#positivelastingmemories
#souvenirsinoubliables
#ricordipositividuraturi
#RecuerdosPositivosyDuraderos
#positivebleibendeErinnerungen
#memoriaspositivaseduradouras
#积极持久印象
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www.wd40company.com
WD-40 Company
1061 Cudahy Place
San Diego, CA 92110
619-275-1400
NOTE TO PRINTER: We don’t have an accurate
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What is
our Why
and how do we do it?
Page 1 of file: Front Outside Cover
Page 2 of file: Inside Front Cover
Page 3 of file: Inside Back Cover
2016 annual report
Page 4 of file: Outside Back Cover
Page 5 of file: Spine Treatment
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
San Diego, California
TRANSFER AGENT
Computershare
P.O. Box 30170
contact
ANNUAL MEETING
College Station, TX 77842-3170
Phone: +1-312-588-4180
https://www-us.computershare.com/investor/
December 13, 2016, 2:00 PM
Joan B. Kroc Institute for Peace & Justice
University of San Diego
5998 Alcala Park
San Diego, California 92110
GLOBAL CORPORATE HEADQUARTERS
Wendy D. Kelley
Director, Investor Relations and
Corporate Communications
Phone: +1-619-275-9304
investorrelations@wd40.com
WD-40 Company
1061 Cudahy Place
San Diego, California 92110
Phone: +1-619-275-1400
OPERATING SUBSIDIARIES
WD-40 Company Ltd.
Milton Keynes, United Kingdom
WD-40 Company (Canada) Ltd.
Etobicoke, Canada
WD-40 Company (Australia) Pty. Ltd.
Epping, Australia
Wu Di (Shanghai) Industrial Co., Ltd.
Shanghai, China
WD-40 Company (Malaysia) SDN. BHD.
Selangor, Malaysia
STOCK INFORMATION
The common stock of the Company is traded
on the NASDAQ® Global Select Market under
the symbol “WDFC.” The Company’s publicly
filed reports, including financial statements and
supporting exhibits, are available on the Securities
and Exchange Commission’s EDGAR system, on
the Company’s website at www.wd40company.
com, or by writing to the Corporate Secretary,
WD-40 Company, P.O. Box 80607, San Diego,
California 92138-0607
LEGAL DISCLAIMERS
This annual report contains “forward-looking
statements” within the meaning of the Private
Securities Litigation Reform Act of 1995.
Such statements reflect management’s
current expectations for the Company’s future
performance but are subject to risks, uncertainties
and assumptions that could cause actual results
to differ materially from those anticipated in or
implied by the forward-looking statements.
The Company’s expectations, beliefs and
projections are expressed in good faith but there
can be no assurance that they will be achieved or
accomplished. Our forward-looking statements
are generally identified with words such as
“believe,” “expect,” “intend,” “plan,” “could,”
“may” and similar expressions. Actual events or
results can differ materially from those expressed
or implied. Please refer to the information set forth
under the captions “Risk Factors” and “Forward-
Looking Statements” in our Annual Report on
Form 10-K for the year ended August 31, 2016
and other reports and documents that we file from
time to time with the Securities and Exchange
Commission for some of the factors that may
cause actual results to differ materially from the
forward-looking statements. Except as required
by law, we undertake no obligation to update any
forward-looking statement.
Copyrighted © 2016 WD-40 Company.
All rights reserved. WD-40®, 3-IN-ONE®, GT85®,
WD-40 EZ-REACH Flexible Straw, Solvol®, Lava®,
X-14®, 2000 Flushes®, Carpet Fresh®, Spot Shot®,
1001® and no vac® are registered trademarks of
WD-40 Company.
Corporate information as of October 15, 2016
Vice President, Business Unit Finance
INVESTOR RELATIONS
CORPORATE INFORMATION
Peter D. Bewley
Governance Committee Chair
Former Senior Vice President,
General Counsel and Corporate Secretary
Former Executive Vice President and CFO
BOARD OF DIRECTORS
Neal E. Schmale
Chairman of the Board
Former President and COO
Sempra Energy
Giles H. Bateman
Former CFO and Director
Price Club
The Clorox Company
Daniel T. Carter
Audit Committee Chair
BevMo! Inc.
Melissa Claassen
Adidas Group
Richard A. Collato
Former President and CEO
YMCA of San Diego County
Mario L. Crivello
Investor
Linda A. Lang
Finance Committee Chair
Former Chairman and CEO
Jack in the Box, Inc.
Daniel E. Pittard
Former President and CEO
Rubio’s Restaurants Inc.
President and Chief Executive Officer
Garry O. Ridge
WD-40 Company
Gregory A. Sandfort
Compensation Committee Chair
Chief Executive Officer
Tractor Supply Company
EXECUTIVE OFFICERS
Garry O. Ridge
President and Chief Executive Officer
Richard T. Clampitt
Vice President, General Counsel and
Corporate Secretary
Michael L. Freeman
Division President, Americas
Geoffrey J. Holdsworth
Managing Director, Asia-Pacific
William B. Noble
Managing Director, EMEA
Jay W. Rembolt
Chief Financial Officer
Stanley A. Sewitch
Vice President, Finance, Treasurer and
Vice President, Global Organization Development
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“ People don’t buy what you do, they buy why you do it.
And what you do simply proves what you believe.”
Simon Sinek, Optimist and Bestselling Author of “Start With Why” and “Leaders Eat Last”
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At WD-40 Company, we know that purpose mobilizes people in a way that
pursuing profits alone never will. That’s why purpose-driven organizations
are often more successful than their counterparts. Recent research shows
that organizations fueled by purpose and passion have outperformed the
S&P 500 index by 14 times over a period of 15 years.1
The blue and yellow can with the little red top has been leaving end-users
with positive lasting memories for more than 60 years. Sometime during
that journey WD-40 Company’s purpose – why we do what we do – became
clear: We exist to create positive lasting memories in everything we do.
We solve problems. We make things work smoothly. We create opportunities.
This clear sense of why inspires how we do what we do: We create positive
lasting memories by cultivating a tribal culture of learning and teaching
which produces a highly engaged workforce who live our company’s values
every day.
Our why and our how ultimately determine what we do: We deliver unique,
high-value and easy to use solutions for a wide variety of maintenance needs
in workshops, factories and homes. We market and distribute our brands
across multiple trade channels in countries all over the world.
Together, our why, how and what have helped us reach new levels of
success in fiscal year 2016, and they continue to set WD-40 Company
apart from other companies in the industry.
Garry Ridge
President and Chief Executive Officer
1 Sisodia, Rajendra and Sheth, Jagdish N., Firms of Endearment: How World Class Companies Profit from Passion and Purpose
2016 WD-40 Company Annual Report 1
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“Imagine a world where nearly everyone wakes up each day inspired to go to work, feels safe while
they are there, and returns home at the end of the day fulfilled by the work they do – feeling that
they have contributed to something greater than themselves. This is the world we envision.”
– Simon Sinek
Dear Stockholders,
In recent years, a flurry of research has confirmed the belief that
purpose is directly linked to stockholder value, with study after
study concluding that purpose-driven organizations outperform their
counterparts on virtually every metric that matters. Here at WD-40
Company we have experienced this effect firsthand, with stockholder
value increasing over 200% over the past 10 years.
The connection between purpose and profits came into sharper focus
for me last November, when I met optimist and bestselling author,
Simon Sinek. Simon and I first met as co-panelists at a leadership
summit. As I listened to him speak, something became very clear
to me. In a single sentence, he succinctly articulated what WD-40
Company has believed all along: people don’t buy what you do, they
buy why you do it.
For WD-40 Company, this means that people aren’t buying the first
lubricant they find on the shelf. Instead, they’re buying the blue and
yellow can with the little red top because it solves problems in their
workplaces and homes. It makes them into heroes in the eyes of their
loved ones. It rarely lets them down. They’re buying the blue and
yellow can with the little red top because it creates positive lasting
memories, solves problems, and makes things work smoothly.
This loyalty to our brands, when coupled with our commitment to
sustaining the WD-40 Company economy, has led to a 14% compound
annual growth rate (CAGR) over the last 18 years. Put simply, this means
that $100 invested in 1998 would be worth about $993 today, based on the
closing price of $118.45 on August 31, 2016, the last day of our fiscal year.
Speaking of fiscal year 2016, it was a year filled with complexity,
volatility and uncertainty around the world. As a global company with
more than half of our revenues generated outside the U.S., we are
exposed to the effect of changing foreign currency exchange rates,
geopolitical unrest and economic fluctuations. All these factors were
in play in fiscal year 2016, and WD-40 Company experienced their
impacts across many parts of the business. In particular, we felt the
negative effects of foreign currency exchange rates, overall weakness
in oil-based economies, and greater uncertainty following the U.K.’s
vote to exit the European Union.
Against that backdrop, I’m proud to say we showed once again that
we sail well on rough seas as well as calm waters. Although our net
sales were constrained to 1% growth, our net income and our diluted
earnings per share reached record levels for the company.
2
2016 WD-40 Company Annual Report
Our successes in fiscal year 2016 were many. WD-40 EZ-Reach Flexible
Straw™, which launched at the end of fiscal year 2015, continued to
gain momentum in the Americas. Sales of WD-40 Specialist® grew all
around the globe, and our flagship product, WD-40 Multi-Use Product,
continued to gain traction in new and existing markets worldwide. These
accomplishments demonstrate that no matter what the macroeconomic
conditions, as long as we stay focused and continue to execute against
our strategic initiatives, we will see growth ahead of us.
Strategic Initiative #1: Grow WD-40 Multi-Use Product
As always, our most important strategic initiative is to take the blue
and yellow can with the little red top to more places, for more uses, by
more people, more frequently. In fiscal year 2016, net sales of WD-40
Multi-Use Product increased 1% over last year.
Our goal is to grow WD-40 Multi-Use Product to approximately $600
million by the end of fiscal year 2025. We’ll advance towards this goal
in fiscal year 2017 by continuing to drive adoption of WD-40 EZ-Reach
Flexible Straw in the Americas while expanding distribution into other
geographies, starting with Australia in early 2017. In EMEA, we’ll
increase the rate of converting European end-users from our classic blue
and yellow can to our more innovative WD-40 Smart Straw® product. In
Asia-Pacific, our focus will be on driving brand awareness, broadening
our distribution channels and entering new markets. Together, these
activities will continue to position WD-40 Multi-Use Product for growth.
Strategic Initiative #2: Grow the WD-40 Specialist Line
We are leveraging the power of the shield to develop new products and
categories in specific geographies. This is the essence of the WD-40
Specialist line, which has expanded to include various maintenance
and repair products available in over 60 countries and territories
around the globe. In fiscal year 2016, global sales of Specialist grew
14% compared to last year, reaching $21.5 million.
Looking forward, in fiscal year 2017 in the U.S., we expect to
introduce a new line of WD-40 Specialist industrial-strength cleaners
and degreasers, as well as a full line of greases designed to simplify
lubrication through superior performance. At the same time, we’ll
continue to drive adoption of WD-40 Specialist Spray & Stay Gel
Lubricant, which we launched in fiscal year 2016. Building on the
success of WD-40 Motorbike in Europe, we plan to introduce in the
U.S. a line of WD-40 Specialist Motorcycle products. By launching
new Specialist categories like these and taking them to new markets
around the world, we believe we can grow WD-40 Specialist to
approximately $125 million in revenue by the end of fiscal year 2025.
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Strategic Initiative #3: Broaden Product and Revenue Base
Strategic Initiative #5: Operational Excellence
We continue to focus on broadening our product portfolio to derive
revenue from new sources and brands. Over the last twelve months,
we have made much progress in renovating older brands like
3-IN-ONE®, and innovating with newer brands and product lines like
WD-40 BIKE™ and GT85®. For example, in the U.S., we introduced
3-IN-ONE Lock Dry Lube and we took WD-40 BIKE from specialty
distribution to the same broad, multi-channel distribution network that
supports our other maintenance products.
In fiscal year 2017, we plan to launch a new line of recreational vehicle
products under the 3-IN-ONE brand, appealing to passionate hobbyists
who enjoy creating positive lasting memories on the road as well as
at home. As always, we’ll continue to develop or acquire maintenance
products that fit with our existing product portfolio and distribution
channels.
Strategic Initiative #4: Attract, Develop and Retain Outstanding
Tribe Members
Our global tribe was 445 members strong at the end of fiscal year 2016.
These exceptional people continue to set WD-40 Company apart from
all others inside and outside of our industry. To sustain this position,
we remain focused on building bench strength among our leaders and
throughout the tribe, and ensuring a good match between our talent
and the opportunities at hand and those that we see in our future.
With this in mind, I’m pleased to share that Mike Freeman, President
of the Americas, will begin transitioning to the role of Chief Strategy
Officer. In this role, Mike will focus on researching the consumer
trends and behaviors that will shape our path over the next five to
seven years. He will also focus on mentoring Steve Brass, who is
moving from a leadership position in EMEA to the role of President of
the Americas. Steve has been with WD-40 Company for 25 years, and
brings a wealth of knowledge and experience to his new role. Steve
and his family relocated to San Diego in September 2016.
In addition, our headquarters is preparing for a transition of its own.
After over 44 years in the same space, we will be relocating our San
Diego-based tribe members to an inviting, up-to-date building. This
long-awaited opportunity to embed our culture in brick and mortar will
foster greater collaboration, innovation and engagement for decades
to come. We will be renovating our new building and plan to relocate
there in July 2017. In total, we will be making a capital investment of
about $15 million during fiscal year 2017 related to our new building.
In line with our value of “Making it better than it is today,” we
continue our pursuit of operational excellence across the business.
This means staying focused on optimizing resources, systems and
processes to drive greater efficiency. It also means meeting regulatory
requirements, assuring product quality, and protecting our intellectual
property. We made progress on all these fronts in fiscal year 2016.
Most notably, in the U.S. we completed the transition to a lower volatile
organic compounds (VOC) formula. In EMEA, we made successful
distribution changes in Germany that position us well for the next
fiscal year. We also made significant progress on and are nearing the
completion of our implementation of an upgraded enterprise resource
planning (ERP) system in our EMEA segment.
Looking Ahead
Last year in this letter I set out a bold goal for WD-40 Company – to
double our revenue by the end of fiscal year 2025 by bringing our
products to a bigger, broader global audience. One year into this
ten-year journey, I’m optimistic that we can achieve this goal. Despite
the headwinds we encountered this fiscal year, we strengthened our
global platform for growth, broadened and deepened our distribution
channels, and continued to innovate new products that will create
positive lasting memories for current and future end-users.
I expect that we will continue to live in a world that is volatile,
uncertain, complex and full of ambiguity. However, the tribe has never
been more aligned and focused. We are clear about our purpose. We
know why and how we do what we do, and our strategic drivers guide
us in using our time, talent, treasure and technology wisely. In short,
we stand ready to deliver on the confidence you, our stockholders,
bestow upon us every day.
I look forward to updating you on our progress in the coming year and
beyond.
Garry Ridge
President and Chief Executive Officer
2016 WD-40 Company Annual Report 3
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Why
We exist to create positive lasting memories in everything we do.
We solve problems. We make things work smoothly.
We create opportunities.
At WD-40 Company, we know from experience that purpose-driven organizations tend to
outperform their competitors in any number of ways. The reason for this is simple. A company
with a clear sense of why ignites the passion of its employees and inspires the trust of its
customers. WD-40 Company has lived this truth throughout most of its history and the results
speak for themselves: steadily higher profits, an engaged workforce, a loyal following, and one
of the most recognizable brands in the world.
4
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THE AMERICAS
“During the 40 years I have served our tribe, I have
accumulated many positive lasting memories.
My positive lasting memory is one that gets
reinforced quite often. When I hear people say
that they just love WD-40, I feel immense pride
personally and for all of our tribe members, past
and present, that have contributed to creating our
remarkable product and company.”
Bill Fantus, Managing Director, Trade Development
Tribe member for 40 years
EUROPE, THE MIDDLE EAST,
AFRICA & INDIA (“EMEA”)
“Toolbank has been distributing WD-40 Company products for over 18
years and we recognize and appreciate the tremendous value in the brand.
It is difficult to think of many other brands that have the instant, universal
recognition and positive appreciation that you get when you think of
WD-40 brands. We encourage all of our retailer customers, from whatever
industry, to stock WD-40 Company products because the range is so
memorable and to have a striking, prominent display will undoubtedly lead
to additional sales. Additional sales create positive lasting memories for
Toolbank, our retailer customers, and for WD-40 Company.”
Wayne Flory, Chief Executive Officer, Toolbank
ASIA-PACIFIC
“WD-40 Company has certainly given my family many joyful memories
as my children grew up with WD-40 Company’s brands and now my
grandchildren are learning about them too. I look forward to enjoying
many more years of positive lasting memories with WD-40®”
CT Wong, Managing Director, Henry Chemical Co Ltd, Hong Kong
“四十年來，WD-40®一直為我和家人帶來許多快樂的回憶，它伴隨著我的孩子們成長，
現在我的孫子們也正在學習如何使用WD-40®了。放眼將來，我很期待能和WD-40®一
起創造更多美好的記憶”
王正道先生， 香港恒和化工有限公司董事经理。
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2016 WD-40 Company Annual Report 5
How
We create positive lasting memories by cultivating a tribal culture of
learning and teaching which produces a highly engaged workforce
who live our company’s values every day.
Our purpose comes to life through our tribe. Our culture of learning and teaching means we
have a deep bench of leaders around the globe who can take the company into the future.
Our highly engaged workforce creates value for our customers, partners and stockholders.
And our values drive the day-to-day choices we make about how to allocate our time, talent,
treasure and technology. This is how we do what we do, and it sets us apart from other
companies in the industry.
Creating a Learning Environment
At WD-40 Company, we don’t see mistakes as career-damaging
events – we see them as learning moments that help us grow.
This company culture of learning and teaching is reinforced
through formal programs such as Leadership Laboratory, which
continues to develop the next generation of leaders in our
organization. 234 tribe members have graduated from various
levels of the program since its inception. What’s more, over
200 employees of our global distribution partners in Asia and
Central America have completed key parts of the program. We
also have 24 tribe members who have been awarded Master
of Science in Executive Leadership (MSEL) degrees from the
University of San Diego. Building our organization’s bench
strength through programs like these helps to ensure the
readiness of our tribe to move into future leadership positions.
Engagement Matters
Our tribe members are passionate about our purpose and
accountable for their results. They understand how their jobs
contribute to our success, and they have the freedom to
decide how to accomplish their goals. In fiscal year 2016, we
administered our biennial employee engagement survey and
our overall global employee engagement score remains at 94%.
We cultivate high employee engagement by creating a culture
based on care, candor, accountability and responsibility –
guided by our values and nourished by learning. Our employee
engagement score is a reflection of that way of life. It is truly all
about the people at WD-40 Company.
Driven by Values
WD-40 Company’s values come to life in everything we do,
whether it’s innovating a new product or serving a long-
time customer. We value: Doing the right thing. Creating
positive lasting memories in all of our relationships. Making
it better than it is today. Succeeding as a tribe while excelling
as individuals. Owning it and passionately acting on it.
Sustaining the WD-40 Company economy.
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Learning to Teach, Teaching to Learn
“We are a learning organization in every sense of the word, through
every part of the organization. We challenge ourselves and each other
to grow, learn and teach, at every level in every region. This gives
us the leadership bench strength we need to grow and adapt to the
world around us.”
Sara Simpson, Retail Marketing Manager, United Kingdom
96% of our tribe members
respect their coaches.
A Tribe of Engagement
“Employee engagement is linked to virtually every metric
that matters, from revenue growth to profitability to creation
of stockholder value. Highly engaged employees are more
innovative. They work harder. They support each other. They
make better decisions. They excel individually and collectively.
They make us successful.”
Massimo de Vigiliis, Business Developer Manager, Italy
98% of our tribe members
love working for WD-40 Company.
Living Our Values
“Our values set the tribe free. With our purpose as our North Star
and our values as our guide, we are empowered to do the right
thing for each other and for our customers, every single day. And
that means we’re doing the right thing for our stockholders.”
Cerene Chen, Brand Development Manager, Asia
99% of our tribe members
believe their opinions and values are
a good fit for the company culture.
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2016 WD-40 Company Annual Report 7
What
We deliver unique, high-value and easy-to-use solutions for a wide
variety of maintenance needs in workshops, factories and homes.
We market and distribute our brands across multiple trade channels
in countries all over the world.
WD-40 Company’s what is the outcome of the actions we take to bring our purpose to life
across 176 countries and 62 trade channels. We market and sell our maintenance products
under the following brands and product lines: WD-40 Multi-Use Product, WD-40 Specialist,
WD-40 BIKE, 3-IN-ONE and GT85. Our products are used in consumer and industrial markets
ranging from aviation to home improvement – and everything in between. In addition to our
maintenance products, we also sell homecare and cleaning products in various global locations.
At our core, we are a global marketing organization with a diversified distribution network. We use
third parties to manufacture, package and deliver our products to customers all over the world. This
approach lets us focus on what we do best: developing and selling high-quality products that
solve problems in factories, workshops and homes around the world.
THE AMERICAS
EUROPE, THE MIDDLE EAST,
AFRICA & INDIA
ASIA-PACIFIC
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2016 WD-40 Company Annual Report
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SPOTLIGHT ON:
THE AMERICAS
“This is an enormously
exciting time for the
Americas. The many
product innovations that
we’ve launched over
the past four years are
beginning to transform
the U.S. into a growth
market and the long-
term prospects for Latin
America are very strong.
I’m thrilled to turn this
growing business over
to a person of Steve’s
caliber, and I look
forward to watching
him sustain and build
the region’s success.”
Mike Freeman
Incumbent Division President,
Americas
“Although each region
has its unique character-
istics, we are all guided
by the same strategy,
vision and values, and
I’m excited to bring my
25 years of experience
with WD-40 Company
to the Americas. Mike’s
impact on the region has
been tremendous, and
I’m fortunate to have his
continued mentorship
as the tribe and I make
positive lasting memo-
ries with our customers
and each other.”
Steve Brass
Incoming Division President,
Americas
THE AMERICAS 2016 SNAPSHOT
$191.4 million in net sales, up 2% from
2015, representing 50% of global sales
Record sales for WD-40 Multi-Use
Product, WD-40 Specialist and 3-IN-ONE
Launched and supported innovations including
WD-40 EZ-Reach Flexible Straw, WD-40 Specialist
Spray & Stay Gel and 3-IN-ONE Lock Dry Lube
We once again delivered strong
financial and operational results in
an uncertain economic climate.
2017 Priorities
In 2017, we plan to fuel growth and provide greater value
to our customers and end-users by launching new product
innovations, embedding innovation into existing channels as
broadly and deeply as we can, expanding category leadership
efforts and continuing to increase long-term Latin America
distribution. We will also continue to meet changing regulatory
requirements in the U.S. and elsewhere. Perhaps most
importantly, we will ensure a smooth leadership transition as
Steve Brass assumes leadership for the Americas from Mike
Freeman, who will be taking on the role of chief strategy officer
for WD-40 Company.
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2016 WD-40 Company Annual Report 9
SPOTLIGHT ON: EMEA
EUROPE, THE MIDDLE EAST, AFRICA & INDIA
“The EMEA business is highly complex – many markets,
many cultures, many currencies, and many stages of
development. Despite this complexity, we delivered 7%
revenue growth in our functional currency, the pound
sterling, as well as record EBITDA growth by staying
true to our brand, our values and our strategic initia-
tives. We’re particularly pleased with our performance
in France, the Netherlands, and Germany. That said, we
experienced overall revenue declines in EMEA in U.S.
dollars due to the negative impacts of foreign currency
exchange rates as well as unstable market conditions
in some geographies. As we look ahead, we continue to
focus on creating positive lasting memories in everything
we do and we see great growth prospects in the future.”
Bill Noble
Managing Director, EMEA
EMEA 2016 SNAPSHOT
$135.2 million in net sales, down 1%
from 2015, representing 36% of global sales
Seamlessly implemented succession
plans in conjunction with Steve Brass’s
move to the Americas
Neared the completion of our implementation
of a next-generation ERP system
We delivered profitable
growth while building our
leadership bench.
2017 Priorities
Our goals are to sell more WD-40 Multi-Use Product by
increasing the penetration of WD-40 Smart Straw; to grow
the market for WD-40 Specialist, particularly in franchise
workshops; and to attract new end-users with WD-40 BIKE and
WD-40 Specialist Motorbike. At the same time, we will capitalize
on the fast-growing Do-It-Yourself (DIY) business in Germany,
which is the second-largest DIY market in the world, as well as
increasing distribution in discount stores in the U.K.
10
2016 WD-40 Company Annual Report
WD-40_2016AR_Editorial_102816.indd 10
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“In 2016, Asia-Pacific delivered EBITDA growth in the
face of economic and political uncertainty throughout
parts of the region, as well as pricing pressure from the
strengthening of the dollar. Despite these challenges, we
remain positioned for growth over the long-term. We’re
creating awareness of WD-40 Multi-Use Product and
WD-40 Specialist in new markets, deepening our brand
presence in existing markets, and creating positive
lasting memories for new and current customers alike.
The growth opportunity for Asia-Pacific continues to
be huge, and that’s what is most exciting for our tribe
members here.”
Geoff Holdsworth
Managing Director, Asia-Pacific
SPOTLIGHT ON:
ASIA-PACIFIC
ASIA-PACIFIC 2016 SNAPSHOT
$54.0 million in net sales, flat compared
to 2015, representing 14% of global sales
Strengthened our succession plan by
identifying and developing new leaders
within the region
Focused on improved processes and
increased overall efficiency
We continued building a
solid foundation for growth
in the coming years.
