M), price increases (+$6.5M), favorable currency impact (+$8.3M) | | Gross Margin | 53.1% (from 50.9%) | N/A | | Consolidated Net Income | +7% | Favorable currency impact of $1.5M | | Diluted EPS | $3.88 (from $3.62) | N/A | Results of Operations This section details operating results, showing 10% growth in total maintenance products sales, a 4% decline in homecare and cleaning products sales, and a 220 basis point improvement in gross margin Net Sales by Product Line (Nine Months Ended May 31, in thousands) | Product Line | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total maintenance products | $410,546 | $371,741 | +10% | | HCCP | $24,020 | $25,062 | -4% | | Total net sales | $434,566 | $396,803 | +10% | - Gross margin for the nine months ended May 31, 2024, increased to 53.1% from 50.9% in the prior year, an improvement of 220 basis points[223] - Operating expenses for the nine months increased by 17% to $158.6 million, primarily due to higher employee-related costs, professional services fees, and travel expenses[177][248] Liquidity and Capital Resources The company's financial condition and liquidity remain strong, with $64.8 million in cash generated from operating activities and compliance with all debt covenants Cash Flow Summary (Nine Months Ended May 31, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $64,824 | $55,593 | | Net cash used in investing activities | ($9,103) | ($4,213) | | Net cash used in financing activities | ($58,145) | ($54,024) | - The increase in net cash from operating activities was driven by higher net income and favorable changes in non-cash adjustments[298] - As of May 31, 2024, $41.9 million remains available for share repurchases under the 2023 Repurchase Plan[271] Critical Accounting Estimates The company's critical accounting estimates, involving subjective judgments, include revenue recognition and income taxes, with no material changes since the last Annual Report - Critical accounting estimates requiring significant judgment are related to revenue recognition and income taxes[12] - No material changes have occurred in the company's critical accounting estimates since the last Annual Report[304] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section incorporates market risk disclosures by reference from the company's most recent Form 10-K, indicating no material changes - Information regarding market risk is incorporated by reference from the company's most recent Form 10-K[323] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of May 31, 2024[324] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[306] Part II Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from the financial statement notes, with no pending proceedings expected to result in a probable loss - The company is subject to various claims and lawsuits in the ordinary course of business but believes no pending proceedings will result in a probable loss or have a materially adverse impact[112][308] Item 1A. Risk Factors No material changes have occurred in the company's risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended August 31, 2023 - No material changes to the risk factors disclosed in the company's 2023 Form 10-K have been identified[7] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities during the third quarter of fiscal year 2024, with 11,250 shares repurchased at an average price of $246.69 per share Share Repurchases (Three Months Ended May 31, 2024) | Period | Total of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 2024 | 5,000 | $255.65 | | April 2024 | 5,000 | $240.11 | | May 2024 | 1,250 | $237.15 | | Total | 11,250 | $246.69 | - As of May 31, 2024, approximately $41.9 million remained available for future share repurchases under the publicly announced plan[327] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications, debt and acquisition agreements, and iXBRL formatted financial statements - Exhibits filed include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, the Quota Purchase Agreement for the Theron acquisition, and amended credit agreements[311][15][328]