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Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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.)

1061 Cudahy Place, San Diego, California

92110

(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☑ No ☐

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

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

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 comm on stock, par value $0.001 per share, as of April 4, 20 1 6 was 14, 320,566 .

WD-40 COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended February 29, 2016

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Page

Item 1.

Financial Statements

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

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

42

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

43

Item 1A.

Risk Factors

43

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 6.

Exhibits

45

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 29,

August 31,

2016

2015

Assets

Current assets:

Cash and cash equivalents

$

42,310

$

53,896

Short-term investments

51,235 48,603

Trade and other accounts receivable, less allowance for doubtful

accounts of $446 and $491 at February 29, 2016

and August 31, 2015, respectively

70,821 58,750

Inventories

36,072 32,052

Current deferred tax assets, net

6,947 5,824

Other current assets

7,012 6,127

Total current assets

214,397 205,252

Property and equipment, net

11,221 11,376

Goodwill

95,903 96,409

Other intangible assets, net

20,914 22,961

Other assets

2,812 3,259

Total assets

$

345,247

$

339,257

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

17,469

$

17,128

Accrued liabilities

17,192 15,200

Accrued payroll and related expenses

11,410 13,357

Revolving credit facility, current

4,541

-

Income taxes payable

3,213 2,287

Total current liabilities

53,825 47,972

Revolving credit facility

118,000 108,000

Long-term deferred tax liabilities, net

24,419 23,145

Other long-term liabilities

2,350 2,282

Total liabilities

198,594 181,399

Commitments and Contingencies (Note 11)

Shareholders' equity:

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

19,602,908 and 19,546,888 shares issued at February 29, 2016 and

August 31, 2015, respectively; and 14,344,971 and 14,450,490 shares

outstanding at February 29, 2016 and August 31, 2015, respectively

20 20

Additional paid-in capital

143,512 141,651

Retained earnings

274,823 260,683

Accumulated other comprehensive income (loss)

(20,806) (8,722)

Common stock held in treasury, at cost ― 5,257,937 and 5,096,398

shares at February 29, 2016 and August 31, 2015, respectively

(250,896) (235,774)

Total shareholders' equity

146,653 157,858

Total liabilities and shareholders' equity

$

345,247

$

339,257

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

Three Months Ended

Six Months Ended

February 29,

February 28,

February 29,

February 28,

2016

2015

2016

2015

Net sales

$

94,550

$

97,331

$

187,072

$

193,684

Cost of products sold

42,188 46,098 83,302 92,750

Gross profit

52,362 51,233 103,770 100,934

Operating expenses:

Selling, general and administrative

28,692 27,360 56,540 54,784

Advertising and sales promotion

5,017 5,485 10,677 11,400

Amortization of definite-lived intangible assets

747 757 1,502 1,526

Total operating expenses

34,456 33,602 68,719 67,710

Income from operations

17,906 17,631 35,051 33,224

Other income (expense):

Interest income

183 178 331 312

Interest expense

(417) (275) (789) (569)

Other income (expense), net

1,320 (1,443) 1,269 (1,341)

Income before income taxes

18,992 16,091 35,862 31,626

Provision for income taxes

5,323 4,758 10,131 9,507

Net income

$

13,669

$

11,333

$

25,731

$

22,119

Earnings per common share:

Basic

$

0.95

$

0.77

$

1.78

$

1.50

Diluted

$

0.94

$

0.76

$

1.77

$

1.49

Shares used in per share calculations:

Basic

14,386 14,636 14,395 14,652

Diluted

14,429 14,703 14,445 14,720

Dividends declared per common share

$

0.42

$

0.38

$

0.80

$

0.72

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)

Three Months Ended

Six Months Ended

February 29,

February 28,

February 29,

February 28,

2016

2015

2016

2015

Net income

$

13,669

$

11,333

$

25,731

$

22,119

Other comprehensive loss:

Foreign currency translation adjustment

(9,421) (1,950) (12,084) (8,246)

Total comprehensive income

$

4,248

$

9,383

$

13,647

$

13,873

See accompanying notes to condensed consolidated financial statements.

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, 2015

19,546,888

$

20

$

141,651

$

260,683

$

(8,722) 5,096,398

$

(235,774)

$

157,858

Issuance of common stock under share-based

compensation plan, net of shares withheld for taxes

56,020 (1,571) (1,571)

Stock-based compensation

1,889 1,889

Tax benefits from settlements of

stock-based equity awards

1,543 1,543

Cash dividends ( $0.80 per share)

(11,591) (11,591)

Acquisition of treasury stock

161,539 (15,122) (15,122)

Foreign currency translation adjustment

(12,084) (12,084)

Net income

25,731 25,731

Balance at February 29, 2016

19,602,908

$

20

$

143,512

$

274,823

$

(20,806) 5,257,937

$

(250,896)

$

146,653

See accompanying notes to condensed consolidated financial statements.

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

Six Months Ended

February 29,

February 28,

2016

2015

Operating activities:

Net income

$

25,731

$

22,119

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

3,311 3,247

Net gains on sales and disposals of property and equipment

(15) (31)

Deferred income taxes

(407) (1,046)

Excess tax benefits from settlements of stock-based equity awards

(1,544) (587)

Stock-based compensation

1,889 1,636

Unrealized foreign currency exchange (gains) losses, net

(1,116) 1,745

Provision for bad debts

97 209

Changes in assets and liabilities:

Trade and other accounts receivable

(14,828) (12,602)

Inventories

(4,858) (408)

Other assets

(660) 2,332

Accounts payable and accrued liabilities

3,199 4,501

Accrued payroll and related expenses

(3,948) ...

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