2017 Priorities
Our goal is to sell more WD-40 Multi-Use Product and WD-40
Specialist in more places with more end-users using more
of our products. We’ll do this by creating brand awareness
in new markets and channels, growing distribution in Asia
and strengthening large retailer distribution in Australia.
We’ll also increase the volume of our products flowing through
existing channels, by introducing innovations like WD-40
EZ-Reach Flexible Straw and new brands, like WD-40 Specialist
Automotive, in select markets.
WD-40_2016AR_Editorial_102816.indd 11
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2016 WD-40 Company Annual Report 11
“Although top-line growth was challenged, our disciplined and focused approach to managing
our global business for earnings growth, as well as lower than normal commodity costs, helped
us deliver diluted earnings per share of $3.64, a new record for the company. In addition to
earnings growth, we also returned capital through regular dividends and share repurchases.”
– Jay W. Rembolt
Dear Stockholders,
Fiscal year 2016 was a year in which our top-line growth was
challenged. We generated net sales of $380.7 million for the fiscal
year, just a 1% increase over the previous fiscal year. However, if
you were to take both translation and transaction exposure into
consideration, changes in foreign currency exchange rates reduced
our total net sales by about $12 million in fiscal year 2016. This means
that if we removed all currency-related impacts, net sales would have
been $392.3 million for the full fiscal year, an increase of about 4%
over the previous fiscal year.
Although top-line growth was challenged, our disciplined and focused
approach to managing our global business for earnings growth and
returns, as well as lower than normal commodity costs, helped us
deliver diluted earnings per share of $3.64, a new record for the
company. This was driven by net income of $52.6 million in fiscal
2016 compared to $44.8 million in fiscal 2015, reflecting an increase
of 17%. Included in these bottom line results was a non-operating
item related to foreign currency exchange gains that increased EPS by
approximately $0.12 for the fiscal year. If we back out this $0.12 from
EPS it still remains a record at $3.52 per share.
Our 55/30/25 Business Model
Last year, we introduced a stretch goal we call our 55/30/25 business
model, which targets a gross margin of 55% of net sales, a cost of
doing business of 30% of net sales, and an EBITDA of 25% of net
sales. Gross margin for fiscal year 2016 was 56% compared to 53%
last year. Gross margin was positively impacted by 240 basis points
from the declining price of crude oil which is one of the primary feed
stocks of our petroleum-based specialty chemicals. From 2010 until
mid-2014, world oil prices had been fairly stable, at around $110 a
barrel. But in the last couple of years, crude oil prices have decreased
and in our fiscal year 2016 dropped to less than half this amount.
During fiscal year 2016 we benefitted from lower than normal crude
oil prices, however, our long-term gross margin target of 55% is not
contingent upon oil staying at any particular price point. We intend to
manage our business to achieve our stretch target goal of 55% gross
margin even if the cost of crude oil increases significantly in the future.
Our cost of doing business was 36% of net sales, up from 34% last
year. This increase was driven by higher employee costs, which
increased year-over-year primarily due to higher employee earned
incentive accruals. Our Growth Reward Program is based on bottom-
line results. Our incentive plan applies to every tribe member at every
level of the organization, and we couldn’t be more pleased to reward
their individual and collective efforts.
12
2016 WD-40 Company Annual Report
Also impacting cost of doing business was our investment in
operational excellence. We continue to make investments in research
and development, brand protection, regulatory compliance and quality
assurance. As we look at the cost of doing business over long term,
we believe that 30% is an appropriate stretch target for the tribe to
rally around. Meanwhile, our final measure, EBITDA, was 22% of net
sales, compared to 19% last year.
Creating Value
At the end of fiscal year 2016, our balance sheet remained strong with
$108.5 million in cash and short-term investments, and $53 million
available on our $175 million line of credit.
As always, we continue to focus on returning capital to our
stockholders through dividends and share repurchases. In the first
quarter of fiscal year 2016, we raised our quarterly dividend to $0.42
per share, resulting in an annualized dividend of $1.68. This marks the
sixth consecutive year that we have increased our dividend.
During the fiscal year, we repurchased approximately 317 thousand
shares of our stock at a total cost of 32.1 million. In the fourth quarter
of fiscal year 2016, our board of directors
of fiscal year 2016, our board of directors
of fiscal year 2016, our board of directors
approved a new share repurchase plan which
approved a new share repurchase plan which
approved a new share repurchase plan which
became effective on September 1, 2016. Under
became effective on September 1, 2016. Under
became effective on September 1, 2016. Under
this plan, we are authorized to acquire up to
this plan, we are authorized to acquire up to
this plan, we are authorized to acquire up to
$75 million of our outstanding shares
through August 31, 2018.
On a year-in, year-out basis, our need
for capital is low, which typically
allows us to produce a high-return on
invested capital. This trend continued
in fiscal year 2016, when our return on
invested capital was a robust 33%.
In closing, I would like to thank
our stockholders for their continued
confidence in WD-40 Company. We look
confidence in WD-40 Company. We look
confidence in WD-40 Company. We look
forward to continuing to increase the value
forward to continuing to increase the value
forward to continuing to increase the value
of the company for all our stakeholders.
Jay W. Rembolt
Vice President, Finance, Treasurer
and Chief Financial Officer
WD-40_2016AR_Editorial.indd 12
10/25/16 5:13 PM
14%
Return on Sales1
1 Calculated as net income for
fiscal year 2016 divided by
net sales for 2016.
Gross Margin
(percent)
2
1 5
9 5
4
6
5
3
5
F Y 2 0 16 R E S U LT S
15%
Return on Assets2
2 Calculated as net income for
fiscal year 2016 divided by total
assets at August 31, 2016.
Sales Per Employee
(in millions)
9
9
.
0
0
0
.
1
7
9
.
0
7
8
.
0
6
8
.
0
33%
Return on Invested Capital3
3 Calculated as net operating profit
after tax divided by average total
assets less cash and cash
equivalents, short-term investments
and non-interest bearing liabilities.
Weighted Average
Shares Outstanding
(in millions)
0
.
6
1
6
.
5
1
1
.
5
1
6
.
4
1
3
.
4
1
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
Net Sales
(in millions)
5
.
8
6
3
0
.
3
8
3
2
.
8
7
3
7
.
0
8
3
8
.
2
4
3
Earnings Per Share
(in dollars)
4
6
.
3
4
0
.
3
7
8
.
4 2
5
.
0 2
2
.
2
Net Income
(in millions)
6
.
2
5
7
.
3
4
8
.
4
4
8
.
9
5 3
.
5
3
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
2016 WD-40 Company Annual Report 13
WD-40_2016AR_Editorial.indd 13
10/25/16 5:13 PM
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the Company’s Common Shares to the yearly weighted cumulative return
of a peer group of companies, the Standard & Poor’s 500 Composite Index (“S&P 500”) and the Russell 2000 Composite Stock Index for the five
fiscal years ending August 31, 2016.
The Company uses the same peer group for the Company’s five-year performance graph as the peer group of companies used by the
Compensation Committee for purposes of benchmarking executive compensation.
The below comparison assumes $100 was invested on August 31, 2011 in the Company’s Common Shares and in each of the indices and assumes
reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among WD-40 Company, the S&P 500 Index, the Russell 2000 Index, and a Peer Group
$350
$300
$250
$200
$150
$100
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
WD-40 Company
S&P 500
Russell 2000
Peer Group
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
WD-40 Company
S&P 500
Russell 2000
Peer Group (1)
100.00
100.00
100.00
100.00
121.74
118.00
113.40
121.15
148.53
140.07
143.19
161.56
178.64
175.43
168.50
180.75
221.79
176.27
168.55
202.08
318.49
198.40
183.04
212.23
*$100 invested on 8/31/11 in stock or index, including reinvestment of dividends. Fiscal year ending August 31.
Copyright © 2016 S&P, a division of McGraw Hill Financial. All rights reserved. Copyright © 2016 Russell Investment Group. All rights reserved.
(1) WD-40 Company’s peer group Index is comprised of the following 19 companies:
• Aceto Corporation
• American Vanguard Corporation
• Balchem Corporation
• Calgon Carbon Corporation
• Cambrex Corporation
• Flotek Industries Inc.
• Hawkins, Inc.
• Innophos Holdings, Inc.
• Innospec Inc.
• Inter Parfums, Inc.
• Landec Corporation
• National Presto Industries, Inc.
• Nutraceutical International Corporation
• Oil-Dri Corporation of America
• Park Electrochemical Corp.
• Prestige Brands Holdings, Inc.
• Quaker Chemical Corporation
• Synutra International, Inc.
• USANA Health Sciences, Inc.
14
2016 WD-40 Company Annual Report
WD-40_2016AR_Editorial.indd 14
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TABLE OF CONTENTS
WD-40 Company Proxy Statement
WD-40 Company Annual Report on Form 10-K
WD-40 Company Corporate Information
WD-40_2016AR_Proxy_Title.indd 1
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WD-40 COMPANY
1061 Cudahy Place
San Diego, California 92110
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The 2016 Annual Meeting of Stockholders of WD-40 Company will be held at the following location and for the
following purposes:
When:
Where:
Items of Business:
Tuesday, December 13, 2016, at 2:00 p.m.
Joan B. Kroc Institute for Peace & Justice
University of San Diego
5998 Alcala Park
San Diego, California 92110
1. To elect a Board of Directors for the ensuing year and until their successors are
elected and qualified;
2. To hold an advisory vote to approve executive compensation;
3. To approve the WD-40 Company 2016 Stock Incentive Plan;
4. To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for fiscal year 2017; and
5. To consider and act upon such other business as may properly come before the
meeting.
Who Can Vote:
Only the stockholders of record at the close of business on October 18, 2016 are
entitled to vote at the meeting.
REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:
VIA THE INTERNET
Visit the website listed on your proxy card
BY MAIL
Sign, date and return your proxy card in the enclosed
envelope
BY TELEPHONE
Call the telephone number on your proxy card
IN PERSON
Attend the Annual Meeting in San Diego
By Order of the Board of Directors
Richard T. Clampitt
Corporate Secretary
San Diego, California
November 3, 2016
[This page intentionally left blank.]
TABLE OF CONTENTS
Page
PROXY STATEMENT SUMMARY
GENERAL INFORMATION
PRINCIPAL SECURITY HOLDERS
ITEM NO. 1: NOMINEES FOR ELECTION AS DIRECTORS
AND SECURITY OWNERSHIP OF MANAGEMENT
Director Independence
Security Ownership of Directors and Executive Officers
Nominees for Election as Directors
Board Leadership, Risk Oversight and Compensation-Related Risk
Board of Directors Meetings, Committees and Annual Meeting Attendance
Board of Directors Compensation
Director Compensation Table – Fiscal Year 2016
Equity Holding Requirement for Directors
Stockholder Communications with Board of Directors
Committees
ITEM NO. 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary of Compensation Decisions and Results
Governance of Executive Officer Compensation Program
Executive Compensation Philosophy and Framework
Executive Officer Compensation Decisions for Fiscal Year 2016
Other Compensation Policies
Accounting Considerations
COMPENSATION COMMITTEE REPORT
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
EXECUTIVE COMPENSATION
Summary Compensation Table
Grants of Plan-Based Awards - Fiscal Year 2016
Outstanding Equity Awards at 2016 Fiscal Year End
Option Exercises and Stock Vested - Fiscal Year 2016
Nonqualified Deferred Compensation – Fiscal Year 2016
Supplemental Death Benefit Plans and Supplemental Insurance Benefits
Change of Control Severance Agreements
ITEM NO. 3: APPROVAL OF THE WD-40 COMPANY 2016 STOCK INCENTIVE PLAN
2016 Plan Summary
Vote Required and Board of Directors’ Recommendation
AUDIT COMMITTEE REPORT
ITEM NO. 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
STOCKHOLDER PROPOSALS
Appendix A: WD-40 COMPANY 2016 STOCK INCENTIVE PLAN
1
2
3
3
4
6
10
11
11
12
13
13
13
16
17
17
19
19
20
29
30
31
31
31
32
34
36
37
38
38
39
40
40
46
47
49
49
49
49
50
50
i
[This page intentionally left blank.]
PROXY STATEMENT SUMMARY
We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the
complete Proxy Statement and 2016 Annual Report before you vote.
2016 ANNUAL MEETING OF STOCKHOLDERS
Date and Time:
December 13, 2016, at 2:00 p.m.
Record Date:
October 18, 2016
Place:
Joan B. Kroc Institute for Peace & Justice
University of San Diego
5998 Alcala Park
San Diego, California 92110
Meeting Webcast:
www.wd40company.com in the Investor Relations section
beginning at 2:00 p.m. Pacific Time on December 13, 2016
CORPORATE GOVERNANCE
Our Corporate Governance Policies Reflect Best Practices
• Annual election of all directors
•
Independent chair
• Executive sessions of independent directors
held at each regularly scheduled board meeting
• Company policy prohibits pledging and hedging
of WD-40 Company stock by directors
• All non-employee directors are independent
• All equity grants received by directors since 2007 must be
held until board service is ended
•
Independent chair approves board meeting agendas
VOTING MATTERS AND BOARD RECOMMENDATIONS
Management Proposals:
Election of Directors (Item No. 1)
Board’s Recommendation
FOR all Director Nominees
Advisory Vote To Approve Executive Compensation
FOR
(Item No. 2)
Approval of the WD-40 Company 2016 Stock Incentive Plan
FOR
(Item No. 3)
Ratification of appointment of PricewaterhouseCoopers LLP
FOR
as the Company’s independent registered public accounting
firm for fiscal year 2017 (Item No. 4)
Page
3
16
40
49
EXECUTIVE COMPENSATION PHILOSOPHY AND FRAMEWORK
Compensation Objectives
The Company’s executive compensation program is designed to achieve five primary objectives:
1. Attract, motivate, reward and retain high performing executives;
2. Align the interests and compensation of executives with the value created for stockholders;
3. Create a sense of motivation among executives to achieve both short- and long-term Company objectives;
4. Create a direct, meaningful link between business and team performance and individual accomplishment and rewards;
and
5. Ensure our compensation programs are appropriately competitive in the relevant labor markets.
Our Executive Compensation Programs Incorporate Strong Governance Features
• No Employment Agreements with Executive Officers
• Executive Officers are Subject to Stock Ownership
Guidelines
• No Supplemental Executive Retirement Plans for
• Executives are Prohibited from Hedging or Pledging
Executive Officers
Company Stock
• Long-Term Incentive Awards are Subject to Double-
• No Backdating or Re-pricing of Equity Awards
Trigger Vesting upon Change of Control
• Annual and Long-Term Incentive Programs Provide a
Balanced Mix of Goals for Profitability and Total
Stockholder Return Performance
• Financial Goals for Performance Awards Never Reset
Say-on-Pay Voting
At the Company’s 2011 Annual Meeting of Stockholders, the first advisory Say-on-Pay vote was held and the
Company’s stockholders were also asked to express their preference as to the frequency of future Say-on-Pay votes.
With regard to the advisory vote as to the frequency of future Say-on-Pay votes, the Company’s stockholders expressed
a preference to have Say-on-Pay votes every year. The Say-on-Pay votes approving the Named Executive Officers
(“NEOs”) compensation for 2011 through 2015 have been approved in each year by more than 95% of the votes cast.
Please see the Compensation Discussion and Analysis section of this proxy statement for a detailed description of our
executive compensation.
Q: Why am I receiving these proxy materials?
GENERAL INFORMATION
A: This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of WD-40
Company for use at its Annual Meeting of Stockholders to be held on Tuesday, December 13, 2016, and at any
postponements or adjournments thereof. This Proxy Statement and enclosed form of Proxy are first sent to stockholders on
or about November 3, 2016.
At the meeting, the stockholders of WD-40 Company will consider and vote upon (i) the election of the Board of Directors
for the ensuing year; (ii) an advisory vote to approve executive compensation; (iii) the approval of the WD-40 Company
2016 Stock Incentive Plan; and (iv) the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for fiscal year 2017. Detailed information concerning these matters is set
forth below. Management knows of no other business to come before the meeting.
Q: What constitutes a quorum in order to hold and transact business at the Annual Meeting?
A: The close of business on October 18, 2016, is the record date for stockholders entitled to notice of and to vote at the Annual
Meeting of Stockholders of WD-40 Company. On October 18, 2016, WD-40 Company had outstanding 14,178,738 shares
of $.001 par value common stock. Stockholders of record entitled to vote at the meeting will have one vote for each share
so held on the matters to be voted upon. If you are a beneficial owner whose shares are held of record by a broker, you
must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted
on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” A
majority of the outstanding shares will constitute a quorum at the meeting. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum. Broker non-votes are shares that are held of record by a
bank or broker as to which the bank or broker has not received instructions from the beneficial owner as to how the shares
are to be voted.
Q:
If I hold my shares through a broker, how do I vote?
A:
If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your
shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does
not have discretionary authority to vote. If you hold your shares through a broker, it is important that you cast your vote if
you want it to count in the election of directors, for approval of the WD-40 Company 2016 Stock Incentive Plan, and in the
advisory vote to approve executive compensation. You may have received a notice from the Company entitled “Important
Notice Regarding the Availability of Proxy Materials Stockholder Meeting to Be Held on December 13, 2016” with voting
instructions or you may have received these proxy materials with separate voting instructions. Follow the instructions to
vote or to request further voting instructions as set forth on the materials you have received. For more information on this
topic, see the Securities and Exchange Commission (“SEC”) Investor Alert issued in February 2010 entitled New
Shareholder Voting Rules for the 2010 Proxy Season at http://www.sec.gov/investor/alerts/votingrules2010.htm.
Q: How will my vote be cast if I provide instructions or return my Proxy and can I revoke my proxy?
A:
If the enclosed form of Proxy is properly executed and returned, the shares represented thereby will be voted in accordance
with the instructions specified thereon. If no specified instruction is given with respect to a particular matter on your form
of Proxy, your shares will be voted by the proxy holder as set forth on the form of Proxy. A Proxy may be revoked by
attendance at the meeting or by filing a Proxy bearing a later date with the Secretary of the Company.
Q: How are the proxies solicited and what is the cost?
A: The cost of soliciting proxies will be borne by the Company. Solicitations other than by mail may be made by telephone or
in person by employees of the Company for which the expense will be nominal.
1
The following table sets forth information concerning those persons known to the Company to be the beneficial owners of more
than 5% of the common stock of the Company:
PRINCIPAL SECURITY HOLDERS
Name and Address of Beneficial Owner
Parnassus Investments
1 Market Street, Suite 1600
San Francisco, CA 94105
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
Vanguard Group, Inc.
P.O. Box 2600
Valley Forge, PA 19482
Amount and
Nature of
Beneficial Ownership
October 18, 2016
1,317,232 1
1,303,155 2
1,120,954 3
Percent of Class
9.29%
9.19%
7.91%
1 As of June 30, 2016, Parnassus Investments (“Parnassus”) filed a report on Form 13F with the Securities and Exchange Commission to
report beneficial ownership of 1,317,232 shares. Parnassus reported sole investment discretion with respect to all shares, sole voting
authority with respect to 1,259,690 shares and no voting authority with respect to 57,542 shares. Beneficial ownership information as of
October 18, 2016 is unavailable.
2 As of June 30, 2016, BlackRock, Inc. (“BlackRock”) and five BlackRock subsidiary investment managers filed reports on Form 13F with
the Securities and Exchange Commission to report beneficial ownership of a total of 1,303,155 shares managed by eleven BlackRock
investment managers. BlackRock disclaims investment discretion with respect to all shares reported as beneficially owned by its
investment management subsidiaries. BlackRock Institutional Trust Company, N.A. reported sole investment discretion and sole voting
authority with respect to 324,954 shares and sole investment discretion and no voting authority with respect to 28,769 shares. Sole
investment discretion and sole voting authority with respect to shares is reported for the following BlackRock subsidiaries: BlackRock
Fund Advisors as to 859,867 shares; BlackRock Investment Management, LLC as to 58,915 shares; BlackRock Asset Management Ireland
Limited as to 10,679 shares; BlackRock Advisors, LLC as to 6,588 shares; and four other BlackRock subsidiaries as to a total of 4,189
shares. Two other BlackRock subsidiaries reported sole investment discretion and sole voting authority with respect to 6,688 shares and
sole investment discretion and no voting authority with respect to 2,506 shares. Beneficial ownership information for BlackRock, Inc. and
its investment management subsidiaries as of October 18, 2016 is unavailable.
3 As of June 30, 2016, The Vanguard Group, Inc. (“Vanguard”) filed a report on Form 13F with the Securities and Exchange Commission
to report beneficial ownership of 1,120,954 shares, including 29,658 shares held by Vanguard Fiduciary Trust Company and 1,900 shares
held by Vanguard Investments Australia, Ltd. Vanguard Fiduciary Trust Company reports shared investment discretion and sole voting
authority with respect to all shares and Vanguard Investments Australia, Ltd. reports shared investment and voting authority with respect
to all shares. Vanguard reported sole investment discretion and no voting authority with respect to 1,088,696 shares and sole investment
discretion and sole voting authority with respect to 700 shares. Beneficial ownership information as of October 18, 2016 is unavailable.
2
ITEM NO. 1
NOMINEES FOR ELECTION AS DIRECTORS
AND SECURITY OWNERSHIP OF MANAGEMENT
At the Company’s Annual Meeting of Stockholders, the ten nominees named below under the heading, Nominees for Election
as Directors, will be presented for election as directors until the next Annual Meeting of Stockholders and until their successors
are elected or appointed. In the event any nominee is unable or declines to serve as a director at the time of the Annual Meeting,
any proxy granted to vote for such nominee will be voted for a nominee designated by the present Board of Directors to fill such
vacancy.
The nominees for election to the Board of Directors who receive a plurality of the votes cast for the election of directors by the
shares present, in person or by proxy, shall be elected as directors. Holders of common stock are not entitled to cumulate their
votes in the election of directors. Withheld votes and broker non-votes are not counted as votes in favor of any nominee. Since
the ten nominees receiving the most votes will be elected as directors, withheld votes and broker non-votes will have no effect
upon the outcome of the election.
Article III, Section 3.2 of the Bylaws of the Company, most recently amended and restated on July 13, 2016, provides that the
authorized number of directors of the Company shall not be less than seven nor more than twelve until changed by amendment
of the Certificate of Incorporation or by a bylaw duly adopted by the stockholders. The exact number of directors is to be fixed
from time to time by a resolution duly adopted by the Board of Directors or by the stockholders.
On March 21, 2016, the Board of Directors voted to increase the number of directors from nine to ten and elected Daniel T.
Carter as a director. On June 20, 2016, the Board of Directors voted to increase the number of directors from ten to eleven and
elected Daniel E. Pittard as a director. On June 20, 2016, the Board of Directors voted to nominate Eric P. Etchart as a director
to be elected at the 2016 Annual Meeting of Stockholders. Mr. Carter and Mr. Pittard were also nominated for election as
continuing directors at the Annual Meeting. Giles H. Bateman and Richard A. Collato are retiring from the Board of Directors
as of the date of the Annual Meeting in accordance with the Company’s Corporate Governance Guidelines. Accordingly, the
number of directors was fixed at ten effective as of the date of the 2016 Annual Meeting of Stockholders by resolution of the
Board of Directors adopted on October 10, 2016.
DIRECTOR INDEPENDENCE
The Board of Directors has determined that each director and nominee other than Garry O. Ridge is an independent director as
defined in Rule 5605(a)(2) of the Marketplace Rules of The Nasdaq Stock Market LLC (the “Nasdaq Rules”). In considering the
independence of directors, the Board of Directors considered Gregory A. Sandfort’s indirect interest, as an executive officer of
Tractor Supply Company, in purchases of the Company’s products made by Tractor Supply Company in the ordinary course of
business. The Company has concluded that Mr. Sandfort’s indirect interest in such transactions is not material and does not
require specific disclosure under Item 404(a) of Regulation S-K promulgated under the Securities Exchange Act of 1934 (the
“Exchange Act”).
Information concerning the independence of directors serving on committees of the Board of Directors is provided below as to
each committee.
3
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following tables set forth certain information, including beneficial ownership of the Company’s common stock, for the
current directors and director nominees, for the executive officers named in the Summary Compensation Table below, and for
all directors and executive officers as a group:
Amount and Nature of
Beneficial Ownership
October 18, 2016 1
Director
Since
2003
Number
18,577 2
Percent of
Class
*
2005
23,930 3
*
*
*
*
846 4
1,709 5
13,990 6
Director/Nominee
Giles H. Bateman
(retiring director)
Peter D. Bewley
Age
71 Investor; Retired CFO, Price Club
Principal Occupation
70 Investor; Retired General Counsel,
The Clorox Company
Daniel T. Carter
60 Investor, Retired Executive Vice President & CFO,
2016
BevMo! Inc.
44 Vice President Business Unit Finance - adidas Group
73 Investor, Retired President & CEO,
YMCA of San Diego County
2015
2003
Melissa Claassen
Richard A. Collato
(retiring director)
Mario L. Crivello
Eric P. Etchart
76 Investor
60 Investor, Retired Senior Vice President,
The Manitowoc Company
1994
N/A
273,590 7
1.93%
Linda A. Lang
58 Investor; Retired Chairman & CEO,
2004
17,508 8
Jack in the Box, Inc.
Daniel E. Pittard
66 Investor; Retired President and CEO,
Rubio's Restaurants, Inc.
Garry O. Ridge
Gregory A. Sandfort
Neal E. Schmale
60 President and CEO, WD-40 Company
61 CEO, Tractor Supply Company
70 Board Chair, WD-40 Company; Retired President
2016
1997
2011
2001
779 9
75,731 10
13,704 11
25,416 12
and COO, Sempra Energy
*
*
*
*
*
Less than one (1) percent.
*
1 All shares owned directly unless otherwise indicated.
2 Mr. Bateman has the right to acquire 3,800 shares upon the exercise of stock options and the right to receive 8,770 shares upon settlement
of vested restricted stock units upon termination of his service as a director of the Company.
3 Mr. Bewley has the right to receive 14,649 shares upon settlement of vested restricted stock units upon termination of his service as a
director of the Company.
4 Mr. Carter has the right to receive 846 shares upon settlement of vested restricted stock units upon termination of his service as a director
of the Company.
5 Ms. Claassen has the right to receive 1,709 shares upon settlement of vested restricted stock units upon termination of her service as a
director of the Company.
6 Mr. Collato has the right to receive 10,018 shares upon settlement of vested restricted stock units upon termination of his service as a
director of the Company.
7 Mr. Crivello has sole voting and investment power over 45,785 shares held in trust for the benefit of others. He also has sole voting and
investment power over 219,801 shares held directly. Mr. Crivello has the right to receive 8,004 shares upon settlement of vested restricted
stock units upon termination of his service as a director of the Company.
8 Ms. Lang has the right to receive 13,866 shares upon settlement of vested restricted stock units upon termination of her service as a director
of the Company.
9 Mr. Pittard has the right to receive 484 shares upon settlement of vested restricted stock units upon termination of his service as a director
of the Company.
10 Mr. Ridge has the right to receive 5,884 shares upon settlement of vested restricted stock units upon termination of employment, the right
to receive 967 shares upon settlement of vested deferred performance units upon termination of employment, the right to receive 4,584
shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 9,142 shares within 60 days upon
settlement of vested market share units. Mr. Ridge also has voting and investment power over 1,229 shares held under the Company’s
401(k) plan.
4
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS (continued)
11 Mr. Sandfort has the right to receive 8,436 shares upon settlement of vested restricted stock units upon termination of his service as a
director of the Company.
12 Mr. Schmale has the right to receive 14,649 shares upon settlement of vested restricted stock units upon termination of his service as a
director of the Company.
Amount and Nature of
Beneficial Ownership
October 18, 2016 1
Executive Officer
Jay W. Rembolt
Age
65 Vice President, Finance, Treasurer and Chief Financial Officer,
Principal Occupation
Number
39,040 2
WD-40 Company
Percent of
Class
*
Michael L. Freeman
William B. Noble
Geoffrey J. Holdsworth
63 Division President, the Americas, WD-40 Company
58 Managing Director, EMEA, WD-40 Company Limited
54 Managing Director, Asia-Pacific, WD-40 Company
25,821 3
10,442 4
8,909 5
*
*
*
(Australia) Pty. Limited
All Directors, Director Nominees and Executive Officers as a Group
557,940 6
3.90%
Less than one (1) percent.
*
1 All shares owned directly unless otherwise indicated.
2 Mr. Rembolt has the right to acquire 6,160 shares upon exercise of stock options, the right to receive 310 shares upon settlement of vested
deferred performance units upon termination of employment, the right to receive 1,049 shares upon settlement of restricted stock units
upon vesting within 60 days, and the right to receive 2,284 shares within 60 days upon settlement of vested market share units. Mr.
Rembolt also has voting and investment power over 6,173 shares held under the Company’s 401(k) plan.
3 Mr. Freeman has the right to receive 3,971 shares upon settlement of vested restricted stock units upon termination of employment, the
right to receive 334 shares upon settlement of vested deferred performance units upon termination of employment, the right to receive
1,049 shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 2,284 shares within 60 days
upon settlement of vested market share units. Mr. Freeman also has voting and investment power over 2,339 shares held under the
Company’s 401(k) plan.
4 Mr. Noble has the right to receive 3,971 shares upon settlement of vested restricted stock units upon termination of employment, the right
to receive 280 shares upon settlement of vested deferred performance units upon termination of employment, the right to receive 736
shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 1,676 shares within 60 days upon
settlement of vested market share units.
5 Mr. Holdsworth has the right to receive 3,971 shares upon settlement of vested restricted stock units upon termination of employment, the
right to receive 248 shares upon settlement of vested deferred performance units upon termination of employment, the right to receive 546
shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 1,142 shares within 60 days upon
settlement of vested market share units.
6
Total includes the rights of directors and executive officers to acquire a total of 9,960 shares upon exercise of stock options, the rights of
executive officers and directors to receive a total of 99,228 shares upon settlement of vested restricted stock units upon termination of
employment or service as a director of the Company, the rights of executive officers to receive 2,508 shares upon settlement of vested
deferred performance units upon termination of employment, the rights of executive officers to receive a total of 9,715 shares upon
settlement of restricted stock units upon vesting within 60 days, the rights of executive officers to receive a total of 17,611 shares within
60 days upon settlement of vested market share units, and a total of 10,731 shares held by executive officers under the Company’s 401(k)
plan.
5
NOMINEES FOR ELECTION AS DIRECTORS
PETER D. BEWLEY – Director
Peter D. Bewley was elected to the Board of Directors in 2005. Mr. Bewley served as associate general counsel for Johnson &
Johnson from 1985 to 1994 after serving as a staff attorney with Johnson & Johnson from 1977 to 1985. He was vice president,
general counsel and secretary and chief compliance officer of Novacare, Inc. from 1994 to 1998. Mr. Bewley was the senior vice
president–general counsel and secretary of The Clorox Company from 1998 until his retirement in 2005. He presently serves as
a director of Tractor Supply Company. Mr. Bewley’s experience at consumer packaged goods companies prepared him to address
strategic issues confronting the Company. In addition, his service as general counsel and secretary of two public companies
provides the Board with a practical and in depth perspective on corporate governance and legal matters.
Skills and Expertise:
Former general counsel with extensive legal experience
(cid:120)
(cid:120) Governance expert
(cid:120) Consumer packaged goods industry background
Committees:
(cid:120) Governance (Chair)
(cid:120) Audit
(cid:120) Compensation
DANIEL T. CARTER – Director
Daniel T. Carter was elected to the Board of Directors on March 21, 2016. Mr. Carter served as executive vice president and
chief financial officer of BevMo! Inc. from 2009 until June 2016. Mr. Carter served as executive vice president and chief financial
officer of Semtek, Inc. from 2008 to 2009; executive vice president and chief financial officer at Charlotte Russe Holding, Inc.
from 1998 to 2007; and chief financial officer of Advanced Marketing Services from 1997 to 1998. From 1986 to 1997 he was
employed by Price Club and its follow-on entities, serving as senior vice president for PriceCostco and chief financial officer for
Price Enterprises. Mr. Carter began his career as an auditor with Ernst & Young, and he is a Certified Public Accountant
(inactive). Mr. Carter received his bachelor of business administration in accounting from the University of Oklahoma. Mr.
Carter’s financial expertise, considerable knowledge of the retail industry and non-profit company board experience provide the
Board with a breadth of relevant skills and experience.
Skills and Expertise:
Former CFO with extensive finance and accounting expertise
(cid:120)
In-depth knowledge of retail industry
(cid:120)
(cid:120) Considerable non-profit board experience
Committees:
(cid:120) Audit (Chair)
(cid:120) Governance
MELISSA CLAASSEN – Director
Melissa Claassen was elected to the Board of Directors in 2015. Ms. Claassen is vice president, business unit finance – adidas
Group. Ms. Claassen served as the chief financial officer of Taylor Made – adidas Golf from 2012 to 2015. From 1996 until
2012 Ms. Claassen held positions at various adidas subsidiaries including chief financial officer of adidas Group Hong Kong and
Taiwan, controlling director at adidas Group China, head of marketing controlling, senior financial controller, finance manager,
SAP team lead, management accountant, and financial accountant. Ms. Claassen’s extensive knowledge and expertise in the
areas of collaboration, finance, accounting, and international business enhance the Board’s management oversight capabilities.
Skills and Expertise:
(cid:120)
(cid:120)
International business experience
Finance and accounting expertise
Committees:
Finance
(cid:120)
(cid:120) Governance
6
MARIO L. CRIVELLO – Director
Mario L. Crivello was elected to the Board of Directors in 1994. Mr. Crivello was the managing owner and master of Tuna Purse
Seiners until his retirement in 1984. Mr. Crivello and members of his family have been investors in the Company since its
founding. His long-standing relationship with the Company and his insight into its history and market position provide the Board
with a valuable shareowner perspective.
Skills and Expertise:
(cid:120)
(cid:120)
(cid:120)
Institutional knowledge from the Company’s beginning
Significant shareholder with strong shareholder perspective
Former business owner with focus on cost management and return
Committees:
(cid:120) Compensation
Finance
(cid:120)
(cid:120) Governance
ERIC P. ETCHART – Director
Eric P. Etchart is a nominee for election to the Board of Directors at the Annual Meeting. Mr. Etchart served as senior vice
president of The Manitowoc Company, Inc. from 2007 until his retirement in January 2016. He served as senior vice president,
business development, from 2015 to 2016 and as president and general manager of the Manitowoc Crane Group from 2007 to
2015. From 1983 to 2007, Mr. Etchart held various sales, marketing and management positions at subsidiaries and predecessor
companies of The Manitowoc Company, Inc. Mr. Etchart is a French national, having held management positions in China,
Singapore, Italy, France and the United States. In May 2016, Mr. Etchart was recognized as a National Association of Corporate
Directors (NACD) Board Leadership Fellow. He presently serves as a director of Graco Inc. and Alamo Group Inc. Mr. Etchart’s
breadth of international finance, marketing and management experience will provide important perspective to the Board. His
demonstrated commitment to the highest standards of board leadership will strengthen the Board’s commitment to good
governance.
Skills and Expertise:
Strong management background in sales, marketing and finance
International business experience
(cid:120)
(cid:120)
(cid:120) Board governance
Committees:
(cid:120) To be determined
7
LINDA A. LANG – Director
Linda A. Lang was elected to the Board of Directors in 2004. Ms. Lang was chairman of the board and chief executive officer of
Jack in the Box, Inc. from 2005 until her retirement in 2014. From 1996 until 2005 she held the offices of president and chief
operating officer, executive vice president, senior vice president marketing, vice president and regional vice president, Southern
California Region, and vice president marketing, all at Jack in the Box, Inc. Ms. Lang has extensive knowledge and expertise in
the areas of brand management and marketing, financial management and reporting, supply chain and distribution management
as well as strategic planning, executive compensation and succession management. Her experience in these and other areas of
corporate management and governance offer complementary experience to the Board.
Skills and Expertise:
(cid:120)
(cid:120)
(cid:120)
Former CEO in touch with today’s consumer
In depth experience in brand management, finance, distribution and compensation
Strong focus on strategy development, strategic planning and strategy execution
Committees:
Finance (Chair)
(cid:120)
(cid:120) Compensation
DANIEL E. PITTARD – Director
Daniel E. Pittard was elected to the Board of Directors on June 20, 2016. From 2006 until his retirement in 2012, Mr. Pittard
served as president, CEO and Board member of Rubio’s Restaurants, Inc. Mr. Pittard was an angel investor and served on the
board of directors of five private companies from 2000 until 2005. He served as senior vice president, strategy and business
development for Gateway, Inc. from 1998 until 1999; and group vice president, Amoco Company (now BP) from 1995 until
1998 with full P&L responsibilities for four businesses with $13 billion in revenue. As a senior vice president for PepsiCo/Frito-
Lay from 1992 to 1995 he had responsibilities for international operations, strategy and new ventures. From 1980 to 1992 he was
with McKinsey and Company, and served as a partner in Atlanta, Stockholm and Helsinki. From 1976 until 1980 Mr. Pittard
was CEO of a joint venture in Saudi Arabia. Mr. Pittard has served on three public company boards - Rubio’s Restaurants,
Novatel Wireless and Pulse Electronics - as well as many private and non-profit boards. He is a former public company CEO
and McKinsey partner with considerable international experience and he was recently designated as a National Association of
Corporate Directors (NACD) Board Leadership Fellow. His expertise in the areas of strategy development and international
business, as well as his extensive public and private company board experience make him a valuable addition to the Board.
Skills and Expertise:
(cid:120)
(cid:120)
(cid:120)
Significant experience in consumer products and industrial business
Strong background in strategy development
International business experience
Committees:
(cid:120) Audit
(cid:120)
Finance
8
GARRY O. RIDGE – President & CEO
Garry O. Ridge joined WD-40 Company in 1987 as managing director, WD-40 Company (Australia) Pty. Limited and he was
responsible for Company operations throughout the Pacific and Asia. Mr. Ridge transferred to the corporate office in 1994 as
director international operations and was elected vice president - international in 1995. He was elected to the position of executive
vice president/chief operating officer in 1996 and he was named president and chief executive officer in 1997. He was also
elected to the Board of Directors in 1997. Prior to joining WD-40 Company Mr. Ridge was managing director of Mermax Pacific
Pty. Ltd. and held a number of senior management positions with Hawker Pacific Pty. Ltd. (a Hawker Siddeley PLC Group
Company) which was a licensee for WD-40® products until 1988. As the CEO of the Company, Mr. Ridge offers the Board an
important Company-based perspective. In addition, his particular knowledge of the Company’s international markets and
industry position provides the Board with valuable insight.
Skills and Expertise:
(cid:120) CEO of the Company
(cid:120) Leader with a passion for a strong culture, employee engagement and protecting and maximizing the return on the
Company’s brand assets
Particular expertise in driving a global business
(cid:120)
GREGORY A. SANDFORT – Director
Gregory A. Sandfort was elected to the Board of Directors in 2011. Mr. Sandfort has served as chief executive officer of Tractor
Supply Company since December 2012. He held the office of president of Tractor Supply Company from 2009 through 2015.
Prior to 2013, Mr. Sandfort served as president and chief operating officer in 2012 and as president and chief merchandising
officer from 2009 to 2012. Mr. Sandfort served as executive vice president-chief merchandising officer of Tractor Supply
Company from 2007 to 2009. Mr. Sandfort previously served as president and chief operating officer at Michael’s Stores, Inc.
from 2006 to 2007, and as executive vice president-general merchandise manager at Michaels Stores, Inc. from 2004 to 2006.
Mr. Sandfort also serves as a director of Tractor Supply Company. Mr. Sandfort brings a retail industry perspective to the Board.
The Board also values Mr. Sandfort’s extensive management experience in the retail industry.
Skills and Expertise:
(cid:120) Active CEO in a channel that distributes the Company’s products
(cid:120) Brings a retail industry perspective
(cid:120) Direct connection with consumers of the Company’s products
Committees:
(cid:120) Compensation (Chair)
(cid:120) Governance
NEAL E. SCHMALE – Chair
Neal E. Schmale was elected to the Board of Directors in 2001. Mr. Schmale was named Board Chair in 2004. Mr. Schmale was
president and chief operating officer of Sempra Energy from 2006 until his retirement in 2011. Previously, he was executive vice
president and chief financial officer of Sempra Energy from 1998 through 2005. Mr. Schmale served as a director of Sempra
Energy from 2004 until 2011. He presently serves as a director of Murphy Oil Corporation. Mr. Schmale’s past experience as
director on four public company boards and his extensive senior management experience with a Fortune 300 company offers the
Board valuable judgment and management perspective.
Skills and Expertise:
Former COO and CFO with broad financial and operations experience
Focused on strategy and execution
(cid:120)
(cid:120)
(cid:120) Extensive public company board experience
Committees:
(cid:120) Audit
Finance
(cid:120)
(cid:120) Governance
9
BOARD LEADERSHIP, RISK OVERSIGHT AND COMPENSATION-RELATED RISK
The Board of Directors of WD-40 Company has maintained separation of its principal executive officer and board chair positions
for many years. In addition, the board chair position is held by an independent director and the Charter of the Corporate
Governance Committee provides that a retiring Chief Executive Officer will not be nominated to stand for re-election to the
Board. The Board of Directors believes that separation of the principal executive officer and the board chair positions is
appropriate for the Company given the size of the Board and the need for undivided attention of the Chief Executive Officer to
the implementation of strategic directives and overall management responsibilities. As an independent director, the board chair
can provide leadership to the Board without perceived or actual conflicts associated with individual and collective interests of
management employees. The Board of Directors believes that a retiring Chief Executive Officer should not continue to serve as
a director in order to provide management with an unfettered ability to provide new leadership.
Risk oversight is undertaken by the Board of Directors as a whole but various Board Committees are charged with responsibility
to review and report on business and management risks included within the purview of each Committee’s responsibilities. The
Compensation Committee considers risks associated with the Company’s compensation policies and practices, with particular
focus on the cash incentive compensation (“Incentive Compensation”) and equity awards offered to the Company’s executive
officers. The Audit Committee considers risks associated with financial reporting and internal control and risks related to
information technology catastrophe and disaster recovery, as well as management of the Company’s insurance risks and
coverage. The Finance Committee considers risks associated with the Company’s financial management and investment
activities, acquisition-related risks and Employee Retirement Income Security Act of 1974 plan oversight. The Board and the
Committees receive periodic reports from management employees having responsibility for the management of particular areas
of risk. The Chief Executive Officer is responsible for overall risk management and provides input to the Board of Directors with
respect to the Company’s risk management process and is responsive to the Board in carrying out its risk oversight role.
With respect to compensation-related risk, the Company’s management has undertaken an annual assessment of the Company’s
compensation policies and practices and strategic business initiatives to determine whether any of these policies or practices, as
well as any compensation plan design features, including those applicable to the executive officers, are reasonably likely to have
a material adverse effect on the Company. Based on this review, management has concluded that the Company’s compensation
policies and practices are not reasonably likely to have a material adverse effect on the Company. This conclusion is based
primarily on the fact that the incentives underlying most of the Company’s compensation plan design features are directed to a
balance between increased profitability and longer-term stockholder returns. Management has discussed these findings with the
Compensation Committee.
10
BOARD OF DIRECTORS MEETINGS, COMMITTEES AND ANNUAL MEETING ATTENDANCE
The Board of Directors is charged by the stockholders with managing or directing the management of the business affairs and
exercising the corporate power of the Company. The Board of Directors relies on the following standing committees to assist in
carrying out the Board of Directors’ responsibilities: the Audit Committee, the Compensation Committee, the Corporate
Governance Committee and the Finance Committee. Each of the committees has a written charter approved by the Board of
Directors and such charters are available on WD-40 Company’s website at http://www.wd40company.com within the “Investors”
section. There were seven meetings of the Board of Directors during the last fiscal year. Each director serving for the full fiscal
year attended at least 75 percent of the aggregate of the total number of meetings of the Board and of all committees on which
the director served. The Board of Directors holds an annual organizational meeting on the date of the Annual Meeting of
Stockholders. All Directors are expected to attend the Annual Meeting. At the last Annual Meeting of Stockholders, all of the
prior year nominee directors were present.
BOARD OF DIRECTORS COMPENSATION
Director compensation is set by the Board of Directors upon the recommendation of the Corporate Governance Committee. The
Corporate Governance Committee conducts an annual review of non-employee director compensation, including consideration
of a survey of director compensation for the same peer group of companies used by the Compensation Committee for the
assessment of executive compensation. For fiscal year 2016, non-employee directors received compensation for services as
directors pursuant to the Directors’ Compensation Policy and Election Plan (the “Director Compensation Policy”) adopted by
the Board of Directors on October 12, 2015. Pursuant to the Director Compensation Policy, non-employee directors received a
base annual fee of $37,500 for services provided from January 1, 2016 through the date of the Company’s 2016 Annual Meeting
of Stockholders. The Board Chair received an additional annual fee of $18,000. Non-employee directors received additional cash
compensation for service on various Board Committees. The Chair of the Audit Committee received $16,000 and each other
member of the Audit Committee received $8,000. The Chair of the Compensation Committee received $10,000 and each other
member of the Compensation Committee received $4,000. Each Chair of the Corporate Governance Committee and the Finance
Committee received $8,000 and each other member of those committees received $4,000. All such annual fees were paid in
March 2016, with the exception of the fees paid to Messrs. Carter and Pittard. As a newly elected member of the Board as of
March 21, 2016, Mr. Carter received a base annual fee of $37,500 and fees for service on the Audit Committee and the Corporate
Governance Committee through the date of the Company’s 2016 Annual Meeting of Stockholders. As a newly elected member
of the Board as of June 20, 2016, Mr. Pittard received a base annual fee of $28,000 and the sum of $4,000 in fees for service on
the Audit Committee and the sum of $2,000 in fees for service on the Finance Committee through the date of the Company’s
2016 Annual Meeting of Stockholders.
In December 2007, the Company’s stockholders approved the WD-40 Company 2007 Stock Incentive Plan (the “Stock Incentive
Plan”) to authorize the issuance of stock-based compensation awards to employees as well as to directors and consultants. For
services provided for the period from the date of the Company’s 2015 Annual Meeting of Stockholders to the next annual
meeting, the Director Compensation Policy provided for the grant of restricted stock unit (“RSU”) awards having a grant date
value of $55,500 to each non-employee director. Each RSU represents the right to receive one share of the Company’s common
stock. On December 8, 2015, each non-employee director, other than Messrs. Carter and Pittard, received an RSU award covering
552 shares of the Company’s common stock. On March 21, 2016, Mr. Carter received an RSU award covering 519 shares of the
Company’s common stock. On June 20, 2016, Mr. Pittard received an RSU award covering 484 shares of the Company’s common
stock. Additional information regarding the RSU awards is provided in a footnote to the Director Compensation table below.
Each non-employee director was also permitted to elect to receive an RSU award in lieu of all or a portion of his or her base
annual fee for service as a director as specified above. The number of shares of the Company’s common stock subject to each
such RSU award granted to the non-employee directors equaled the compensation payable in RSUs divided by the fair market
value of the Company’s common stock as of the date of grant. RSU awards granted to non-employee directors pursuant to the
Director Compensation Policy are subject to Award Agreements under the Stock Incentive Plan. All RSU awards granted to non-
employee directors are fully vested and are settled in shares of the Company’s common stock upon termination of the director’s
service as a director of the Company.
The Company also maintains a Director Contributions Fund from which each incumbent non-employee director has the right, at
a specified time each fiscal year, to designate $6,000 in charitable contributions to be made by the Company to properly qualified
(under Internal Revenue Code Section 501(c)(3)) charitable organizations.
11
DIRECTOR COMPENSATION TABLE - FISCAL YEAR 2016
The following Director Compensation table provides information concerning director compensation earned by each non-
employee director for services rendered in fiscal year 2016. Since the annual base fee and fees for service on Committees are
payable for services provided to the Company from January 1st of the fiscal year until the next annual meeting of stockholders,
such compensation is reported for purposes of the Director Compensation table on a weighted basis. For fiscal year 2016, one
third of the reported compensation earned or paid in cash is based on the Director Compensation Policy in effect for calendar
year 2015 and two thirds of the reported compensation earned or paid in cash is based on the Director Compensation Policy in
effect for calendar year 2016. Amounts earned and reported in the Director Compensation table for Fees Earned or Paid in Cash
for the fiscal year for each director are dependent upon the various committees on which each director served as a member or as
chair during the fiscal year.
Name
Giles H. Bateman
Peter D. Bewley
Daniel T. Carter
Melissa Claassen
Richard A. Collato
Mario L. Crivello
Linda A. Lang
Daniel E. Pittard
Gregory A. Sandfort
Neal E. Schmale
All Other
Compensation
($)4
Fees Earned or Paid
in Cash
($)1
Total
($)
Stock Awards
($)2
Option Awards
($)3
$ 57,167 $ 55,437 $ - $ 6,000 $ 118,604
$ 57,167 $ 55,437 $ - $ 6,000 $ 118,604
$ 34,333 $ 55,434 $ - $ - $ 89,767
$ 43,833 $ 55,437 $ - $ 6,000 $ 105,270
$ 55,167 $ 55,437 $ - $ 6,000 $ 116,604
$ 49,167 $ 55,437 $ - $ 6,000 $ 110,604
$ 49,167 $ 55,437 $ - $ 6,000 $ 110,604
$ 17,500 $ 55,437 $ - $ - $ 72,937
$ 46,167 $ 55,437 $ - $ 6,000 $ 107,604
$ 71,167 $ 55,437 $ - $ 6,000 $ 132,604
1
For services rendered during fiscal year 2016, directors other than Ms. Claassen and Messrs. Carter and Pittard received RSU awards
pursuant to elections made in 2014 and 2015 under the Director Compensation Policy with respect to their services as directors in calendar
years 2015 and 2016, respectively, in each case in lieu of all or part of their base annual fees for such calendar year (as described in the
narrative preceding the Director Compensation table) as follows: Peter D. Bewley, Linda A. Lang, Gregory A. Sandfort and Neal E.
Schmale received RSU awards valued at $37,140. Based on the elections of Ms. Claassen, Mr. Carter and Mr. Pittard, with respect to their
base annual fees for services as a director in calendar years 2015 (as to Ms. Claassen) and 2016, Ms. Claassen received RSU awards for
services rendered during fiscal year 2016 valued at $30,795 and Mr. Carter received RSU awards for services rendered during fiscal year
2016 valued at $24,970. Mr. Pittard elected to receive his base annual fees in cash. The number of shares underlying each director’s RSU
award is rounded down to the nearest whole share.
2 Amounts included in the Stock Awards column represent the grant date fair value for non-elective RSU awards granted to all non-employee
directors pursuant to the Director Compensation Policy. On December 8, 2015, each director other than Messrs. Carter and Pittard received
a non-elective RSU award covering 552 shares of the Company’s common stock. Each RSU award has a grant date fair value equal to the
closing price of the Company’s common stock on that date in the amount of $100.43 per share multiplied by the number of shares
underlying the RSU award. On March 21, 2016 and on June 20, 2016, Mr. Carter and Mr. Pittard, respectively, received non-elective RSU
awards covering 519 shares and 484 shares, respectively, of the Company’s common stock. The RSU awards granted to Mr. Carter and
Mr. Pittard have grant date fair values equal to the closing price of the Company’s common stock on the respective dates of the awards in
the amounts of $106.81 and $114.54 per share, respectively, multiplied by the number of shares underlying the respective RSU awards.
The number of shares underlying each director’s RSU award is rounded down to the nearest whole share. Outstanding RSUs held by each
director as of October 18, 2016 are reported above in footnotes to the table under the heading, Security Ownership of Directors and
Executive Officers. The RSUs are settled in stock only upon termination of service as a director and the RSUs provide for the payment of
dividend equivalent compensation in amounts equal to dividends declared and paid on the Company’s common stock.
3 Outstanding options held by directors as of October 18, 2016 are reported above in footnotes to the table under the heading, Security
Ownership of Directors and Executive Officers.
4 Amounts represent charitable contributions made by the Company in fiscal year 2016 as designated by non-employee directors pursuant
to the Company’s Director Contribution Fund.
12
EQUITY HOLDING REQUIREMENT FOR DIRECTORS
All RSU awards to non-employee directors, including both non-elective grants and RSU awards granted pursuant to the annual
elections of the directors to receive RSUs in lieu of all or part of their base annual fee, provide for immediate vesting but will not
be settled in shares of the Company’s common stock until termination of each director’s service as a director. The number of
shares to be issued to each non-employee director upon termination of service is disclosed in the footnotes to the table under the
heading, Security Ownership of Directors and Executive Officers.
STOCKHOLDER COMMUNICATIONS WITH BOARD OF DIRECTORS
Stockholders may send communications to the Board of Directors by submitting a letter addressed to: WD-40 Company,
Corporate Secretary, 1061 Cudahy Place, San Diego, CA 92110.
The Board of Directors has instructed the Corporate Secretary to forward such communications to the Board Chair. The Board
of Directors has also instructed the Corporate Secretary to review such correspondence and, at the Corporate Secretary’s
discretion, to not forward correspondence which is deemed of a commercial or frivolous nature or inappropriate for Board of
Director consideration. The Corporate Secretary may also forward the stockholder communication within the Company to
another department to facilitate an appropriate response.
COMMITTEES
CORPORATE GOVERNANCE COMMITTEE
NOMINATION POLICIES AND PROCEDURES
The Corporate Governance Committee is comprised of Peter D. Bewley (Chair), Daniel T. Carter, Melissa Claassen, Mario L.
Crivello, Gregory A. Sandfort and Neal E. Schmale. The Corporate Governance Committee also functions as the Company’s
nominating committee and is comprised exclusively of independent directors as defined in the Nasdaq Rules. The Corporate
Governance Committee met four times during the last fiscal year.
The Corporate Governance Committee acts in conjunction with the Board of Directors to ensure that a regular evaluation is
conducted of succession plans, performance, independence, and of the qualifications and integrity of the Board of Directors. The
Corporate Governance Committee also reviews the applicable skills and characteristics required of nominees for election as
directors. The objective is to balance the composition of the Board of Directors to achieve a combination of individuals of
different backgrounds and experiences, including, but not limited to, whether the candidate is currently or has recently been an
executive officer at a publicly traded company; whether the candidate has substantial background in matters related to the
Company’s products or markets, in particular, supply chain management, information technology, retailing and marketing; and
whether the candidate has substantial international business experience, a substantial financial background or is serving as a
director at one or more publicly traded companies. The Board of Directors has not established any specific diversity criteria for
the selection of nominees other than the general composition criteria noted above.
In determining whether to recommend a director for re-election, the Corporate Governance Committee considers the director’s
past attendance at meetings, results of evaluations and the director’s participation in and anticipated future contributions to the
Board of Directors. A director who will have reached the age of 72 prior to the date of the next annual meeting of stockholders,
except for non-employee directors first elected to the Board prior to June 29, 1999, will be expected to retire from the Board.
However, the Board may re-nominate any director for up to three additional years if relevant circumstances warrant continued
service.
13
The Corporate Governance Committee reviews new Board of Director nominees through a series of internal discussions,
reviewing available information, and interviewing selected candidates. Generally, candidates for nomination to the Board of
Directors have been suggested by directors or employees. The Company does not currently employ a search firm or third party
in connection with seeking or evaluating candidates.
The Corporate Governance Committee will consider director candidates recommended by security holders under the same criteria
as other candidates described above. Nominations may be submitted by letter addressed to: WD-40 Company Corporate
Governance Committee, Corporate Secretary, 1061 Cudahy Place, San Diego, CA 92110. Nominations by security holders must
be submitted in accordance with the requirements of the Company’s Bylaws, including submission of such nominations within
the time required for submission of stockholder proposals as set forth below under the heading, Stockholder Proposals.
AUDIT COMMITTEE
RELATED PARTY TRANSACTIONS REVIEW AND OVERSIGHT
The Audit Committee is comprised of Daniel T. Carter (Chair), Giles H. Bateman (retiring director), Peter D. Bewley, Richard
A. Collato (retiring director), Daniel E. Pittard and Neal E. Schmale. Five meetings were held during the last fiscal year to review
quarterly financial reports, to consider the annual audit and other audit services, to review the audit with the independent
registered public accounting firm after its completion and to review the Company’s business continuity and insurance programs.
The Board of Directors has determined that Mr. Carter is an “audit committee financial expert” as defined by regulations adopted
by the Securities and Exchange Commission. Mr. Carter and each of the other members of the Audit Committee are independent
directors as defined in the Nasdaq Rules. Each member of the Audit Committee also satisfies the requirements for service on the
Audit Committee as set forth in Rule 5605(c)(2) of the Nasdaq Rules.
The Audit Committee has responsibility for review and oversight of related party transactions for potential conflicts of interest.
Related party transactions include any independent business dealings between the Company and related parties who consist of
the Company’s executive officers, directors, director nominees and holders of more than 5% of the Company’s shares. Such
transactions include business dealings with parties in which any such related party has a material direct or indirect interest. The
Board of Directors has adopted a written policy to provide for the review and oversight of related party transactions by the Audit
Committee. Executive officers and directors are required to notify the Secretary of the Company of any proposed or existing
related party transactions in which they have an interest. The Secretary and the Audit Committee also rely upon the Company’s
disclosure controls and procedures adopted pursuant to Exchange Act rules for the purpose of assuring that matters requiring
disclosure, including related party transactions that may involve the potential for conflicts of interests, are brought to the attention
of management and the Audit Committee on a timely basis. Certain related party transactions do not require Audit Committee
review and approval. Such transactions are considered pre-approved. Pre-approved transactions include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
compensation arrangements approved by the Compensation Committee or the Board of Directors and expense
reimbursements consistent with the Company’s expense reimbursement policy;
transactions in which the related party’s interest is derived solely from the fact that he or she serves as a director of another
corporation that is a party to the transaction;
transactions in which the related party’s interest is derived solely from his or her ownership (combined with the ownership
interests of all other related parties) of not more than a 5% beneficial interest (but excluding any interest as a general partner
of a partnership) in an entity that is a party to the transaction; and
transactions available to all employees of the Company generally.
If a related party transaction is proposed or if an existing transaction is identified, the Audit Committee has authority to
disapprove, approve or ratify the transaction and to impose such restrictions or other limitations on the transaction as the
Committee may consider necessary to best assure that the interests of the Company are protected and that the related party
involved is not in a position to receive an improper benefit. In making such determination, the Audit Committee considers such
factors as it deems appropriate, including without limitation (i) the benefits to the Company of the transaction; (ii) the commercial
reasonableness of the terms of the transaction; (iii) the dollar value of the transaction and its materiality to the Company and to
the related party; (iv) the nature and extent of the related party’s interest in the transaction; (v) if applicable, the impact of the
transaction on a non-employee director’s independence; and (vi) the actual or apparent conflict of interest of the related party
participating in the transaction.
14
During the fiscal year ended August 31, 2016, there were no transactions required to be reported pursuant to the requirements of
Item 404(a) of Regulation S-K under the Exchange Act that did not require review and approval by the Audit Committee.
The Audit Committee also has responsibility for the selection, appointment and oversight of the independent registered public
accounting firm for the Company.
FINANCE COMMITTEE
The Finance Committee is comprised of Linda A. Lang (Chair), Giles H. Bateman (retiring director), Melissa Claassen, Mario
L. Crivello, Daniel E. Pittard and Neal E. Schmale. Four meetings of the Finance Committee were held during the last fiscal
year. The Finance Committee is appointed by the Board for the primary purpose of assisting the Board in overseeing financial
matters of importance to the Company, including matters relating to acquisitions, investment policy, capital structure, and
dividend policy. The Finance Committee also reviews the Company’s annual and long-term financial strategies and objectives.
COMPENSATION COMMITTEE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Gregory A. Sandfort (Chair), Peter D. Bewley, Richard A. Collato (retiring
director), Mario L. Crivello and Linda A. Lang, all of whom are independent directors as defined under the Nasdaq Rules. The
Compensation Committee met three times during the last fiscal year. During the fiscal year ended August 31, 2016, there were
no compensation committee interlock relationships with respect to members of the Board of Directors and the Compensation
Committee as described in Item 407(e)(4)(iii) of Regulation S-K promulgated under the Exchange Act.
15
ITEM NO. 2
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act, the Company’s stockholders are being asked to cast
an advisory vote to approve the compensation of the Company’s Named Executive Officers (“NEOs”) identified in the
Compensation Discussion and Analysis section of this proxy statement. This vote is commonly referred to as a “Say-on-Pay”
vote.
At the Company’s 2011 Annual Meeting of Stockholders, the first Say-on-Pay vote was held and the Company’s stockholders
were also asked, by a non-binding advisory vote, to express their preference as to the frequency of future Say-on-Pay votes and
the Board of Directors recommended annual Say-on-Pay voting. The Company’s stockholders expressed a preference to have
Say-on-Pay votes every year.
The following resolution will be presented for approval by the Company’s stockholders at the 2016 Annual Meeting of
Stockholders:
“RESOLVED, that the stockholders of WD-40 Company (the “Company”) hereby approve the compensation of the Company’s
Named Executive Officers as disclosed in the Compensation Discussion and Analysis section of the Company’s proxy statement
for the 2016 Annual Meeting of Stockholders and in the accompanying compensation tables and narrative disclosures.”
The advisory vote to approve executive compensation is a non-binding vote on the compensation of the Company’s NEOs. This
proxy statement contains a description of the compensation provided to the NEOs as required by Item 402 of Regulation S-K
promulgated under the Exchange Act.
Stockholders are encouraged to carefully consider the Compensation Discussion and Analysis, accompanying compensation
tables and related narrative discussion in this proxy statement in considering this advisory vote. The Board of Directors believes
that the compensation provided to the Company’s NEOs offers a competitive pay package with a proper balance of current and
long term incentives aligned with the interests of the Company’s stockholders.
This is an advisory vote and will not affect compensation previously paid or awarded to the NEOs. While a vote disapproving
the NEOs’ executive compensation will not be binding on the Board of Directors or the Compensation Committee, the
Compensation Committee will consider the results of the advisory vote in making future executive compensation decisions.
The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal at
the Annual Meeting of Stockholders is required to approve this advisory vote on executive compensation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ADOPTION OF THE PROPOSED RESOLUTION FOR APPROVAL OF THE COMPENSATION OF THE
COMPANY’S NAMED EXECUTIVE OFFICERS.
16
COMPENSATION DISCUSSION AND ANALYSIS
WD-40 Company’s Compensation Discussion and Analysis addresses the executive compensation philosophy and the processes
and decisions of the Compensation Committee of the Company’s Board of Directors (the “Committee”) with respect to the
compensation of the Company’s Named Executive Officers (the “NEOs”). For fiscal year 2016, the Company’s NEOs were:
Jay W. Rembolt, our Vice President, Finance, Treasurer and Chief Financial Officer (“CFO”);
(cid:120) Garry O. Ridge, our Chief Executive Officer (“CEO”);
(cid:120)
(cid:120) Michael L. Freeman, our Division President, the Americas;
(cid:120) William B. Noble, our Managing Director, EMEA; and
(cid:120) Geoffrey J. Holdsworth, our Managing Director, Asia-Pacific.
EXECUTIVE SUMMARY OF EXECUTIVE COMPENSATION DECISIONS AND RESULTS
The compensation structure for the NEOs is comprised of three elements: base salary, retention-related equity compensation and
performance-related cash and equity compensation. Through the application of these elements, a significant portion of NEO
realized compensation is directly tied to Company performance measured by increased earnings and total stockholder return
(“TSR”). Performance-based compensation tied to earnings is based on earnings before interest, income taxes, depreciation and
amortization (“EBITDA”), not earnings per share.
Retention-related equity compensation includes restricted stock unit (“RSU”) awards that vest over a period of three years after
grant. Retention-related equity compensation features are also reflected in our performance-based market share unit (“MSU”)
awards that may be earned over a market return-based vesting period of three years.
Performance-related compensation includes (i) an annual cash Incentive Compensation opportunity that is tied to current fiscal
year financial results; (ii) MSU awards that are tied to a measure of TSR; and (iii) deferred performance unit (“DPU”) awards
that are tied to current fiscal year financial results that exceed levels required for maximum payment of that portion of the cash
Incentive Compensation opportunity that is tied to global EBITDA.
The foregoing compensation structure elements are described fully later in this Compensation Discussion and Analysis.
In establishing the framework for overall NEO compensation and in assessing such compensation for each NEO in light of
individual and overall Company performance, the Committee considers actual and target levels of compensation with reference
to both short-term and long-term performance periods as well as labor market data and peer group executive compensation. The
Committee seeks to align individual NEO performance incentives with both short-term and long-term Company objectives. The
Committee reviews each of the principal elements of NEO compensation to determine the effectiveness of the established
framework for NEO compensation based on measures of Company performance, specifically including regional and global
measures based on the Company’s EBITDA, but also including relative Company performance as compared to the established
peer group of companies and a comparable market index. Additionally, the Committee also considers the relative achievement
of longer term strategic objectives as to which each NEO is accountable. Information regarding NEO strategic objectives is
provided in the Executive Officer Compensation Decisions section below under the heading, Base Salary: Process. The
Committee believes that a review of NEO compensation and relative company performance over multi-year periods demonstrates
the effectiveness of the Company’s established framework for NEO compensation.
THREE YEAR PERFORMANCE-BASED COMPENSATION REVIEW
For fiscal year 2016, the Company’s financial performance was strong, resulting in achievement of the maximum performance
measure goals for regional and global EBITDA under the Company’s Incentive Compensation program (the “Performance
Incentive Program”). As described in more detail below, maximum first level performance measure goals for the Americas,
EMEA, and Asia-Pacific regions were all achieved. In addition, the full maximum first and second level goals for global
EBITDA were achieved. As a result, each of the NEOs earned the maximum amount of Incentive Compensation for fiscal year
2016. The Company’s financial performance for fiscal year 2015, as measured against goals for regional and global EBITDA,
was mixed. Maximum first level goals for the Americas and Asia-Pacific regions were achieved in fiscal year 2015, but minimum
first level goals for EMEA were not achieved. The second level minimum goal for global EBITDA was not achieved. As a result,
earned Incentive Compensation amounts for fiscal year 2015 for the NEOs were at or near the target amounts (50% of the
maximum earned Incentive Compensation opportunity) for all of the NEOs other than Mr. Noble and no Incentive Compensation
was earned by Mr. Noble. The Company’s financial performance for fiscal year 2014 exceeded many of the goals established by
the Committee for performance-based compensation earned for that year. As a result, earned Incentive Compensation for fiscal
year 2014 for each NEO was above the target amount of the potential reward for all of the NEOs.
17
For the three fiscal years ended August 31, 2016, the TSR for the Company’s shares exceeded, by an absolute percentage point
difference, the return for the Russell 2000 Index (the “Index”) by 91.4%. As a result, MSUs awarded to the NEOs in October
2013 provided vested shares of the Company’s common stock to the NEOs at the maximum amount of 200% of the target number
of award shares. For the three fiscal years ended August 31, 2015, the TSR for the Company’s shares exceeded, by an absolute
percentage point difference, the return for the Index by 27.5%. As a result, MSUs awarded to the NEOs in October 2012 provided
vested shares of the Company’s common stock to the NEOs at the maximum amount of 200% of the target number of award
shares. There were no performance-based equity awards providing for vesting as of the end of fiscal year 2014.
FISCAL YEAR 2016 COMPENSATION
Compensation decisions for fiscal year 2016 were made in October 2015 based on individual and Company performance during
fiscal year 2015 and a market survey conducted by the Committee’s compensation consultant. The relative market percentile of
total compensation for each of the NEOs for fiscal year 2016 based on peer group data is provided below under the heading
Overall Reasonableness of Compensation.
The following is a summary of the decisions made by the Committee for NEO compensation for fiscal year 2016:
(cid:120)
For fiscal year 2016, base salaries for the NEOs were not increased. Base salaries for the NEOs were assessed in relation to
labor market information. For fiscal year 2016, consideration was given to the appropriate relative mix of salary, annual
Incentive Compensation and equity awards.
(cid:120) Annual Incentive Compensation is awarded to the NEOs under the Company’s Performance Incentive Compensation Plan
described below under the heading Performance Incentive Program. For purposes of the Performance Incentive Program,
goals for regional and global EBITDA were established at the beginning of the year. The Company’s performance as
measured against these goals is described in detail below. For fiscal year 2016, the target amounts of annual Incentive
Compensation (50% of the maximum earned Incentive Compensation opportunity) for each of the NEOs were increased to
provide a greater proportion of total target compensation in the form of performance-based annual compensation.
(cid:120)
(cid:120)
(cid:120)
In October 2015, the NEOs received annual RSU awards providing for the issuance of a total of 7,326 shares of the
Company’s common stock to be earned by continued employment by the Company over a vesting period of three years.
These awards serve a retention purpose together with an incentive to maximize long term stockholder value through share
price appreciation.
In October 2015, the NEOs received MSU awards subject to performance vesting covering a target number of shares of the
Company’s common stock equal to 7,326 shares. If the Company’s TSR over the three year vesting period matches the
median return for the Index, the target number of shares of the Company’s common stock would be issued to the NEOs. The
actual number of shares to be issued will be from 0% to 200% of the target number of shares depending upon the Company’s
TSR as compared to the return for the Index.1
In October 2015, the NEOs received DPU awards that provided an opportunity to receive up to an aggregate maximum of
11,078 additional shares of the Company’s common stock upon termination of employment. The DPU awards provided for
vesting as of the end of fiscal year 2016 if the Company were to achieve a level of global EBITDA for the fiscal year in
excess of the maximum goal for global EBITDA established for the Performance Incentive Program2. Since the Company’s
global EBITDA for fiscal year 2016 exceeded the maximum goal for global EBITDA established for the Performance
Incentive Program, the DPU awards vested as to 19.3% of the maximum number of shares that each NEO was eligible to
earn.
(cid:120) RSU, MSU and DPU award amounts for fiscal year 2016 varied among the NEOs based on labor market compensation
practices specific to the region of employment, relative achievement of individual performance measures and goals
established for each NEO, as well as Company performance for fiscal year 2015 in areas over which each NEO had direct
influence.
1
2
For a more complete description of the MSU awards, refer to the Executive Officer Compensation Decisions section below under the
heading, Market Share Unit Awards.
For a more complete description of the DPU awards, refer to the Executive Officer Compensation Decisions section below under the
heading, Deferred Performance Unit Awards.
18
(cid:120) The Company’s stockholders have provided advisory votes to approve executive compensation required by Section 14A of
the Exchange Act (the “Say-on-Pay” votes) at the Company’s annual meeting of stockholders for fiscal years 2013, 2014
and 2015. In each instance, at least 95% of the votes cast in the Say-on-Pay votes approved the compensation of the NEOs
as disclosed in the Compensation Discussion and Analysis section of the Company’s proxy statements for those fiscal years
and in the accompanying compensation tables and narrative disclosures. The Committee has considered the results of these
advisory Say-on-Pay votes in its decision-making for executive compensation of the NEOs and has concluded that no
significant changes in executive compensation decisions and policies are warranted.
GOVERNANCE OF EXECUTIVE OFFICER COMPENSATION PROGRAM
The purpose of the Committee is to establish and administer the compensation arrangements for our CEO and the other executive
officers of the Company, including the other NEOs, on behalf of the Board of Directors. The Committee is responsible for
developing the Company’s overall executive compensation strategy, with support from management and the Committee’s
independent compensation consulting firm. For fiscal year 2016 compensation decisions, the Committee’s compensation
consulting firm was Board Advisory, LLC. The Committee also has responsibilities in connection with administration of the
Company’s equity compensation plans.
The Committee operates pursuant to a Charter which outlines its responsibilities, including the Committee’s responsibilities with
respect to performance reviews and approval of annual compensation arrangements for the NEOs. A copy of the Compensation
Committee Charter can be found under the Investors section of the Company’s website at http://www.wd40company.com.
PROCESS FOR EVALUATING EXECUTIVE OFFICER PERFORMANCE AND COMPENSATION
In accord with its Charter, the Committee works with the Company’s Human Resources function in carrying out its
responsibilities. The Vice President of Global Organization Development is management’s liaison with the Committee. The
Committee’s independent compensation consulting firm provides advice and information relating to executive compensation.
For fiscal year 2016, the compensation consulting firm assisted the Committee in the evaluation of executive base salary,
Incentive Compensation opportunities, equity incentive design and award levels, and the specific pay recommendation for our
CEO. The Committee’s compensation consulting firm reports directly to the Committee and provides no additional services for
management.
EXECUTIVE COMPENSATION PHILOSOPHY AND FRAMEWORK
COMPENSATION OBJECTIVES
The Company’s executive compensation program is designed to achieve five primary objectives:
1. Attract, motivate, reward and retain high performing executives;
2. Align the interests and compensation of executives with the value created for stockholders;
3. Create a sense of motivation among executives to achieve both short- and long-term Company objectives;
4. Create a direct, meaningful link between business and team performance and individual accomplishment and rewards; and
5. Ensure our compensation programs are appropriately competitive in the relevant labor markets.
TARGET PAY POSITION/MIX OF PAY
The Company’s compensation program consists primarily of base salary, annual cash incentives, and long-term oriented equity
awards. Each of these components is discussed in greater detail in the Executive Officer Compensation Decisions section below.
The Committee has established a target for executive officer total compensation (defined as base salary, plus target Incentive
Compensation, plus the grant date fair value of equity awards) at the median market level of compensation for each position
(details on the use of peer group data to establish the median market level is provided below). Actual pay may vary, based on
Company and/or individual performance, length of time within the position, and anticipated contribution. The Committee does
not adhere to specific guidelines regarding the percentage of total compensation that should be represented by each compensation
component, but monitors market competitiveness. A review of total compensation for each NEO relative to the target market
percentile is provided in the Executive Officer Compensation Decisions section below under the heading, Overall Reasonableness
of Compensation.
COMPENSATION BENCHMARKING
For purposes of its fiscal year 2016 compensation decisions, the Committee examined the executive compensation practices of
a peer group of nineteen companies to assess the competitiveness of the Company’s executive compensation. Peer group
19
companies were selected from a list of U.S. headquartered companies having revenues and earnings reasonably comparable to
the Company and doing business in the specialty chemical industry or within specific consumer products categories. In addition
to the peer group data, the Committee considers surveys of general industry company data provided by Hay Group, a global
management consulting firm and Kenexa, an IBM Company. These data sources are applied by the Committee to establish the
market median level of compensation for each executive officer position. The companies used in the peer group analysis for
fiscal year 2016 compensation decisions were as follows:
(cid:120)(cid:3) Aceto Corporation
(cid:120) American Vanguard Corporation
(cid:120) Balchem Corporation
(cid:120) Calgon Carbon Corporation
(cid:120) Cambrex Corporation
(cid:120)
Flotek Industries Inc.
(cid:120) Hawkins, Inc.
(cid:120)
(cid:120)
(cid:120)
Innophos Holdings, Inc.
Innospec Inc.
Inter Parfums, Inc.
(cid:120) Landec Corporation
(cid:120) National Presto Industries, Inc.
(cid:120) Nutraceutical International Corporation
(cid:120) Oil-Dri Corporation of America
(cid:120)
Park Electrochemical Corp.
(cid:120)
Prestige Brands Holdings, Inc.
(cid:120) Quaker Chemical Corporation
(cid:120)
Synutra International, Inc.
(cid:120) USANA Health Sciences, Inc.
EXECUTIVE OFFICER COMPENSATION DECISIONS FOR FISCAL YEAR 2016
BASE SALARY: PROCESS
Base salaries for all executive officers, including the NEOs, are approved by the Committee effective for the beginning of each
fiscal year. In setting base salaries, the Committee considers the salary range prepared by its compensation advisor based on each
NEO’s job responsibilities and the market 50th percentile target pay position. Salary adjustments, if any, are based on factors
such as individual performance, position, current pay relative to the market, future anticipated contribution and the Company-
wide merit increase budget. Assessment of individual performance follows a rigorous evaluation process, including self-
evaluation and the establishment of annual goals for each executive officer and an assessment of the achievement thereof.
Individual performance elements considered in this process included individual and Company performance goals and
achievements in such areas as growth, innovation, leadership, earnings and customer relations for Mr. Ridge; governance and
risk, compliance, forecasting and financial reporting for Mr. Rembolt; and business unit performance, teamwork, execution and
growth for Messrs. Freeman, Noble and Holdsworth.
BASE SALARY: FISCAL YEAR 2016
In October 2015, the Committee reviewed the market competitiveness of executive officer base salaries relative to peer group
market data presented by the Committee’s compensation advisor. Based on its review of the peer group market data, no increases
in base salary were approved by the Committee for any of the NEOs for fiscal year 2016.
20
PERFORMANCE INCENTIVE PROGRAM
The Company uses its Performance Incentive Program to tie executive officer compensation to the Company’s financial
performance. All Company employees participate in the same Performance Incentive Program as described below. The
Performance Incentive Program is offered to the executive officers pursuant to the WD-40 Company Performance Incentive
Compensation Plan most recently approved by the stockholders at the Company’s 2012 Annual Meeting of Stockholders.
The Performance Incentive Program provides direct incentives to all Company employees, including executive officers, to affect
regional financial performance and, for the Company as a whole, to promote sales at increasing levels of profitability. Specific
performance measures tied to regional financial results are used in the Performance Incentive Program formulas as applied to
each employee according to his or her particular area of responsibility.
For the NEOs, Incentive Compensation opportunity awards for fiscal year 2016 were based on pre-established goals for the
following corporate performance measures: (i) the Company’s EBITDA computed for each of the Company’s relevant financial
reporting segments (“Regional EBITDA”); and (ii) EBITDA computed on a consolidated basis (“Global EBITDA”). The
calculations of attainment of these performance measures for the NEOs are the same as the calculations for all other employees
for whom such performance measures were applicable.
The Company’s Incentive Compensation program, as applied to all of its employees, is designed with the intent to fund the
Incentive Compensation payout to all employees, including the NEOs, from increased earnings over the prior fiscal year. If the
Company does not realize an increase in Global EBITDA over the prior year, it is possible that Mr. Freeman, Mr. Noble and/or
Mr. Holdsworth will earn some Incentive Compensation because the performance measure for a portion of the Incentive
Compensation opportunity payable to those NEOs is based on Regional EBITDA.
Depending upon actual performance results, the Incentive Compensation opportunities for fiscal year 2016 range from 0% up to
150% of base salary for Mr. Ridge, from 0% up to 100% of base salary for Messrs. Rembolt and Freeman, from 0% up to 80%
of base salary for Mr. Noble, and from 0% up to 80% of an amount referred to in Australia for compensation comparison purposes
as the fixed annual reward (“FAR”)1 for Mr. Holdsworth. These Incentive Compensation opportunity percentages represent
increases over the percentages applied in prior years. Mr. Ridge’s maximum percentage opportunity increased from 100% to
150%. The maximum percentage opportunity increased from 60% to 100% for Messrs. Rembolt and Freeman and from 60% to
80% for Messrs. Noble and Holdsworth. These increased percentage opportunities were established by the Committee based
upon competitive market data that supports target incentive compensation at higher levels for each of the NEOs and a greater
proportion of overall compensation represented by performance-based compensation.
The maximum Incentive Compensation potential for employees under the Performance Incentive Program is referred to herein
as the employee’s “Annual Opportunity.” For each of the NEOs, the Performance Incentive Program for fiscal year 2016 provided
two performance measure levels (“Levels A and C”) for determination of earned Incentive Compensation; each level represented
50% of the Annual Opportunity. The Performance Incentive Program is consistently applied for all employees of the Company
except that there are three performance measure levels (“Levels A, B and C”) for all employees other than the NEOs and certain
other management employees. The maximum Incentive Compensation payouts for Messrs. Freeman, Noble and Holdsworth
required achievement of specified segment goals for Regional EBITDA (Level A) and Company performance that equaled the
maximum goal amount for Global EBITDA as described below (Level C). For Messrs. Ridge and Rembolt (each of whom has
global rather than regional responsibilities), the maximum Incentive Compensation payouts required achievement of specified
goals for Global EBITDA for each of Levels A and C.
Only two of the three performance measure goals are applied for the NEOs and certain other management employees for purposes
of calculating earned Incentive Compensation in order to provide an increased incentive to those employees to achieve the
maximum level of Global EBITDA results for the benefit of stockholders. Level B performance measure goals for other
employees are more directed to achievement of goals tied to areas over which they have more direct influence. For such other
employees, Level A represented 50% of the Annual Opportunity, Level B represented 30% of the Annual Opportunity and Level
C represented 20% of the Annual Opportunity.
Target and maximum payout amounts for each of the NEOs for the fiscal year 2016 Performance Incentive Program are disclosed
below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2016.
1 Mr. Holdsworth’s FAR includes his base salary (as reported in the Summary Compensation Table) and welfare benefit costs, vehicle
allowance costs and retirement plan contribution as described in footnote 3 to the Summary Compensation Table.
21
The table below sets forth the fiscal year 2016 Performance Incentive Program payout weightings and the minimum and
maximum goals for the performance measures applicable to each of the NEOs. The minimum and maximum Level A goals for
Regional and Global EBITDA were based on earnings before deduction of any Incentive Compensation amounts. The minimum
and maximum Level C goals for Global EBITDA were based on earnings after deduction of an estimate of the maximum possible
Incentive Compensation amounts for Levels A and B, but before deduction of Incentive Compensation amounts for Level C.
Level
A
A
A
A
C
Performance Measure
Regional EBITDA (Americas)
Regional EBITDA (EMEA)1
Regional EBITDA (Asia-Pacific)
Global EBITDA
Global EBITDA
Garry O. Ridge
Jay W. Rembolt
N/A
N/A
N/A
50%
50%
Michael L.
Freeman
50%
N/A
N/A
N/A
50%
William B.
Noble
N/A
50%
N/A
N/A
50%
Minimum
Goal
FY 2016
($ thousands)
Maximum
Goal
FY 2016
($ thousands)
$ 51,157 $ 55,174
$ 30,738 $ 36,465
$ 13,600 $ 15,600
$ 77,801 $ 82,815
$ 74,650 $ 80,788
Geoffrey J.
Holdsworth
N/A
N/A
50%
N/A
50%
1
EMEA figures have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 2016
of $1.4499 per GBP.
The following table sets forth the actual fiscal year 2016 performance results and percentage achievement for each of the
performance measures under the Performance Incentive Program formulas applicable to the NEOs:
Level
A
A
A
A
C
Performance Measure
Regional EBITDA (Americas)
Regional EBITDA (EMEA)1
Regional EBITDA (Asia-Pacific)
Global EBITDA
Global EBITDA
Actual
FY 2016
($ thousands)
$ 57,577
$ 38,425
$ 16,821
$ 92,012
$ 81,544
% Achievement
100.0%
100.0%
100.0%
100.0%
100.0%
1
EMEA figures have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 2016
of $1.4499 per GBP.
Achievement of the maximum goals for Regional EBITDA and Global EBITDA is intended to be attainable through the
concerted efforts of all management teams working in their own regions and areas of responsibility and for the Company as a
whole.
22
Based on the Company’s fiscal year 2016 performance and the Committee’s certification of the relative attainment of each of the
performance measures under the Performance Incentive Program, the payouts for our executive officers, including the NEOs,
were calculated. On October 10, 2016, the Committee approved payment of the following Incentive Compensation amounts to
the NEOs for fiscal year 2016 performance:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble1
Geoffrey J. Holdsworth2
Title
President and Chief Executive Officer
Vice President, Finance, Treasurer
and Chief Financial Officer
Division President, the Americas
Managing Director, EMEA
Managing Director, Asia-Pacific
FY 2016
Annual
Opportunity
(As % of
Base Salary2)
150%
100%
FY 2016
Incentive
Compensation
Paid ($)
$ 963,624
$ 308,664
100%
80%
80%
$ 332,585
$ 258,516
$ 221,854
FY 2016
Actual Incentive
Compensation
(As % of
Opportunity)
100%
100%
100%
100%
100%
1 Mr. Noble’s Incentive Compensation amount has been converted from Great Britain pounds sterling (“GBP”) at an average annual
exchange rate for fiscal year 2016 of $1.4499 per GBP.
2 Mr. Holdsworth’s Incentive Compensation amount has been converted from Australian dollars (“AUD”) at an average annual exchange
rate for fiscal year 2016 of $0.7270 per AUD. As noted above, Mr. Holdsworth’ Annual Opportunity is based on his FAR rather than his
base salary.
As an example of the operation of the Performance Incentive Program, Mr. Freeman’s Incentive Compensation payout for fiscal
year 2016 was computed as follows:
Incentive Compensation Annual Opportunity = 100% X Eligible Earnings ($332,585) = $332,585.
(cid:120)
(cid:120) Level A (Regional EBITDA (Americas)) = 50% of Annual Opportunity = $166,293.
— Level A Incentive Compensation = Level A Achievement (100%) X Level A Annual Opportunity = $166,293.
(cid:120) Level C (Global EBITDA) = 50% of Annual Opportunity = $166,293.
— Level C Incentive Compensation = Level C Achievement (100%) X Level C Annual Opportunity = $166,293.
Mr. Freeman’s aggregate Incentive Compensation payout was the sum of the payouts under Levels A and C of the Performance
Incentive Program, or $332,585.
EQUITY COMPENSATION
Equity compensation is a critical component of the Company’s efforts to attract and retain executives and key employees,
encourage employee ownership in the Company, link pay with performance and align the interests of executive officers with
those of stockholders. To provide appropriately directed incentives to our executive officers, the Committee has provided awards
of time-vesting restricted stock unit (“RSU”) awards as well as performance-vesting market share unit (“MSU”) awards and
deferred performance unit (“DPU”) awards. Equity awards are granted pursuant to the Company’s 2007 Stock Incentive Plan
(the “Stock Incentive Plan”) approved by the stockholders at the 2007 Annual Meeting of Stockholders.
The Company’s MSU awards are tied to a measure of total stockholder return (“TSR”) that is determined by reference to a change
in the value of the Company’s common stock with reinvestment of dividends. In October 2015, the Committee granted primary
equity allocations of RSU and MSU awards for fiscal year 2016. The authorized awards were divided equally between the two
types of awards for each NEO. MSU awards provide for vesting after a three year performance vesting period based on a
comparison of the Company’s TSR against the Russell 2000 Index (the “Index”) as described in more detail below. In addition
to the RSU and MSU awards, the NEOs also received DPU awards in October 2015. As compared to the retention and long term
performance-based attributes of the RSU and MSU awards, the DPU awards provide an incentive reward for achieving Global
EBITDA results for the fiscal year in excess of the amount of Global EBITDA required for maximum payout of Incentive
Compensation under Level C of the Performance Incentive Program as described above. DPU awards provide for vesting at the
end of the fiscal year for which they are granted. All RSU, MSU and DPU awards are subject to terms and conditions set forth
in an applicable award agreement (the “Award Agreement”).
The principal attributes and benefits of the RSU, MSU and DPU awards for executive officers are as follows:
(cid:120) RSU awards provide for vesting in relatively equal portions over a period of three years from the grant date.
23
(cid:120) MSU awards provide for performance-based vesting tied to the Company’s TSR over a performance measurement period
of three fiscal years beginning with the fiscal year in which the awards are granted and ending on August 31st of the third
year.
(cid:120) DPU awards provide for performance-based vesting tied to the Company’s Global EBITDA achievement for the current
fiscal year in excess of the maximum goal for Global EBITDA under Level C of the Company’s Performance Incentive
Program.
(cid:120) RSU and MSU awards provide for the issuance of shares of the Company’s common stock upon vesting.
(cid:120) Vested DPU awards provide for the issuance of shares of the Company’s common stock only upon termination of
employment. Until issuance of the shares for vested DPU awards, the holders of the vested DPU awards are entitled to
receive dividend equivalent payments with respect to their vested DPU awards, payable in cash as and when dividends are
declared upon shares of the Company’s common stock.
(cid:120) A mix of RSU, MSU and DPU awards is appropriate as compared to RSU awards alone or other equity awards, such as
stock options, for the following reasons: i) MSU awards granted annually provide a more direct performance-based incentive
aligned directly with longer term stockholder interests; ii) RSU awards have a greater perceived value to recipients than
stock options; iii) DPU awards offer a reward for exceeding the highest goal for near-term financial results for the Company;
iv) RSU, MSU and DPU awards have a lower compensation expense impact on the Company’s reported financial results
than stock options; v) RSU, MSU and DPU awards have less dilutive impact on a share count basis than stock options; and
vi) the issuance of shares of the Company’s common stock upon vesting of RSUs and MSUs, and the deferred issuance of
shares following vesting of DPU awards, encourages long-term stock ownership and facilitates the achievement of the
Company’s stock ownership guidelines (as described below in the Other Compensation Policies section, under the heading,
Executive Officer Stock Ownership Guidelines).
The Board recognizes the potentially dilutive impact of equity awards. The Company’s equity award practices are designed to
balance the impact of dilution and the Company’s need to remain competitive by recruiting, retaining and providing incentives
for high-performing employees.
Restricted Stock Unit Awards
RSU awards provide for the issuance of shares of the Company’s common stock to the award recipient upon vesting provided
that the recipient remains employed with the Company through each vesting date. Shares of the Company’s common stock equal
to the portion of the RSU award that has vested are issued promptly upon the vesting date. RSU awards provide for vesting over
a period of three years from the grant date. 34% of the RSU award will vest on the first vesting date and 33% of the RSU award
will vest on each of the second and third vesting dates. The vesting date each year is the third business day following the
Company’s public release of its annual earnings for the preceding fiscal year, but not later than November 15 of the vesting year.
Payment of required withholding taxes due with respect to the vesting of the RSU awards, if any, will be covered through
withholding of shares by the Company. For RSU award recipients who retire from the Company after reaching age 65, all RSUs
will have a vesting date that is 30 days following the effective date of retirement. The Company will issue a net number of shares
to the recipient for a vested RSU award after withholding shares having a value as of the vesting date equal to the required tax
withholding obligation.
Market Share Unit Awards
MSU awards provide for performance-based vesting over a performance measurement period of three fiscal years commencing
with the fiscal year in which the MSU awards are granted (the “Measurement Period”). The recipient must remain employed
with the Company for vesting purposes until the date on which the Committee certifies achievement of the requisite performance
provided for in the MSU Award Agreement. A number of shares of the Company’s common stock equal to an “Applicable
Percentage” of the “Target Number” of shares covered by the MSU awards to the NEOs will be issued as of the “Settlement
Date”. The Applicable Percentage is determined by reference to the performance vesting provisions of the MSU Award
Agreements as described below. The Settlement Date for an MSU award is the third business day following the Company’s
public release of its annual earnings for the third fiscal year of the Measurement Period. Payment of required withholding taxes
due with respect to the settlement of an MSU award, if any, will be covered through withholding of shares by the Company. The
Company will issue a net number of shares to the recipient for a vested MSU award after withholding shares having a value as
of the Settlement Date equal to the required tax withholding obligation.
24
The performance vesting provisions of MSU awards are based on relative TSR for the Company over the Measurement Period
as compared to the total return (“Return”) for the Index as reported for total return (with dividends reinvested), as published by
Russell Investments. For purposes of computing the relative TSR for the Company as compared to the Return for the Index,
dividends paid with respect to the Shares will be treated as having been reinvested as of the ex-dividend date for each declared
dividend. The Applicable Percentage of the Target Number of shares will be determined based on the absolute percentage point
difference between the TSR for the Company as compared to the Return for the Index as set forth in the table below:
Relative TSR
(absolute percentage point difference)
> 20%
20%
15%
10%
5%
Equal
-5%
-10%
>-10%
Applicable Percentage
200%
200%
175%
150%
125%
100%
75%
50%
0%
The Applicable Percentage will be determined on a straight line sliding scale from the minimum 50% Applicable Percentage
achievement level to the maximum 200% Applicable Percentage achievement level. For purposes of determining the TSR for
the Company and the Return for the Index, the beginning and ending values for each measure will be determined on an average
basis over a period of all market trading days within the ninety (90) calendar days prior to the beginning of the fiscal year for the
beginning of the Measurement Period and over a period of all market trading days within the ninety (90) calendar days prior to
the end of the third fiscal year of the Measurement Period. For purposes of determining relative achievement, actual results are
to be rounded to the nearest tenth of one percent and rounded up from the midpoint. The number of MSU Shares to be issued on
the Settlement Date is to be rounded to the nearest whole share and rounded upward from the midpoint.
In the event of a Change in Control (as defined in the Stock Incentive Plan), the Measurement Period will end as of the effective
date of the Change in Control and the ending values for calculating the TSR for the Company and the Return for the Index will
be determined based on the closing price of the Company’s common stock and the value of the Index, respectively, immediately
prior to the effective date of the Change in Control. The Applicable Percentage will be applied to a proportionate amount of the
Target Number of MSUs based on the portion of the Measurement Period elapsed as of the effective date of the Change in
Control. The recipient NEO will receive RSUs for the portion of the Target Number of MSUs to which the Applicable Percentage
is not applied. Those RSUs will time vest, subject to rights under the NEO’s Change of Control Severance Agreement, as of the
Settlement Date.
Deferred Performance Unit Awards
DPU awards provide for performance-based vesting over a performance measurement period of the fiscal year in which the DPU
awards are granted (the “Measurement Year”). The DPU awards provide for vesting of a number of DPUs equal to an
“Applicable Percentage” of the “Maximum Number” of DPUs” awarded to the NEOs following conclusion of the Measurement
Year (“Vested DPUs”). The recipient must remain employed with the Company for vesting purposes until August 31 of the
Measurement Year. For NEOs who are residents of the United States, the Vested DPUs must be held until termination of
employment. Following termination of employment, each Vested DPU will be settled by issuance of one share of the Company’s
common stock (a “DPU Share”). The Maximum Number of DPUs refers to the maximum number of DPU Shares that may be
issued with respect to a DPU award upon full achievement of the applicable performance goal as described below. The
Applicable Percentage is determined by reference to the performance vesting provisions of the DPU Award Agreement as
described below. For NEOs who are not residents of the United States, the Compensation Committee has discretion to either
defer settlement of each Vested DPU by issuance of a DPU Share following termination of employment or settle each Vested
DPU in cash by immediate payment of an amount equal to the closing price of one share of the Company’s common stock as of
the date of the Compensation Committee’s certification of achievement of the performance measure applied in determination of
the Applicable Percentage.
Each Vested DPU that is not settled in cash will include the right to receive a dividend equivalent payment in an amount equal
to the dividends declared with respect to the Company’s common stock for each Vested DPU. Such dividend equivalent
payments are to be paid in cash as ordinary compensation income as and when common stock dividends are paid by the Company,
provided, however, that the Company may elect to accumulate such dividend equivalent payments for later payment not less
often than annually.
25
The performance vesting provisions of the DPUs are based on relative achievement within an established performance measure
range of the Company’s EBITDA before deduction of the stock-based compensation expense for the Vested DPUs (“Adjusted
Global EBITDA”) for the Measurement Year.
For fiscal year 2016, the performance vesting provisions for the DPUs were established as set forth in the table below:
Adjusted Global EBITDA1
> $80,769,000
$80,769,000
$76,980,000
< $76,980,000
$76,780,000*
* Implied zero percentage achievement level.
Applicable Percentage
100%
100%
5%
0%
0%
1
The calculation of Adjusted Global EBITDA accounts for full payment of all Incentive Compensation earned for the fiscal year. On the
other hand, the maximum goal for Level C under the Performance Incentive Program set forth in the table on page 22 does not account
for payment of any Level C Incentive Compensation. As a result, the minimum amount included in the table above is less than the amount
included in the table on page 22 as the maximum Level C goal for Global EBITDA.
The Applicable Percentage will be determined on a straight line sliding scale from the implied zero percentage achievement level
to the maximum 100% Applicable Percentage achievement level, but the Applicable Percentage shall not be less than 5%. For
purposes of determining the Applicable Percentage, the calculated percentage is to be rounded to the nearest tenth of one percent
and rounded upward from the midpoint. The number of Vested DPUs is to be rounded to the nearest whole unit and rounded
upward from the midpoint.
Equity Awards – Fiscal Year 2016
For fiscal year 2016, equity awards to our executive officers were granted to satisfy goals for executive officer retention, to
provide incentives for current and future performance, and to meet objectives for overall levels of compensation and pay mix.
RSU, MSU and DPU awards were granted to the NEOs by the Committee in October 2015. All of the equity awards are set forth
below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2016. In establishing award levels for the NEOs
for fiscal year 2016, the Committee placed emphasis on long-term retention goals and desired incentives for current and future
contributions. The RSU and MSU awards to our CEO were, consistent with past practice, larger than the awards to the other
NEOs in recognition of his higher level of responsibility for overall Company performance and based upon market data that
supports a higher level of equity compensation for our CEO. The specific RSU award amounts and Target Number of shares
covered by MSU awards were determined for each NEO based on an assessment of the NEO’s achievement of individual
performance goals as well as Company performance for fiscal year 2015 in areas over which the NEO had particular influence.
The DPU award amounts were established by reference to each NEO’s Incentive Compensation opportunity amount based on
fiscal year 2015 base salary amounts and fiscal year 2016 maximum percentage opportunity for Incentive Compensation – the
share equivalent value of the DPUs awarded to each NEO as of the date of grant equals 50% of the NEO’s maximum Incentive
Compensation opportunity amount.
Market Share Unit Award Vesting for Three Fiscal Year Performance Achievement
On October 10, 2016, the Committee certified achievement of the performance measure applicable to MSU awards granted to
the NEOs in October 2013. The Committee certified the Company’s relative TSR as compared to the Return for the Index for
the performance Measurement Period ended August 31, 2016 for purposes of calculating the vested number of shares of the
Company’s common stock for those MSU awards. The relative TSR as compared to the Return for the Index (as an absolute
percentage point difference) over the three fiscal year Measurement Period ending August 31, 2016 was 91.4%. As a result,
based on the table above in the description of the MSU awards, the Applicable Percentage of the Target Number of shares
underlying the MSU awards granted in October 2013 was 200%.
26
For the MSU awards granted to the NEOs in October 2013, the NEOs were thus eligible to receive 200% of the Target Number
of shares of the Company’s common stock underlying the MSU awards. The following table sets forth the Target Number and
vested number of shares underlying the MSU awards granted to each NEO in October 2013:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Geoffrey J. Holdsworth
Target Number
Vested Shares
4,571
1,142
1,142
838
571
9,142
2,284
2,284
1,676
1,142
Deferred Performance Unit Award Vesting for Fiscal Year 2016 Performance Achievement
On October 10, 2016, the Committee certified achievement of the performance measure applicable to DPU awards granted to
the NEOs in October 2015. The Committee certified the calculation of the Company’s Adjusted Global EBITDA (as described
above in the description of the DPU awards) in the amount of $77,549,000. As a result, based on the table above in the description
of the DPU awards, the Applicable Percentage of the Maximum Number of shares underlying the DPU awards granted in October
2015 was 19.3%.
For the DPU awards granted to the NEOs in October 2015, the number of Vested DPUs that each of the NEOs was entitled to
receive as of August 31, 2016 was 19.3% of the Maximum Number of DPU Shares underlying such DPU awards. The following
table sets forth the Maximum Number of shares underlying the DPU awards granted to each NEO and the number of Vested
DPUs each NEO has received:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Geoffrey J. Holdsworth
BENEFITS AND PERQUISITES
Maximum Number
Vested DPUs
5,009
1,604
1,729
1,451
1,285
967
310
334
280
248
As is the case with most Company employees, the NEOs are provided with standard health and welfare benefits, and, for the
NEOs other than Mr. Noble and Mr. Holdsworth, the opportunity to participate in the WD-40 Company Profit Sharing/401(k)
Plan (the “Plan”). The Plan serves to provide our executive officers, including the eligible NEOs, with tax-advantaged retirement
savings as an additional component of overall compensation. Employees have the right to invest the Company’s contributions to
the Plan in a Company Stock Fund invested in shares of the Company’s common stock as an alternative to other investment
choices available under the Plan. For Mr. Noble and Mr. Holdsworth, the Company provides contributions to local retirement
programs for their benefit.
The Company maintains individual Supplemental Death Benefit Plan agreements with each of the NEOs other than Mr. Noble
and Mr. Holdsworth. The Company’s Supplemental Death Benefit Plan agreement obligations are funded by life insurance
policies owned by the Company.
The Company also provides leased vehicles to its executive officers and private health insurance for Mr. Noble in excess of
coverage available to other Company employees in the United Kingdom. The costs associated with the perquisites and other
personal benefits provided to the NEOs are included in the Summary Compensation Table below and they are separately
identified in the footnote disclosure of such perquisites and other personal benefits included with the Summary Compensation
Table.
The Committee considers the cost of the foregoing health and welfare benefits and perquisites in connection with its approval of
the total compensation for each of our NEOs. All such costs are considered appropriate in support of the Committee’s objective
of attracting and retaining high quality executive officers because they are common forms of compensation for senior executives
and are expected by such executives when they consider competing compensation packages.
27
POST-EMPLOYMENT OBLIGATIONS
The Company has change of control severance agreements with each of the NEOs. The specific terms of the agreements are
described in detail below under the heading, Change of Control Severance Agreements. The agreements were entered into with
our executive officers after extensive review by the Committee and the Board of Directors and negotiation with the executive
officers to replace previously existing employment agreements. Consideration was given to possible inclusion of severance
compensation to be paid to the executive officers in the event of their termination of employment without cause (or for good
reason) without regard to the existence of a change of control of the Company. No such provisions were included and severance
compensation is payable only following a termination of employment without “cause” or for “good reason” within two years
following a “change of control” of the Company (as the quoted terms are defined in the severance agreements).
The Committee believes that the change of control severance agreements help ensure the best interests of stockholders by
fostering continuous employment of key management personnel. As is the case in many public companies, the possibility of an
unsolicited change of control exists. The uncertainty among management that can arise from a possible change of control can
result in the untimely departure or distraction of key executive officers. Reasonable change of control severance agreements
reinforce continued attention and dedication of executive officers to their assigned duties and support the Committee’s objective
of retaining high quality executives.
OVERALL REASONABLENESS OF COMPENSATION
The Committee believes that the Company is achieving its compensation objectives and, in particular, rewards executive officers
for driving operational success and stockholder value creation. Based on reviews of tally sheets and a “pay-for-performance”
analysis by the Committee, and in light of the Company’s compensation objectives, the Committee and the Board of Directors
believe that the pay mix and target pay position relative to market for each of the NEOs are reasonable and appropriate. The
“pay-for-performance” analysis includes a review of the individual components of executive officer compensation that are tied
to Company performance, as measured by identified performance metrics as well as the price of the Company’s common stock.
In particular, the Committee reviews executive officer Incentive Compensation to determine whether it appropriately rewards
achievement of specific target levels of Company performance and does not otherwise provide rewards in the absence of
reasonable measures of individual and Company success. Similarly, with respect to equity awards, the Committee considers the
effectiveness of such awards in providing a reasonable incentive to the executive officers to increase profits (as measured by
Regional and Global EBITDA) and total stockholder return without inappropriately rewarding the executive officers if
performance targets are not achieved over the long term.
The following table sets forth the total compensation for each of our NEOs (based on cash compensation received as base salary
and earned Incentive Compensation, the value of Vested DPUs at their date of grant per share value, plus the value of equity
awards other than the DPUs at their date of grant per share values) for fiscal year 2016, together with the relative market percentile
for each NEO:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble3
Geoffrey J. Holdsworth4
Annual
Earned
Incentive
Compensation
Value of Vested
DPU Awards1
Value of
Stock Awards2
Total
Compensation
Base Salary
$ 642,416 $ 963,624 $ 93,006 $ 849,846 $ 2,548,892
$ 308,664 $ 308,664 $ 29,816 $ 174,855 $ 821,999
$ 332,585 $ 332,585 $ 32,124 $ 174,855 $ 872,149
$ 323,145 $ 258,516 $ 26,930 $ 109,838 $ 718,429
$ 205,850 $ 221,854 $ 23,853 $ 99,835 $ 551,392
Present Value of
Total
Compensation
Received as a
Percentage of
Market Median
146%
137%
153%
139%
121%
1
For purposes of comparing total compensation for fiscal year 2016 to market median compensation levels for each NEO, the Committee
included the Value of Vested DPUs based on the closing price of the Company’s common stock on the grant date of $96.18 per share.
The Committee treats the DPUs separately from other stock-based awards and has included their value (based on the number of Vested
DPUs earned by each NEO) as an additional element of short-term incentive compensation because the DPUs are designed as a
supplemental reward for achievement of financial performance for the fiscal year that exceeds the highest level of performance required
under the Company’s Performance Incentive Program.
28
2
For purposes of comparing total compensation for fiscal year 2016 to market median compensation levels for each NEO, the Committee
included the Value of Stock Awards (RSUs and MSUs) based on the closing price of the Company’s common stock on the grant date of
$96.18. MSUs are valued based on the target number of shares of the Company’s common stock to be issued upon achievement of the
applicable performance measure. Information concerning all of the Stock Awards (including the DPUs) for fiscal year 2016 is set forth
below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2016.
3 Mr. Noble’s salary and Incentive Compensation amounts have been converted from Great Britain pounds sterling (“GBP”) at an average
annual exchange rate for fiscal year 2016 of $1.4499 per GBP.
4 Mr. Holdsworth’s salary and Incentive Compensation amounts have been converted from Australian dollars (“AUD”) at an average annual
exchange rate for fiscal year 2016 of $0.7270 per AUD.
For fiscal year 2016, total compensation for our NEOs was assessed by the Committee’s compensation consulting firm. As noted
in the table above, total compensation for the NEOs ranged from 121% to 153% of the market median compensation level for
each position as determined by the Committee’s compensation consulting firm. The levels of compensation are considered by
the Committee to be in line with target compensation levels for the NEOs in a year in which the Company’s performance was
strong. These market position comparisons are based on the blended analysis from the Committee’s compensation consultant
which incorporates peer group proxy analysis and general industry survey data as discussed above under the heading,
Compensation Benchmarking.
OTHER COMPENSATION POLICIES
EXCHANGE ACT RULE 10b5-1 TRADING PLANS AND INSIDER TRADING GUIDELINES
The Company maintains insider trading guidelines, including transaction pre-approval requirements, applicable to our officers
and directors required to report changes in beneficial ownership under Section 16 of the Exchange Act as well as certain other
employees who can be expected to have access to material non-public information concerning the Company. These insider
trading guidelines also require pre-approval of all trading plans adopted pursuant to Rule 10b5-1 promulgated under the Exchange
Act. To avoid the potential for abuse, the Company’s policy with respect to such trading plans is that, once adopted, trading plans
are not subject to change or cancellation. Any such change or cancellation of an approved trading plan by an executive officer,
director or employee covered by the Company’s insider trading guidelines in violation of the policy will result in the Company’s
refusal to approve future trading plan requests for that person.
EXECUTIVE OFFICER STOCK OWNERSHIP GUIDELINES
The Board of Directors has approved guidelines for executive officer ownership of the Company’s common stock. The guidelines
specify that each executive officer will be expected to attain, within a period of five years from the later of the date of election
of the executive officer or the date of adoption of the guidelines, and to maintain thereafter, equity ownership in the Company
valued at not less than one times his or her current base salary for executive officers other than our CEO and CFO, two times the
current base salary for our CFO, and five times the current base salary for our CEO. Valuation for purposes of the guidelines is
to be determined at the higher of cost or current fair market value for shares of the Company’s common stock held outright and
shares underlying vested RSUs, MSUs and DPUs then held. Vested stock options are valued on a net after tax basis assuming a
45% marginal tax rate on the stock option value equal to the current market price for the Company’s common stock less the
option exercise price.
The Board of Directors believes that the stock ownership guidelines serve to improve alignment of the interests of our executive
officers and the Company’s stockholders. At the present time, all of the NEOs have exceeded the expected level of stock
ownership.
As noted above under the heading Equity Compensation, the NEOs receive both time-vesting RSU awards and performance-
based vesting MSU and DPU awards. As the RSU and MSU awards vest, shares of the Company’s common stock are issued to
the NEOs and these shares may then be sold or retained, subject to the stock ownership guidelines described above. Vested DPU
awards provide for deferred issuance of shares to the NEOs upon termination of employment. Outstanding unvested RSU and
MSU awards held as of August 31, 2016 by the NEOs are set forth, together with stock options granted for fiscal years prior to
2009, in the table below under the heading, Outstanding Equity Awards at 2016 Fiscal Year End. All of the NEOs hold Vested
DPUs and each of the NEOs, other than Mr. Rembolt, holds vested RSU awards that must be retained until termination of
employment as noted above in the footnotes to the tables under the heading, Security Ownership of Directors and Executive
Officers.
29
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986 (the “Code”) limits the deductibility of compensation payable in any tax
year to certain covered executive officers (generally limited to the NEOs, but presently excluding the CFO pursuant to current
Treasury Department guidance). Section 162(m) of the Code generally provides that a publicly-held company cannot deduct
compensation paid to its most highly paid executive officers to the extent that such compensation exceeds $1 million per officer
per taxable year. Compensation that is “performance-based” within the meaning of the Code does not count toward the $1 million
limit. Compensation paid in fiscal year 2016 to the NEOs pursuant to the WD-40 Company Performance Incentive Compensation
Plan most recently approved by the stockholders at the Company’s 2012 Annual Meeting of Stockholders is intended to qualify
as “performance-based” compensation. In addition, vested shares under MSU awards and vested DPU awards are intended to
qualify as “performance-based” compensation.
While the Compensation Committee attempts to maximize the deductibility of compensation paid to the NEOs, the Committee
retains the flexibility necessary to provide total compensation in line with competitive practice, the Company’s compensation
philosophy, and the interests of stockholders. Therefore, the Company may from time to time pay compensation to its executive
officers that may not be deductible under Section 162(m).
ACCOUNTING CONSIDERATIONS
We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”) for our
stock-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based
payment awards made to employees and directors, including stock options, restricted stock awards, and performance-based
awards based on the grant date fair value of these awards. Depending upon the type of performance conditions applicable to
performance-based awards, ASC Topic 718 may require the recording of compensation expense over the service period for the
award (usually, the vesting period) based on the grant date value (such as for our MSUs) or compensation expense may be
recorded based on the expected probability of vesting over the vesting period, subject to adjustment as such probability may vary
from period to period (such as for our DPUs). This calculation is performed for accounting purposes and amounts reported in the
compensation tables below are based on the compensation expense expected to be recorded over the vesting periods for the
awards, determined as of the grant date for the awards. In the case of our MSUs, the grant date values fix the compensation
expense to be recorded over the vesting period. These amounts are reported in the tables below even though our executive
officers may realize more or less value from their awards depending upon the actual level of achievement of the applicable
performance measure. In the case of our DPUs, no value is included in the Summary Compensation Table or in the table under
the heading, Grants of Plan-Based Awards – Fiscal Year 2016, because ASC Topic 718 requires that we assess the probability
of vesting of the DPUs as of the grant date. As of the grant date, we did not consider it probable that the DPUs would become
vested even though it was possible that our executive officers would receive Vested DPUs as of the end of the fiscal year.
30
COMPENSATION COMMITTEE REPORT
The Compensation Committee of WD-40 Company’s Board of Directors has reviewed and discussed with management of the
Company the Compensation Discussion and Analysis included in this proxy statement and the Company’s annual report on Form
10-K for the year ended August 31, 2016, and, based upon that review and discussion, recommended to the board that it be so
included.
Compensation Committee
Gregory A. Sandfort, Chair
Peter D. Bewley
Richard A. Collato
Mario L. Crivello
Linda A. Lang
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten
percent of the Company’s stock, to file with the Securities Exchange Commission initial reports of stock ownership and reports
of changes in stock ownership. Reporting persons are required by SEC regulation to furnish the Company with copies of all
Section 16(a) reports they file.
To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company during the last
fiscal year and written representations that no other reports were required, all Section 16(a) requirements were complied with by
all persons required to report with respect to the Company’s equity securities during the last fiscal year.
EXECUTIVE COMPENSATION
None of our executive officers has an employment agreement or other arrangement, whether written or unwritten, providing for
a term of employment or compensation for services rendered other than under specific plans or programs described herein.
For fiscal year 2016, our executive officers received a base salary amount established by the Compensation Committee of the
Board of Directors at the beginning of the fiscal year. In addition, each employee of the Company, including each executive
officer, may receive Incentive Compensation under a Performance Incentive Program established at the beginning of the fiscal
year by the Company and, for our executive officers, by the Committee. A complete description of the Performance Incentive
Program is provided in the Compensation Discussion and Analysis section of this proxy statement under the heading,
Performance Incentive Program. Information regarding the target and maximum potential Incentive Compensation payable
under the Performance Incentive Program for fiscal year 2016 is provided below in the table under the heading, Grants of Plan-
Based Awards - Fiscal Year 2016. The actual payouts under the Performance Incentive Program for fiscal year 2016 and further
details regarding the program are provided in the Compensation Discussion and Analysis section of this proxy statement. Our
executive officers also received equity compensation in the form of RSUs, MSUs and DPUs, and other compensation benefits
for services rendered in fiscal year 2016 as more fully described and reported in the Compensation Discussion and Analysis
section of this proxy statement and in the compensation tables below. As a relative share of reported total compensation for
fiscal year 2016, annual salary and earned Incentive Compensation was 60% of total compensation for our CEO and from 68%
to 74% of total compensation for the other NEOs.
31
SUMMARY COMPENSATION TABLE
The following table shows information for the three fiscal years ended August 31, 2016, August 31, 2015 and August 31, 2014,
concerning the compensation of our CEO, our CFO and the three most highly compensated executive officers other than the
CEO and CFO as of the end of fiscal year 2016 (collectively, the “Named Executive Officers” or “NEOs”):
Name and Principal Position
Garry O. Ridge
President and
Chief Executive Officer
Jay W. Rembolt
Vice President, Finance,
Treasurer and Chief Financial Officer
Michael L. Freeman
Division President,
the Americas
William B. Noble4
Managing Director, EMEA
Geoffrey J. Holdsworth5
Managing Director, Asia-Pacific
Year
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014
Salary
Stock Awards1
Non-Equity
Incentive Plan
Compensation2
$ 642,416 $ 998,645 $ 963,624 $ 99,946 $ 2,704,631
1,689,844
1,828,630
All Other
Compensation3
261,407
470,089
642,416
626,747
686,446
642,682
99,575
89,112
Total
$ 308,664 $ 205,470 $ 308,664 $ 81,601 $ 904,399
627,319
677,349
75,360
135,397
308,664
301,136
158,322
160,565
84,973
80,251
$ 332,585 $ 205,470 $ 332,585 $ 86,122 $ 956,762
677,905
716,947
99,729
146,013
332,585
324,473
158,322
160,565
87,269
85,896
$ 323,145 $ 129,069 $ 258,516 $ 81,792 $ 792,522
586,950
743,479
121,861
125,675
-
141,426
348,976
358,555
116,113
117,823
$ 205,850 $ 117,315 $ 221,854 $ 78,010 $ 623,029
465,448
535,339
69,332
113,483
231,107
251,976
85,920
89,597
79,089
80,283
1
Stock Awards other than DPUs for fiscal years 2016, 2015 and 2014 are reported at their grant date fair values. Grant date fair value
assumptions and related information is set forth in Note 13, Stock-based Compensation, to the Company’s financial statements included
in the Company’s annual report on Form 10-K filed on October 24, 2016. Stock Awards consisting of MSUs awarded in fiscal years
2016, 2015 and 2014 are included based on the value of 100% of the target number of shares of the Company’s common stock to be issued
upon achievement of the applicable performance measure. Stock Awards consisting of DPUs awarded in fiscal years 2016 and 2015 are
reported as having no value under applicable disclosure rules and ASC Topic 718 due to the lack of any expected probability of vesting
of the DPUs as of the grant date, as discussed above in the Compensation Discussion and Analysis section under the heading, Accounting
Considerations. For achievement of the highest level of the applicable performance measure for the MSUs, NEOs will receive 200% of
the target number of shares. For achievement of the highest level of the applicable performance measure for the DPUs, NEOs would
receive Vested DPUs covering the maximum number of shares reported for purposes of the table under the heading, Grants of Plan-Based
Awards – Fiscal Year 2016 and as described above in the Compensation Discussion and Analysis section under the heading, Equity
Compensation.
32
SUMMARY COMPENSATION TABLE (continued)
The following table sets forth the amounts that would have been included for the Stock Awards for fiscal years 2016, 2015 and 2014 for
each of the NEOs if the grant date fair values for the MSUs had been based on the maximum number of shares to be received and if the
value of the DPUs were included at their grant date fair values based on the maximum number of shares covered by the DPUs:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Geoffrey J. Holdsworth
Year
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014
RSUs
MSUs
(Maximum)
DPUs
(Maximum)
$ 409,637
$ 1,178,016
$ 473,551
309,963
287,744
752,965
709,876
316,339
-
$ 84,282
$ 242,376
$ 151,642
71,490
71,889
173,664
177,353
91,145
-
$ 84,282
$ 242,376
$ 163,460
71,490
71,889
173,664
177,353
98,283
-
$ 52,943
$ 152,251
$ 137,178
52,431
52,752
127,364
130,141
108,577
-
$ 48,122
$ 138,386
$ 121,484
35,713
35,944
86,753
88,676
76,718
-
Total Stock
Awards
$ 2,061,204
1,379,267
997,620
$ 478,300
336,299
249,242
$ 490,118
343,437
249,242
$ 342,372
288,372
182,893
$ 307,992
199,184
124,620
2 Amounts reported as Non-Equity Incentive Plan Compensation represent Incentive Compensation payouts under the Company’s
Performance Incentive Program as described in the narrative preceding the Summary Compensation Table and in the Compensation
Discussion and Analysis section of this proxy statement. Threshold, target and maximum payouts for each of the NEOs for fiscal year
2016 are set forth below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2016.
3 All Other Compensation for each of the NEOs includes the following items: (i) perquisites and benefits described below; (ii) employer
profit sharing and matching contributions to the Company’s 401(k) Profit Sharing Plan for each NEO other than Messrs. Noble and
Holdsworth, a U.K. employer retirement benefit contribution for Mr. Noble, and an Australia employer retirement plan contribution for
Mr. Holdsworth; (iii) dividend equivalent amounts paid to each NEO other than Mr. Rembolt with respect to RSUs held by those NEOs
that are vested and that will not be settled in shares until termination of employment; and (iv) a taxable payment in the amount of $6,634
made to Mr. Noble in lieu of a retirement plan contribution under the U.K. retirement benefit program that would, if contributed to the
retirement plan, result in adverse tax consequences to Mr. Noble. Perquisites and benefits received by each of the NEOs include group
medical, dental, vision, wellness and other insurance benefits (“welfare benefit costs”) and vehicle allowance costs which include lease or
depreciation expense, fuel, maintenance and insurance costs for each NEO other than Mr. Noble, and a cash allowance and fuel for
Mr. Noble. For fiscal year 2016, the total employer 401(k) profit sharing and matching contributions for each NEO other than Messrs.
Noble and Holdsworth was $44,167. Mr. Noble’s and Mr. Holdsworth’s employer retirement benefit contributions were $40,922 and
$30,877, respectively. Dividend equivalent payments received by the NEOs in fiscal year 2016 were as follows: for Mr. Ridge - $9,650;
and for each of Messrs. Freeman, Noble and Holdsworth - $6,512. For fiscal year 2016, the welfare benefit costs for each NEO were as
follows: Mr. Ridge - $27,074; Mr. Rembolt - $25,506; Mr. Freeman - $23,605; Mr. Noble - $10,095; and Mr. Holdsworth - $8,184. For
fiscal year 2016, the vehicle allowance costs for each NEO were as follows: Mr. Ridge - $19,055; Mr. Rembolt - $11,928; Mr. Freeman -
$11,838; Mr. Noble - $17,629; and Mr. Holdsworth - $32,437.
4 Mr. Noble’s Salary, Non-Equity Incentive Plan Compensation and All Other Compensation for each fiscal year have been converted from
Great Britain pounds sterling (“GBP”) at average annual exchange rates for the year as follows: for fiscal year 2016 at $1.4499 per GBP,
for fiscal year 2015 at $1.5658 per GBP, and for fiscal year 2014 at $1.6490 per GBP.
5 Mr. Holdsworth’s Salary, Non-Equity Incentive Plan Compensation and All Other Compensation for each fiscal year have been converted
from Australian dollars (“AUD”) at average annual exchange rates for the year as follows: for fiscal year 2016 at 0.7270, for fiscal year
2015 at $0.8162 per AUD, and for fiscal year 2014 at $0.9166 per AUD.
33
GRANTS OF PLAN-BASED AWARDS - FISCAL YEAR 2016
In December 2007, the Company’s stockholders approved the WD-40 Company 2007 Stock Incentive Plan to authorize the
issuance of stock-based compensation awards to employees, directors and consultants. In addition to base salary and the
Performance Incentive Compensation, for fiscal year 2016 the executive officers were granted RSU, MSU and DPU awards
under the Stock Incentive Plan. Descriptions of the RSU, MSU and DPU awards are provided above in the Compensation
Discussion and Analysis section under the heading, Equity Compensation.
Information concerning the grant of RSU, MSU and DPU awards to the NEOs is provided in the following Grants of Plan-Based
Awards table. The table also contains information with respect to Performance Incentive Program opportunity awards for fiscal
year 2016 as described above in the Compensation Discussion and Analysis section under the heading, Performance Incentive
Program. The table provides threshold, target and maximum payout information relating to the Company’s fiscal year 2016
Performance Incentive Program.
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards1
Estimated Future Payouts Under
Equity Incentive Plan Awards2
Name
Garry O. Ridge
Grant Date
10/12/2015
10/12/2015 (MSU)
10/12/2015 (RSU)
10/12/2015 (DPU)
Threshold
($)
Target
($)
$ 1 $ 481,812 $ 963,624
Maximum
($)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units3
(#)
Grant Date
Fair Value of
Stock and
Options
Awards4
($)
Threshold
(#)
Target
(#)
Maximum
(#)
2,209
4,418
8,836
$ 589,008
250
5,009
$ -
4,418
$ 409,637
Jay W. Rembolt
10/12/2015
$ 1 $ 154,332 $ 308,664
10/12/2015 (MSU)
10/12/2015 (RSU)
10/12/2015 (DPU)
454
909
1,818
$ 121,188
80
1,604
$ -
909
$ 84,282
Michael L.
10/12/2015
$ 1 $ 166,293 $ 332,585
Freeman
10/12/2015 (MSU)
454
909
1,818
$ 121,188
10/12/2015 (RSU)
10/12/2015 (DPU)
86
1,729
$ -
909
$ 84,282
William B. Noble5
10/12/2015
$ 1 $ 129,258 $ 258,516
10/12/2015 (MSU)
10/12/2015 (RSU)
10/12/2015 (DPU)
285
571
1,142
$ 76,126
72
1,451
$ -
571
$ 52,943
Geoffrey J.
10/12/2015
$ 1 $ 110,927 $ 221,854
Holdsworth6
10/12/2015 (MSU)
10/12/2015 (RSU)
10/12/2015 (DPU)
259
519
1,038
$ 69,193
64
1,285
$ -
519
$ 48,122
1
The Estimated Future Payouts Under Non-Equity Incentive Plan Awards represent Threshold, Target and Maximum payouts under the
WD-40 Company Performance Incentive Plan for Incentive Compensation payable for fiscal year 2016 performance. The Target amount
represents fifty percent of the Maximum payout for each NEO. The Maximum amount represents the Incentive Compensation opportunity
for each NEO that assumes full achievement of the performance measures for Level A of the Performance Incentive Program (as more
fully discussed above in the Compensation Discussion and Analysis section under the heading, Performance Incentive Program) and
attainment by the Company of a level of Global EBITDA sufficient to maximize such payouts under Level C of the Performance Incentive
Program.
34
GRANTS OF PLAN-BASED AWARDS - FISCAL YEAR 2016 (Continued)
2
The Estimated Future Payouts Under Equity Incentive Plan Awards represent the Threshold, Target and Maximum number of shares to
be issued upon performance vesting of MSU and DPU awards as described in the Compensation Discussion and Analysis section under
the heading, Equity Compensation. There is no applicable Target number of shares for DPU awards to be earned by the NEOs.
3 All Other Stock Awards represent RSUs described in the Compensation Discussion and Analysis section under the heading, Equity
Compensation.
4
5
6
Information relating to the amounts disclosed as the Grant Date Fair Value of Stock Awards is included in footnote 1 to the Summary
Compensation Table above.
The Target and Maximum amounts for Mr. Noble’s Estimated Future Payouts Under Non-Equity Incentive Plan Awards have been
converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 2016 of $1.4499 per GBP.
The Target and Maximum amounts for Mr. Holdsworth’s Estimated Future Payouts Under Non-Equity Incentive Plan Awards have been
converted from Australian dollars (“AUD”) at an average annual exchange rate for fiscal year 2016 of $0.7270 per AUD.
35
OUTSTANDING EQUITY AWARDS AT 2016 FISCAL YEAR END
The following table provides detailed information concerning the unexercised stock options and RSU and MSU awards that were
not vested as of the end of the last fiscal year for each of the NEOs:
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
That
Have Not
Vested
(#)1
Market Value of
Shares or Units
of Stock That
Have Not Vested
($)2
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
(#)3
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
($)4
$ 36.03
10/16/17
-
-
6,160
6,160
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,070 $ 1,073,435
27,508 $ 3,255,572
9,070 $ 1,073,435
27,508 $ 3,255,572
2,009 $ 237,765
6,300 $ 745,605
2,009 $ 237,765
6,300 $ 745,605
2,009 $ 237,765
6,300 $ 745,605
2,009 $ 237,765
6,300 $ 745,605
1,377 $ 162,968
4,430 $ 524,291
1,377 $ 162,968
4,430 $ 524,291
1,069 $ 126,516
3,278 $ 387,951
1,069 $ 126,516
3,278 $ 387,951
Name
Garry O. Ridge
Total
Jay W. Rembolt
Total
Michael L. Freeman
Total
William B. Noble
Total
Geoffrey J.
Holdsworth
Total
1 Represents RSU awards to the NEOs that were not vested as of the fiscal year end.
2
The Market Value of the RSU awards that were not vested as of the fiscal year end was $118.35 per unit, determined by reference to the
closing price for the Company’s common stock as of August 31, 2016.
3 Represents the maximum number of shares to be issued with respect to MSU awards granted to the NEOs that were not vested as of the
fiscal year end. The maximum number of shares to be issued with respect to MSU awards equals the number of shares to be issued with
respect to the MSU awards upon achievement of the highest level of achievement for such MSU awards as described above in the
Compensation Discussion and Analysis section under the heading, Equity Compensation.
4
The Market Value of the maximum number of shares to be issued with respect to unvested MSU awards at fiscal year end was $118.35
per share, determined by reference to the closing price for the Company’s common stock as of August 31, 2016.
36
OPTION EXERCISES AND STOCK VESTED - FISCAL YEAR 2016
The following table sets forth the number of shares of the Company’s common stock acquired on exercise of stock options in the
Company’s last fiscal year and the aggregate dollar value realized on exercise of such stock options for the NEOs. The table also
sets forth the number of shares of the Company’s common stock acquired (or subject to deferred settlement in the case of DPU
awards) upon the vesting of RSU, MSU and DPU awards in the Company’s last fiscal year and the aggregate dollar value realized
with respect to such vested RSU, MSU and DPU awards.
Option Awards
Stock Awards
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Geoffrey J. Holdsworth
Number of Shares
Acquired on Exercise
(#)
-
5,000
-
-
-
Value Realized
on Exercise1
($)
$ -
$ 354,070
$ -
$ -
$ -
Number of Shares
Acquired on Vesting2
(#)
18,945
4,153
4,796
3,430
2,477
Value Realized
on Vesting3
($)
$ 1,786,038
$ 394,011
$ 454,406
$ 326,025
$ 236,603
1
2
3
The Value Realized on Exercise is calculated by subtracting the aggregate exercise price for the shares of the Company’s common stock
acquired upon exercise of the stock options from the fair market value price of such shares as of the date of exercise. The fair market value
price of each share at exercise is determined by the actual trade price for the share if sold in a cashless exercise transaction, otherwise by
the closing price as of the date of exercise.
The Number of Shares Acquired on Vesting for each NEO includes shares of the Company’s common stock issued upon vesting of RSU
and MSU awards on October 20, 2015 and upon vesting of DPU awards on August 31, 2016.
The Value Realized on Vesting for shares of the Company’s common stock issued on October 20, 2015 is calculated based on the number
of vested RSU and MSU awards multiplied by the closing price of $92.98 for the Company’s common stock as of that date. The Value
Realized on Vesting for the Vested DPUs as of August 31, 2016 is calculated based on the number of Vested DPUs multiplied by the
closing price of $118.35 for the Company’s common stock as of that date. The Value Realized on Vesting attributable to the Vested DPUs
for each of the NEOs is deferred pending settlement of the Vested DPUs. Settlement of the DPUs is deferred until termination of
employment as described in the Compensation Discussion and Analysis section under the heading, Equity Compensation. Amounts
deferred for each of the NEOs is set forth in the table below under the heading, Nonqualified Deferred Compensation – Fiscal Year 2016.
37
NONQUALIFIED DEFERRED COMPENSATION – FISCAL YEAR 2016
The following table provides information concerning compensation received by the NEOs that is subject to deferral under
applicable RSU and DPU award agreements:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Geoffrey J. Holdsworth
Registrant
Contributions
in last FY1
($)
Aggregate
Earnings
in last FY2
($)
$ 114,444
$ 36,689
$ 39,529
$ 33,138
$ 29,351
$ 203,645
$ -
$ 137,436
$ 137,436
$ 137,436
Aggregate
Balance
at last FYE3
($)
$ 810,816
$ 36,689
$ 509,497
$ 503,106
$ 499,319
1 Registrant Contributions in last FY represents the value, as of the vesting date on August 31, 2016, of the Vested DPUs earned by the
NEOs as described in the Compensation Discussion and Analysis section under the heading, Equity Compensation. The Vested DPUs
entitle each NEO to receive one share of the Company’s common stock for each Vested DPU following termination of employment. The
value for each Vested DPU is based on the closing price of the Company’s common stock on the August 31, 2016 vesting date in the
amount of $118.35 per share.
2
3
The Aggregate Earnings in last FY represents the increase in value from August 31, 2015 to August 31, 2016 of the shares underlying
deferred settlement RSUs held by each NEO that will be settled in shares of the Company’s common stock following termination of
employment as disclosed in footnotes to the table under the heading, Security Ownership of Directors and Executive Officers. The number
of such deferred settlement RSUs for each NEO was multiplied by the difference in the closing price of the Company’s common stock on
August 31, 2016 of $118.35 and on August 31, 2015 of $83.74, or $34.61.
The Aggregate Balance at last FYE represents the value as of August 31, 2016 of the Vested DPUs and RSUs held by each NEO that will
be settled in shares of the Company’s common stock following termination of employment as noted in the footnotes above. The value for
each Vested DPU and each deferred settlement RSU is based on the closing price of the Company’s common stock as of August 31, 2016
in the amount of $118.35 per share.
SUPPLEMENTAL DEATH BENEFIT PLANS AND SUPPLEMENTAL INSURANCE BENEFITS
The Company maintains Supplemental Death Benefit Plans for the NEOs other than Mr. Noble and Mr. Holdsworth. Under the
death benefit plan agreements, the NEO’s designated beneficiary or estate, as applicable, will receive a death benefit equal to the
NEO’s then current base salary in the event of his death prior to retirement from the Company. All of the NEOs are also eligible
to receive life insurance benefits offered to all employees of the Company and, in the case of Messrs. Noble and Holdsworth, to
all employees of the Company’s U.K. and Australian subsidiaries, respectively.
The death benefits under the Supplemental Death Benefit Plans are not formally funded but the Company has purchased key man
life insurance policies owned by the Company to cover its benefit obligations. The Board of Directors has determined which key
employees participate in the plans and the amount of the benefit payable for each participant. Non-employee directors do not
have death benefit plan agreements.
Based upon their fiscal year 2016 base salaries, the supplemental death benefit to be provided to the NEOs other than Mr. Noble
and Mr. Holdsworth as of the end of fiscal year 2016 would have been as set forth in the following table:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Geoffrey J. Holdsworth
Death Benefit
$ 642,416
$ 308,664
$ 332,585
$ -
$ -
38
CHANGE OF CONTROL SEVERANCE AGREEMENTS
Each executive officer serves at the discretion of the Board of Directors. On February 14, 2006, the Company entered into Change
of Control Severance Agreements (“Severance Agreements”) with each of the executive officers identified in the Summary
Compensation Table above, with the exception of Mr. Rembolt. On October 16, 2008, the Company entered into a Severance
Agreement with Mr. Rembolt. The Severance Agreements provide that each executive officer will receive certain severance
benefits if his employment is terminated without “Cause” or if he resigns for “Good Reason”, as those terms are defined in the
Severance Agreements, within two years after a “Change of Control” as defined in the Severance Agreements and summarized
below. If the executive officer’s employment is terminated during the aforementioned two-year period by the Company without
“Cause” or by the executive officer for “Good Reason”, the executive officer will be entitled to a lump sum payment (subject to
limits provided by reference to Section 280G of the Internal Revenue Code which limits the deductibility of certain payments to
executives upon a change in control) of twice the executive officer’s salary, calculated based on the greater of the executive
officer’s then current annual salary or a five-year average, plus twice the executive officer’s earned Incentive Compensation,
calculated based on the greater of the most recent annual earned Incentive Compensation or a five-year average. Further, any of
the executive officer’s outstanding stock options and other equity incentive awards that are not then fully vested (with the
exception of DPU awards), will be accelerated and vested in full following such termination of employment within such two-
year period and the executive officer will be entitled to continuation of health and welfare benefits under the Company’s then
existing benefit plans or equivalent benefits for a period of up to two years from the date of termination of employment. No
employment rights or benefits other than the change of control severance benefits described in this paragraph are provided by
the Severance Agreements.
For purposes of the Severance Agreements and subject to the express provisions and limitations contained therein, a “Change of
Control” means a transaction or series of transactions by which a person or persons acting together acquire more than 30% of the
Company’s outstanding shares; a change in a majority of the incumbent members of the Company’s Board of Directors as
specified in the Severance Agreements, a reorganization, merger or consolidation as specified in the Severance Agreements or a
sale of substantially all of the assets or complete liquidation of the Company. As specified more particularly in the Severance
Agreements, a “Change of Control” does not include a reorganization, merger or consolidation or a sale or liquidation where a
majority of the incumbent members of the Company’s Board of Directors continue in office and more than 60% of the successor
company’s shares are owned by the Company’s pre-transaction stockholders.
The Severance Agreements have a term of two years, subject to automatic renewal for successive two year periods unless notice
of non-renewal is provided by the Company’s Board of Directors not less than six months prior to the end of the current term.
The term of the Severance Agreements will be automatically extended for a term of two years following any “Change of Control.”
The following table sets forth the estimated amounts payable to each of the NEOs pursuant to their respective Severance
Agreements on the assumption that the employment of each NEO was terminated without “Cause” or otherwise for “Good
Reason” effective as of the end of fiscal year 2016 following a “Change of Control” as provided for in the Severance
Agreements. The table also includes the value, as of the end of the fiscal year, of all RSU and MSU awards that were not
vested as of the end of fiscal year 2016.
Severance Pay1
Executive Officer
$ 1,807,645 $ 48,232 $ 2,701,221 $ 4,557,098
Garry O. Ridge
$ 768,049 $ 47,832 $ 610,568 $ 1,426,449
Jay W. Rembolt
$ 864,628 $ 43,832 $ 610,568 $ 1,519,028
Michael L. Freeman
William B. Noble
$ 784,954 $ 11,520 $ 425,113 $ 1,221,587
Geoffrey J. Holdsworth $ 611,557 $ 16,368 $ 320,492 $ 948,417
Welfare Benefits2
Accelerated Vesting of
RSUs and MSUs3
Total Change of
Control Severance
Benefits
1
2
3
For each NEO other than Mr. Noble and Mr. Holdsworth, Severance Pay includes two times the reported Salary for fiscal year 2016 plus
two times the reported Non-Equity Incentive Plan Compensation for fiscal year 2015. For Mr. Noble and Mr. Holdsworth, Severance Pay
includes two times the reported Salary for fiscal year 2016 plus two times the average of the Non-Equity Incentive Plan Compensation
amounts paid to each of them with respect to the five fiscal years ended August 31, 2015.
For each NEO, Welfare Benefits includes an estimate of the Company’s cost to provide two years of continuation coverage under the
Company’s welfare benefit plans, which does not include life insurance or long-term disability insurance.
The value included for accelerated vesting of RSU and MSU awards equals the value of the RSU and MSU awards that were not vested
at $118.35 for each RSU and MSU based on the closing price for the Company’s common stock as of August 31, 2016. MSUs are valued
for this purpose based upon the Target Number of shares of the Company’s common stock to be issued with respect to the MSUs as
described above in the Compensation Discussion and Analysis section under the heading, Equity Compensation, in the event of the
acceleration of vesting thereof pursuant to the NEOs’ Severance Agreements and MSU Award Agreements.
39
ITEM NO. 3
APPROVAL OF THE WD-40 COMPANY 2016 STOCK INCENTIVE PLAN
The Board of Directors has adopted the 2016 Stock Incentive Plan (the “2016 Plan”), subject to stockholder approval at the
Annual Meeting. If stockholders approve the 2016 Plan, the 2016 Plan will become effective on December 13, 2016 and will
terminate on December 12, 2026. If the 2016 Plan is approved, the Company’s 2007 Stock Incentive Plan (the “2007 Plan”) will
terminate on December 13, 2016, though such termination will not impact awards previously granted under the 2007 Plan.
2016 PLAN SUMMARY
The following is a summary of the principal features of the 2016 Plan. This summary does not purport to be complete and is
subject to, and qualified in its entirety by, the provisions of the 2016 Plan, a copy of which is attached to this proxy statement as
Appendix A. Capitalized terms used but not defined herein shall have the meanings set forth in the 2016 Plan.
The purposes of the 2016 Plan are to attract and retain the best caliber personnel available for positions of substantial
responsibility, to provide additional incentive to employees, directors or consultants of the Company or its subsidiaries
(collectively, the “Participants”) and to optimize the profitability and growth of the Company through incentives that are
consistent with the Company’s goals and that link the goals of the Participants in the 2016 Plan to those of the Company’s
stockholders. The 2016 Plan permits the grant of the following types of incentive awards: (1) Options (qualified and non-
qualified), (2) Stock Appreciation Rights, (3) Restricted Stock, (4) Restricted Stock Units, (5) Performance Shares, (6)
Performance Units and (7) Other Stock-Based Awards.
The number of shares of the Company’s common stock (“Shares”) initially reserved for issuance under the 2016 Plan is 1,000,000
Shares.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information regarding shares of the Company’s common stock authorized for issuance under the
2007 Plan as of August 31, 2016:
Securities to be issued upon
Exercise of Outstanding Options,
Warrants & Rights
(#)
Weighted Average Exercise Price of
Outstanding Options, Warrants &
Rights
($)
Securities Remaining Available for
Future Issuance Under Equity
Compensation Plans
(#)
Equity Compensation Plans
Approved by Security Holders
Equity Compensation Plans
Not Approved Security
Total
229,878 $ 35.59
1,696,909
n/a
n/a
229,878 $ 35.59
n/a
1,696,909
If the 2016 Plan is approved by the stockholders at the Annual Meeting, none of the Shares remaining available under the 2007
Plan on that date will be available for issuance under the 2016 Plan, and any shares reserved for issuance under outstanding share
awards under the 2007 Plan that are subsequently cancelled or forfeited will not be available for issuance under the 2016 Plan.
If the 2016 Plan is not approved by the stockholders at the Annual Meeting, Shares remaining available for future issuance under
the 2007 Plan as of the date of the Annual Meeting will continue to be available for future Awards until expiration of the 2007
Plan on December 10, 2017.
For purposes of determining the number of Shares available for Awards under the 2016 Plan, Awards of Options and Stock
Appreciation Rights (“SARs”) are counted as one (1) Share used for each Option or SAR awarded. Awards of Restricted Stock,
Restricted Stock Units (“RSUs”), Performance Shares, Performance Units providing for a share-based award, and Other Stock-
Based Awards (referred to as “Full Value Stock Awards”) are counted as three (3) Shares used for each Share to be issued with
respect to a Full Value Stock Award.
The 2016 Plan will be administered by the Board or by the Committee. Subject to the provisions of the 2016 Plan and the
authority of the Board, the Committee has the authority to: (1) select the persons to whom Awards are to be granted, (2) determine
whether and to what extent Awards are to be granted, (3) determine the size and type of Awards, (4) approve forms of agreement
for use under the 2016 Plan, (5) determine the terms and conditions applicable to Awards, (6) establish Performance Measures
for any Performance Period and determine whether such measures were satisfied, (7) amend any outstanding Award in the event
40
of termination of employment or a Change in Control, (8) construe and interpret the 2016 Plan and any Award Agreement and
apply its provisions and (9) subject to certain limitations, take any other actions deemed necessary or advisable for the
administration of the 2016 Plan. Subject to the power of the Board to administer the 2016 Plan, all decisions, interpretations and
other actions of the Committee shall be final and binding on all holders of Awards or rights and on all persons deriving their
rights therefrom.
The 2016 Plan provides that Awards may be granted to Participants as identified by the Board or the Committee, except that
Incentive Stock Options may be granted only to Employees. The Company has 445 total employees eligible to participate in the
2016 Plan, 44 of which are presently identified as prospective participants, having been awarded RSUs and Performance Unit
Awards designated as market share units (“MSUs”) and/or deferred performance unit awards (“DPUs”) under the 2007 Plan on
October 10 and 11, 2016. Upon the election of the nominees for election as directors at the Annual Meeting, 9 non-employee
directors will be eligible to participate in the 2016 Plan. No consultants have been identified as prospective participants.
The Company has designed the 2016 Plan so that it permits the issuance of Awards that are intended to qualify as performance-
based under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). See the discussion below relating
to the Federal Tax Aspects of the 2016 Plan for more information relating to Code Section 162(m).
The 2016 Plan prohibits repricing of Options or SARs, including by way of an exchange for another Award, unless stockholder
approval is obtained.
Terms and Conditions of Option and SAR Awards
Each Option granted under the 2016 Plan will be evidenced by an Award Agreement between the Participant and the Company
and will be subject to the following terms and conditions:
(cid:120) Exercise Price. The Committee sets the Exercise Price for the Shares subject to each Option, provided that the Exercise
Price cannot be less than 100% of the Fair Market Value of the Company’s common stock on the Option grant date. In
addition, the Exercise Price of an Incentive Stock Option must be at least 110% of Fair Market Value if, on the grant date,
the Participant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the
Company or any of its subsidiaries (a “10% Stockholder”).
Form of Consideration. The means of payment for Shares issued upon exercise of an option is specified in each option
agreement. Payment generally may be made by cash, other shares of common stock owned by the Participant, any other
method permitted by the Committee, or by a combination of the foregoing.
(cid:120)
(cid:120) Exercise of the Option. Each Award Agreement will specify the term of the Option and the date when the Option is to
become exercisable, provided that, except for Options granted to a non-employee director or a consultant, or as specified in
an Award Agreement upon a termination of employment or a Change in Control or Subsidiary Disposition, no Option may
be exercisable prior to one (1) year from the date of grant. The 2016 Plan provides that in no event shall an Option granted
under the 2016 Plan be exercised more than ten (10) years after the date of grant. Moreover, in the case of an Incentive
Stock Option granted to a 10% Stockholder, the term of the Option shall be for no more than five (5) years from the date of
grant.
(cid:120) Termination of Employment. If an option holder’s employment terminates for any reason (including death or permanent
disability), all Options held by such option holder under the 2016 Plan will expire upon the earlier of (i) such period of time
as is set forth in his or her Award Agreement or (ii) the expiration date of the Option. The option holder may exercise all or
part of his or her Option at any time before such expiration to the extent that such Option was exercisable at the time of
termination of employment.
SAR grants may be either freestanding or tandem with Option grants. Each SAR grant shall be evidenced by an Award
Agreement that will specify the Exercise Price, the term of the SAR, the conditions of exercise, and such other terms and
conditions as the Committee shall determine.
The Exercise Price of SARs may not be less than 100% of the Fair Market Value of the Company’s common stock on the grant
date of the Award. The Committee, subject to the provisions of the 2016 Plan, shall have the discretion to determine the terms
and conditions of SARs granted under the 2016 Plan. Each Award Agreement will specify the term of the SAR and the date
when the SAR is to become exercisable, provided that except for Awards to non-employee directors or consultants or as specified
in an Award Agreement upon a termination of employment or a Change in Control or Subsidiary Disposition, no SAR may be
exercisable prior to one (1) year from the date of grant.
Upon exercise of a SAR, the holder of the SAR will be entitled to receive payment in an amount equal to the product of (i) the
difference between the Fair Market Value of a share on the date of exercise and the Exercise Price and (ii) the number of Shares
for which the SAR is exercised. At the discretion of the Committee, payment to the holder of a SAR may be in cash, shares of
common stock or a combination thereof.
41
SARs granted under the 2016 Plan will expire as determined by the Committee, but in no event later than ten (10) years from the
date of grant. No SAR may be exercised by any person after its expiration.
In order that Option and SAR Awards may qualify as performance-based compensation under Section 162(m) of the Code, no
Participant may be granted Options and SARs with respect to more than 75,000 Shares in any one calendar year period, provided
that such limit is increased to 150,000 Shares for a Participant during the year following his or her date of hire.
Terms and Conditions of Full Value Stock Awards
Each Restricted Stock or RSU grant will be evidenced by an Award Agreement that will specify the purchase price (if any) and
such other terms and conditions as the Committee shall determine.
The Committee will have the discretion to determine (i) the number of Shares subject to a Restricted Stock or RSU Award granted
to any Participant and (ii) the conditions for vesting that must be satisfied, provided that there shall be a minimum vesting period
of one (1) year for Participants other than non-employee directors and consultants or as specified in an Award Agreement upon
a termination of employment or a Change in Control or Subsidiary Disposition.
Each Performance Share grant will be evidenced by an Award Agreement that shall specify such other terms and conditions as
the Committee, in its sole discretion, shall determine.
The Committee will have complete discretion to determine (i) the number of Shares subject to a Performance Share Award and
(ii) the conditions that must be satisfied for grant or for vesting, provided that there shall be a minimum vesting period of one (1)
year for Participants other than non-employee directors and consultants or as specified in an Award Agreement upon a
termination of employment or a Change in Control or Subsidiary Disposition.
The Committee may also grant Other Stock-Based Awards that may include, without limitation, grants of Shares based on
attainment of performance goals, payment of shares as a bonus in lieu of cash based on attainment of performance goals, and the
payment of Shares in lieu of cash under other Company incentive, bonus or compensation programs. The Committee will have
the discretion to determine the conditions for vesting of any such Award, provided that, except for Awards to directors and
consultants or as specified in an Award Agreement upon a termination of employment or a Change in Control or Subsidiary
Disposition, there shall be a minimum vesting period of one (1) year, provided that an Award for payment of Shares in lieu of
cash under other Company incentive, bonus or compensation programs shall not be subject to a minimum vesting period.
In order that Full Value Stock Awards subject to vesting upon attainment of specified performance goals may qualify as
performance-based compensation under Section 162(m) of the Code, no Participant may be granted Awards of Restricted Stock,
RSUs, Performance Shares, Performance Units or Other Stock-Based Awards with respect to more than 37,500 Shares in any
one calendar year period, provided that such limit is increased to 75,000 Shares for a Participant during the year following his or
her date of hire.
Terms and Conditions of Performance Unit Awards
Performance Units are similar to Performance Shares, except that they may include cash-valued unit awards that may be settled
in Shares, cash or a combination of the two. The Shares available for issuance under the 2016 Plan will not be diminished as a
result of the settlement of a Performance Unit in cash. Each Performance Unit grant will be evidenced by an Award Agreement
that will specify such terms and conditions as may be determined at the discretion of the Committee, provided that there shall be
a minimum vesting period of one (1) year for Participants other than non-employee directors and consultants or as specified in
an Award Agreement upon a termination of employment or a Change in Control or Subsidiary Disposition.
In order to qualify as performance-based compensation under Section 162(m) of the Code, no Participant shall be granted a
Performance Unit Award that is a cash value award (rather than a share-based award) that provides for a cash payment value of
more than $2,500,000 in any one fiscal year.
Other 2016 Plan Provisions
The aggregate grant date fair value of Awards granted to non-employee directors in any fiscal year of the Company may not
exceed $300,000; provided that (i) the maximum amount shall be $600,000 in the year in which a non-employee director
commences service on the Board; and (ii) the limitation shall not apply to Awards made pursuant to an election to receive the
Award in lieu of all or a portion of cash compensation received for service on the Board or any committee of the Board.
42
Certain Awards under the 2016 Plan will be intended to qualify as “performance-based compensation” for purposes of
deductibility under Section 162(m) of the Code. For any such Award, the Committee will establish the performance objectives
to be used within 90 days after the commencement of the Performance Period (being at least one (1) year.) The performance
objectives to be used shall be selected from the following list of measures (collectively, the “Performance Measures”): total
shareholder return, stock price, net customer sales, volume, gross profit, gross margin, operating profit, operating margin,
management profit, earnings from continuing operations (including derivatives thereof before interest, taxes, depreciation and/or
amortization), earnings per share from continuing operations, net operating profit after tax, net earnings, net earnings per share,
brand contribution to earnings, return on assets, return on investment, return on equity, return on invested capital, cost of capital,
average capital employed, cash value added, economic value added, cash flow, cash flow from operations, working capital,
working capital as a percentage of net customer sales, asset growth, asset turnover, market share, customer satisfaction, and
employee satisfaction. The targeted level or levels of performance with respect to the Performance Measures may be established
at such levels and on such terms as the Committee may determine, in its discretion, on a corporate-wide basis or with respect to
one or more business units, divisions, subsidiaries, business segments or functions, and in either absolute terms or relative to the
performance of one or more comparable companies or an index covering multiple companies. Unless otherwise determined by
the Committee, measurement of the Performance Measures above shall exclude the impact of charges for restructurings,
discontinued operations, extraordinary items and other unusual or non-recurring items, as well as the cumulative effects of tax
or accounting changes, each as determined in accordance with generally accepted accounting principles or identified in the
Company’s financial statements, notes to the financial statements, management’s discussion and analysis or other filings with
the SEC. Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) of the Code may
be based on these or such other performance measures as the Committee may determine.
An Award granted under the 2016 Plan which is an Incentive Stock Option may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during
the lifetime of the recipient, only by the recipient. Other Awards will be transferable to the extent provided in the Award, except
that no Award may be transferred for consideration.
Unless otherwise provided for in an Award Agreement for the issuance of Restricted Stock, the Participant holder of Restricted
Stock will be entitled to all dividends paid with respect to such Shares prior to full vesting. The Award Agreements for other
Full Value Stock Awards may include provision for the payment or accumulation of the amount of dividends that would otherwise
be paid with respect to the number of Shares covered by the Award as if they were issued and outstanding (“Dividend
Equivalents”), provided that no Dividend Equivalents may be paid with respect to a Full Value Stock Award that is subject to
performance-based vesting provisions prior to the vesting thereof. Dividend Equivalents may be paid in cash and/or Shares as
and when the dividends are paid with respect to the Company’s common stock or they may be accumulated and paid, with or
without interest, at such time as may be provided for in the Award Agreement. No Dividend Equivalents may be paid or
accumulated in connection with an Option or SAR Award.
In the event of any merger, reorganization, consolidation, recapitalization, liquidation, stock dividend, split-up, spin-off, stock
split, reverse stock split, share combination, share exchange, extraordinary dividend, or any change in the corporate structure
affecting the Shares, such adjustment shall be made in the number and kind of Shares that may be delivered under the 2016 Plan,
the individual Award limits set forth in the 2016 Plan, and, with respect to outstanding Awards, in the number and kind of Shares
subject to outstanding Awards, the Exercise Price, grant price or other price of Shares subject to outstanding Awards, any
performance conditions relating to Shares, the market price of Shares, or per Share results, and other terms and conditions of
outstanding Awards, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that, unless otherwise determined by the Committee, the number of Shares
subject to any Award shall always be rounded down to a whole number. Any such adjustment shall be made by the Committee,
whose determination shall be conclusive.
In the event of a Change in Control, if the successor corporation does not assume the Awards or substitute equivalent Awards,
such Awards shall become fully vested and exercisable. In this event, performance-based Awards will vest on a pro-rata monthly
basis based on the performance level attained as of the date of the Change in Control, if determinable, or at the target level, if not
determinable. In such event, the Committee shall notify the Participant that each Award subject to exercise is fully exercisable.
The Committee may, in its sole discretion, provide that all outstanding Options and SARs shall be terminated upon the
effectiveness of a Change in Control and provide each Participant an amount in cash equal to the excess of the Fair Market Value
of a Share immediately prior to the effectiveness of a Change in Control over the Option Exercise Price or the SAR grant price,
or the Committee may cancel or terminate Options or SARs without payment if the Fair Market Value of a Share as of the
effective date of a Change of Control is less than the Option Exercise Price or SAR grant price per Share. In the event of a
Subsidiary Disposition, the Committee may, in its sole discretion, provide for the automatic full vesting of Awards only with
respect to those Participants who are, at the time of the Subsidiary Disposition, engaged primarily in Continuous Service with
the Subsidiary involved in such Subsidiary Disposition.
43
The Board of Directors may amend, suspend or terminate the 2016 Plan at any time; provided, however, that stockholder approval
is required for any amendment to the extent necessary to comply with the NASDAQ listing standards or applicable laws. In
addition, no amendment, suspension or termination may adversely impact an Award previously granted without the consent of
the Participant to whom such Award was granted unless required by applicable law.
FEDERAL TAX ASPECTS
The following paragraphs are a summary of the material U.S. federal income tax consequences associated with certain Award
types to be granted under the 2016 Plan. The summary is based on existing U.S. laws and regulations, and there can be no
assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does
not discuss the tax consequences upon a Participant’s death, or the provisions of the income tax laws of any municipality, state
or foreign country in which the Participant may reside. Furthermore, this summary does not address applicable federal tax
provisions of Section 409A of the Code enacted under the American Jobs Creation Act of 2004. To the extent applicable, it is
intended that the 2016 Plan and any Awards granted thereunder will comply with the requirements of Section 409A of the Code.
The new rules imposed by Section 409A may impact the way certain types of deferred compensation are taxed and certain
provisions of Award Agreements may be included to protect against undesired tax consequences.
Incentive Stock Options
No taxable income is recognized when an Incentive Stock Option is granted or exercised, although the exercise is an adjustment
item for alternative minimum tax purposes and may subject the Participant to the alternative minimum tax. If the Participant
exercises the Option and then later sells or otherwise disposes of the Shares more than two years after the grant date and more
than one year after the exercise date, the difference between the sale price and the Exercise Price generally will be taxed as long-
term capital gain or loss. If these holding periods are not satisfied, the Option will generally be treated for tax purposes as a
nonqualified stock option as described below. The Participant will recognize ordinary income at the time of sale or other
disposition equal to the difference between the Exercise Price and the lower of (i) the Fair Market Value of the Shares at the date
of the Option exercise or (ii) the sale price of the Shares. Any gain or loss recognized on such a premature disposition of the
Shares in excess of the amount treated as ordinary income will be treated as long-term or short-term capital gain or loss, depending
on the holding period.
Nonqualified Stock Options
No taxable income is recognized when a Nonqualified Stock Option is granted to a Participant with an Exercise Price equal to
the Fair Market Value on the date of grant. Upon exercise, the Participant will recognize ordinary income in an amount equal to
the excess of the Fair Market Value of the Shares on the exercise date over the Exercise Price. Any taxable income recognized
in connection with the exercise of a Nonqualified Stock Option by an Employee is subject to tax withholding by the Company.
Any additional gain or loss recognized upon later disposition of the Shares is capital gain or loss, which may be long-term or
short-term capital gain or loss depending on the holding period.
Stock Appreciation Rights
No taxable income is recognized when a stock appreciation right is granted to a Participant. Upon exercise, the Participant will
recognize ordinary income in an amount equal to the amount of cash received and the Fair Market Value of any Shares received.
Any additional gain or loss recognized upon later disposition of the Shares is capital gain or loss, which may be long-term or
short-term capital gain or loss depending on the holding period.
Full Value Stock Awards and Performance Units
A Participant generally will not have taxable income upon grant of Restricted Stock, RSUs, Performance Shares, Performance
Units or Other Stock-Based Awards that are subject to vesting provisions. Instead, the Participant will usually recognize ordinary
income at the time of vesting equal to the Fair Market Value (on the vesting date) of the Shares or cash received minus any
amount paid. RSUs, Performance Units or Other Stock-Based Awards settled in stock may not be taxable until the settlement
date if the award otherwise complies with the requirements for deferral of taxation under applicable tax laws. For Restricted
Stock, Performance Shares and shares issued pursuant to Other Stock-Based Awards subject to risk of forfeiture, a Participant
instead may elect to be taxed at the time of issuance of Shares subject to restrictions and risk of forfeiture.
44
Company Tax Treatment
The Company generally will be entitled to a tax deduction in connection with an Award under the 2016 Plan in an amount equal
to the ordinary income realized by a Participant and at the time the Participant recognizes such income (for example, the exercise
of a Nonqualified Stock Option, early disposition of an Incentive Stock Option or upon vesting of a Full Value Stock Award that
is not otherwise subject to deferred taxation.) For Incentive Stock Options, the Company will not be entitled to a tax deduction
unless the Participant makes an early disposition of the Shares acquired upon exercise of the Option as discussed above. Special
rules limit the deductibility of compensation paid to the chief executive officer and to each of the next four most highly
compensated executive officers. Under Section 162(m) of the Code, unless various conditions are met that enable compensation
to qualify as “performance-based,” the annual compensation paid to any of these specified executive officers will be deductible
only to the extent that it does not exceed $1,000,000. However, the 2016 Plan has been designed to permit the Committee to
grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m) of the Code, thereby
permitting the Company to receive a federal income tax deduction in connection with such Awards even to the extent that the
income recognized by the executive officer with respect to the Award would cause the executive officer's non-exempt income
for such year to exceed $1,000,000.
45
2007 PLAN STOCK-BASED INCENTIVE AWARDS
The following table presents information relating to stock-based incentive awards granted under the 2007 Plan on October 10
and 11, 2016 to the Named Executive Officers, all current executive officers as a group and all employees, including all officers
who are not executive officers, as a group. The table also includes information relating to the prospective grant of RSU awards
to all current directors who are not executive officers as a group expected to be granted under the 2007 Plan immediately
following the Annual Meeting of Stockholders on December 13, 2016 if the 2016 Plan is not approved by the stockholders at the
Annual Meeting or under the 2016 Plan if it is approved. The awards included in the table consist of RSU awards, MSU awards
and DPU awards granted to employees as generally described in the Compensation, Discussion and Analysis section under the
heading Equity Compensation and RSUs to be granted to the non-employee directors as described above under the heading,
Board of Directors Compensation. The benefits included in this table are representative of benefits that would be received or
allocated to these persons and groups under the 2016 Plan if the 2007 Plan had terminated prior to October 10, 2016. It is not
otherwise possible to determine the benefits to be received by the persons or groups referred to in the table.
Name and Principal Position
Garry O. Ridge
President and
Chief Executive Officer
Jay W. Rembolt
Vice President, Finance,
Treasurer and Chief Financial Officer
Michael L. Freeman
Division President,
the Americas
William B. Noble
Managing Director, EMEA
Geoffrey J. Holdsworth
Managing Director, Asia-Pacific
Executive Officer Group
Non-Executive Director Group
Non-Executive Officer Employee Group
Dollar Value1
($)
$ 956,335
RSUs Granted
(#)
MSUs Granted
(#)
DPUs Granted
(#)
4,250
4,250
4,311
$ 175,966
$ 175,966
$ 110,710
$ 100,584
$ 1,821,537
$ 444,000 2
$ 1,443,810
782
782
492
447
782
1,381
782
1,488
492
447
1,156
1,365
8,095
N/A 2
6,460
8,095
11,387
6,460
14,138
1
2
The Dollar Value of RSUs, MSUs and DPUs granted to employees and NEOs on October 10 and 11, 2016 is based on the grant date
closing price of the Company’s common stock multiplied by the number of RSU awards and the target number of MSU Shares underlying
the MSU awards. No amount is included for the DPUs since the Company has determined that, as of the grant date, under the applicable
accounting treatment for the DPUs as described in the Compensation Discussion and Analysis section under the heading, Accounting
Considerations, it is not probable that the DPUs will vest.
On October 10, 2016 the Board of Directors approved a compensation policy for non-employee directors elected to serve as directors at
the Annual Meeting of Stockholders on December 13, 2016. The director compensation policy provides for the award of RSUs on
December 13, 2016 with respect to shares of the Company’s common stock having a fair market value as of the date of grant equal to
$55,500. The number of RSUs to be granted to each non-employee director will be determined as of the date of grant by dividing $55,500
by the closing price for the Company’s shares on December 13, 2016. The RSUs awarded to each director will be fully vested upon grant
and will be settled in shares only upon termination of the director’s service as a director. The RSUs described herein will also be granted
to director nominee, Eric Etchart, if he is elected as a director at the Annual Meeting.
VOTE REQUIRED AND BOARD OF DIRECTORS’ RECOMMENDATION
The affirmative vote of a majority of the shares of common stock represented and entitled to vote at the Annual Meeting is
required to approve the 2016 Plan. The persons designated in the enclosed proxy will vote your shares FOR ratification unless
you include instructions to the contrary. The Board of Directors urges stockholders to vote in favor of approval of the WD-40
Company 2016 Stock Incentive Plan.
46
AUDIT COMMITTEE REPORT
Each year the Board of Directors appoints an Audit Committee to fulfill regulatory requirements and to assist the Board in
oversight of the Company’s financial reporting, internal control functions, internal audit activities and audit process. Each
member of the Audit Committee meets the independence requirements set by the Nasdaq Stock Market.
The responsibilities of the Audit Committee include the selection and appointment of an independent registered public accounting
firm to be hired as the Company’s independent accountants. The Audit Committee is also responsible for recommending to the
Board that the Company’s consolidated financial statements be included in its annual report on Form 10-K.
With respect to the preparation and audit of the Company’s consolidated financial statements, management is responsible for the
preparation of the financial statements; the establishment of accounting and financial reporting principles; the establishment of
disclosure controls and procedures; the establishment of internal control over financial reporting; the evaluation of the
effectiveness of both disclosure controls and procedures and internal control over financial reporting; and the evaluation of
changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect,
internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for
performing an independent audit of the consolidated financial statements and expressing an opinion as to whether the
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America.
The Audit Committee has reviewed the consolidated financial statements of the Company for the fiscal year ended August 31,
2016. The Audit Committee has discussed the preparation of the consolidated financial statements with management and with
the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, and the Audit Committee has met
separately with PricewaterhouseCoopers LLP and with management to discuss issues relating to the preparation and audit of the
financial statements.
For the fiscal year ended August 31, 2016, management has completed the documentation, testing and evaluation of the
Company’s system of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002.
The Audit Committee has been kept apprised of management’s activities in the completion of such work and evaluation and the
Audit Committee has provided oversight and advice with respect to the process undertaken by management. The Audit
Committee will continue to oversee such work being undertaken by the Company for the fiscal year ending August 31, 2017.
The Audit Committee has taken the following steps in making its recommendation that the Company’s consolidated financial
statements be included in its annual report on Form 10-K for the fiscal year ended August 31, 2016:
1. At regularly scheduled meetings of the Audit Committee, management and PricewaterhouseCoopers LLP provided periodic
reports as to the work undertaken by the Company to complete the documentation, testing and evaluation of the Company’s
system of internal control over financial reporting. Upon completion of such work and upon preparation of the Company’s
consolidated financial statements for the fiscal year ended August 31, 2016, the Audit Committee reviewed a report provided
by management on the effectiveness of the Company’s internal control over financial reporting;
2. The Audit Committee discussed with PricewaterhouseCoopers LLP, the Company’s independent registered public
accounting firm for the fiscal year ended August 31, 2016, those matters required to be discussed by Statement on Auditing
Standards No. 61 and Public Company Accounting Oversight Board Auditing Standard No. 2, including information
concerning the scope and results of the audit. These communications and discussions are intended to assist the Audit
Committee in overseeing the financial reporting and disclosure process;
3. The Audit Committee discussed with PricewaterhouseCoopers LLP
from
PricewaterhouseCoopers LLP a letter concerning independence as required under applicable independence standards for
auditors of public companies. This discussion and disclosure helped the Audit Committee in evaluating such independence;
independence and
received
its
4. The Audit Committee reviewed and discussed with the Company’s management and PricewaterhouseCoopers LLP the
Company’s audited consolidated balance sheet at August 31, 2016, and the related consolidated statements of operations, of
shareholders’ equity, of comprehensive income and of cash flows for the fiscal year ended August 31, 2016; and
5. The Audit Committee has reviewed PricewaterhouseCoopers LLP’s Report of Independent Registered Public Accounting
Firm and Management’s Report on Internal Control over Financial Reporting included in the Company’s annual report on
Form 10-K for the fiscal year ended August 31, 2016.
47
Based on the reviews and discussions explained above, the Audit Committee recommended to the Board that the Company’s
consolidated financial statements be included in its annual report on Form 10-K for its fiscal year ended August 31, 2016.
PricewaterhouseCoopers LLP has been selected to serve as the Company’s independent registered public accounting firm for the
fiscal year ending August 31, 2017.
Audit Committee
Daniel T. Carter, Chair
Giles H. Bateman
Peter D. Bewley
Richard A. Collato
Daniel E. Pittard
Neal E. Schmale
48
ITEM NO. 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as the independent registered public
accounting firm for the Company to audit the consolidated financial statements of the Company for fiscal year 2017. Although
ratification by stockholders is not required by law, the Audit Committee has determined that it is desirable to request ratification
of this selection by the stockholders. Notwithstanding its selection, the Audit Committee, in its discretion, may appoint a new
independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change
would be in the best interests of the Company and its stockholders. If the stockholders do not ratify the appointment of
PricewaterhouseCoopers LLP, the Audit Committee may reconsider its selection.
A majority of the votes of the common stock present or represented at the meeting is required for approval. Broker non-votes
will be voted in favor of approval. PricewaterhouseCoopers LLP acted as the Company’s independent registered public
accounting firm during the past fiscal year and, unless the Audit Committee appoints new independent accountants,
PricewaterhouseCoopers LLP will continue to act in such capacity during the current fiscal year. It is anticipated that a
representative of PricewaterhouseCoopers LLP will attend the Annual Meeting of Stockholders, will have an opportunity to make
a statement if he or she desires to do so and will be available to respond to appropriate questions.
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit products and services provided by the
independent registered public accounting firm. These products and services may include audit services, audit-related services,
tax services, software and other products or services. Pre-approval is generally provided for up to one year and any pre-approval
is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent
accountants and management are required to periodically report to the Audit Committee regarding the extent of services provided
by the independent public accountants in accordance with this pre-approval, and the fees for the services performed to date. The
Audit Committee may also pre-approve particular services on a case-by-case basis. The possible effect on the independence of
the public accountants is considered by the Audit Committee. There is no direct or indirect understanding or agreement that
places a limit on current or future years’ audit fees or permissible non-audit products and services.
AUDIT FEES
PricewaterhouseCoopers LLP has provided audit services to the Company for each of the past two fiscal years. Audit fees consist
of fees for professional services rendered for the audit of the Company’s consolidated annual financial statements, the review of
the interim consolidated financial statements included in quarterly reports and services that are normally provided by
PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements. The aggregate fees billed to
the Company by PricewaterhouseCoopers LLP for audit services performed for the Company for the past two fiscal years were
$905,951 for the year ended August 31, 2015 and $998,179 for the year ended August 31, 2016.
AUDIT-RELATED FEES
Audit-related services consist of assurance and related services that are reasonably related to the performance of the audit or
review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” The aggregate fees billed
to the Company by PricewaterhouseCoopers LLP were $14,353 for the year ended August 31, 2016 and these fees were
associated with technical assistance provided in connection with the transition of the Company’s U.K. subsidiary to new U.K.
generally accepted accounting principles (“GAAP”). No such audit-related services were performed by PricewaterhouseCoopers
LLP or billed to the Company for the year ended August 31, 2015.
TAX FEES
Tax fees consist of tax compliance, tax advice, tax consulting or tax planning services provided by PricewaterhouseCoopers LLP
to the Company. The aggregate fees billed to the Company by PricewaterhouseCoopers LLP were $49,679 for the year ended
August 31, 2015, and $56,480 for the year ended August 31, 2016, primarily in connection with international tax planning
consulting services.
49
ALL OTHER FEES
Other fees for services provided by PricewaterhouseCoopers LLP for fiscal years 2015 and 2016 consisted of fees for access
provided by PricewaterhouseCoopers LLP to its online research reference materials. The aggregate fees billed to the Company
by PricewaterhouseCoopers LLP for other services performed for the Company were $1,800 for both the year ended August 31,
2015 and the year ended August 31, 2016.
STOCKHOLDER PROPOSALS
Stockholder proposals must be received by the Company no sooner than June 6, 2017 and not later than July 6, 2017 to be
included in the proxy statement and form of proxy for the next annual meeting. Any proposal submitted outside of these dates
will be considered untimely in order to be considered at the Company’s 2017 Annual Meeting of Stockholders in accordance
with the Company’s Bylaws.
By Order of the Board of Directors
Richard T. Clampitt
Corporate Secretary
Dated: November 3, 2016
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS ARE
URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OR FORMS OF PROXY IN THE
ENCLOSED ENVELOPE.
50
Appendix A
WD-40 COMPANY
2016 STOCK INCENTIVE PLAN
1.
Establishment, Objectives and Duration.
(a) Establishment of the Plan. WD-40 Company (hereinafter referred to as the “Company”), hereby establishes an
incentive compensation plan to be known as the “WD-40 Company 2016 Stock Incentive Plan” (hereinafter referred to as the
“Plan”). The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Stock-Based Awards. The Plan is
effective as of December 13, 2016 (the “Effective Date”), subject to the approval of the Plan by the stockholders of the Company
at the 2016 Annual Meeting.
(b) Definitions. Definitions of capitalized terms used in the Plan are contained in the attached Glossary, which is
incorporated as part of the Plan.
(c) Objectives of the Plan. The objectives of the Plan are to attract and retain the best available personnel for positions
of substantial responsibility, to provide additional incentive to Participants and to optimize the profitability and growth of the
Company through incentives that are consistent with the Company’s goals and that link the personal interests of Participants to
those of the Company’s stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of Participants who make or are expected to make significant contributions to the Company’s
success and to allow Participants to share in the success of the Company.
(d) Duration of the Plan. No Award may be granted under the Plan after the day immediately preceding the tenth (10th)
anniversary of the Effective Date, or such earlier date as the Board shall determine. The Plan will remain in effect with respect
to outstanding Awards until no Awards remain outstanding.
2.
Administration of the Plan.
(a) The Committee. The Plan shall be administered by the Board or by the Compensation Committee of the Board or
such other committee (the Compensation Committee or such other committee is hereinafter referred to as the “Committee”) as
the Board shall select consisting of two or more members of the Board each of whom is intended to be a “non-employee director”
within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, an “outside director” under regulations
promulgated under Section 162(m) of the Code, and an “independent director” under NASDAQ listing standards. The members
of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board.
(b) Authority of the Committee. Subject to Applicable Laws and the provisions of the Plan (including any other powers
given to the Committee hereunder), and except as otherwise provided by the Board, the Committee shall have full and final
authority in its discretion to take all actions determined by the Committee to be necessary in the administration of the Plan,
including, without limitation, discretion to:
(i) select the Employees, Directors and Consultants to whom Awards may from time to time be granted
hereunder;
(ii) determine whether and to what extent Awards are granted hereunder;
(iii) determine the size and types of Awards granted hereunder;
(iv) approve forms of Award Agreement for use under the Plan;
(v) determine the terms and conditions of any Award granted hereunder;
(vi) establish performance goals for any Performance Period and determine whether such goals were satisfied;
(vii) amend the terms of any outstanding Award granted under the Plan at any time, including following a
Participant’s termination of employment or in the event of a Change in Control, provided that, except as otherwise provided in
Section 18, no such amendment shall reduce the Exercise Price of outstanding Options or the grant price of outstanding SARs
without the approval of the stockholders of the Company, and provided further, that any amendment that would adversely affect
the Participant’s rights under an outstanding Award shall not be made without the Participant’s written consent;
to decide all questions of fact arising in its application; and
(viii) construe and interpret the terms of the Plan and any Award Agreement entered into under the Plan, and
(ix) take such other action, not inconsistent with the terms of the Plan, as the Committee deems appropriate.
i
Notwithstanding the foregoing, except as Applicable Laws may require the grant of an Award to be authorized only by
the Committee or that determinations with respect to the attainment or satisfaction of Performance Measure(s) be made by the
Committee, the Board shall have full authority to administer the Plan.
(c) Effect of Committee’s Decisions. Subject to the authority of the Board to administer the Plan, all decisions,
determinations and interpretations of the Committee shall be final, binding and conclusive on all persons, including the Company,
its Subsidiaries, its stockholders, Employees, Directors, Consultants and their estates and beneficiaries.
3.
Shares Subject to the Plan; Effect of Grants; Individual Limits.
(a) Number of Shares Available for Grants. Subject to adjustment as provided in Section 18 hereof, the maximum
number of Shares that may be issued pursuant to Awards under the Plan shall be 1,000,000 Shares. Shares that are potentially
deliverable under a Full-Value Award (counted as provided for in Section 3(b)) that expires or is canceled or forfeited, or (subject
to the provisions of Section 16 with respect to tax withholding) is otherwise settled without the delivery of Shares, shall not be
treated as having been issued under the Plan for purposes of Section 3(b). Shares that are potentially deliverable upon exercise
of an Option Award or an SAR that may be settled in Shares (counted as provided for in Section 3(b)) that expires or is canceled
or forfeited, or is otherwise settled without the delivery of Shares, shall, nevertheless, be treated as having been issued under the
Plan for purposes of Section 3(b). The Shares to be issued pursuant to Awards may be authorized but unissued Shares or treasury
Shares. No Award shall be granted under the Plan providing for the issuance of Shares to the extent that, as of the date of the
Award, the number of Shares deliverable under such Award will exceed the maximum number of Shares authorized pursuant to
this Section 3(a) reduced by the total number of Shares issued pursuant to Awards under the Plan (counted as provided for in
Section 3(b)) plus the number of Shares that are potentially deliverable under all outstanding Awards pursuant to the Plan
(counted as provided for in Section 3(b)).
(b) Award Type Share Counting. The issuance of each Share pursuant to Awards of Restricted Stock, Restricted Stock
Units, Performance Shares, Performance Units and Other Stock-Based Awards shall be counted as three (3) Shares for purposes
of computing the number of Shares authorized for issuance under the Plan pursuant to Section 3(a). Each Share issued pursuant
to an Award of an Option or an SAR shall be counted as one Share for purposes of the number of Shares authorized for issuance
under the Plan pursuant to Section 3(a).
(c) Individual Award Limits. Subject to adjustment as provided in Section 18 hereof, the following limitations shall
apply with respect to Awards under the Plan:
(i) Options and SARs – Individual Limits: The maximum aggregate number of Shares with respect to which
Options and SARs may be granted in any calendar year to any one Participant shall be 75,000 Shares, provided that such limit
shall be increased to 150,000 Shares during the first year following the date of hire for an Employee who has not previously been
in Continuous Service with the Company or a Subsidiary for a period of at least one year.
(ii) Full-Value Awards of Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units
and Other Stock-Based Awards – Individual Limits: The maximum aggregate number of Shares of Restricted Stock and Shares
with respect to which Restricted Stock Units, Performance Shares, Performance Units and Other Stock-Based Awards may be
granted in any calendar year to any one Participant shall be 37,500 Shares, provided that such limit shall be increased to 75,000
Shares during the first year following the date of hire for an Employee who has not previously been in Continuous Service with
the Company or a Subsidiary for a period of at least one year.
(iii) Performance Units Having a Cash Value – Individual Limits: The maximum aggregate compensation
that can be paid pursuant to Performance Units providing for a cash value award rather than a share-based award in any one fiscal
year to any one Participant shall be $2,500,000.
(iv) Awards to Non-Employee Directors – Individual Limits: The aggregate grant date fair value of Awards
that may be granted under the Plan during any fiscal year of the Company to any Director shall not exceed $300,000; provided,
however, that (i) the limit set forth in this sentence shall be multiplied by two in the year in which a Director commences service
on the Board; and (ii) the limit set forth in this sentence shall not apply to Awards made pursuant to an election to receive the
Award in lieu of all or a portion of cash compensation received for service on the Board or any committee of the Board.
4.
Eligibility and Participation.
(a) Eligibility. Persons eligible to participate in the Plan include all Employees, Directors and Consultants.
(b) Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all
eligible Employees, Directors and Consultants, those to whom Awards shall be granted and shall determine the nature and amount
of each Award. The Committee may establish additional terms, conditions, rules or procedures to accommodate the rules or laws
of applicable foreign jurisdictions and to afford Participants favorable treatment under such laws; provided, however, that no
Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are
inconsistent with the provisions of the Plan.
ii
(c) Termination of Service. An eligible Employee, Director or Consultant to whom an Award is granted under the Plan
shall be remain eligible for such Award so long as he or she remains in Continuous Service with the Company or a Subsidiary
and thereafter only on such terms and conditions as may be specified in the applicable Award Agreement.
5.
Types of Awards.
(a) Type of Awards. Awards under the Plan may be in the form of Options (both Nonqualified Stock Options and/or
Incentive Stock Options), SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other
Stock-Based Awards.
(b) Designation of Award. Each Award shall be designated in the Award Agreement.
6.
Options.
(a) Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such
number and upon such terms, and at any time and from time to time, as shall be determined by the Committee.
(b) Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Exercise
Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee
shall determine including, but not limited to, the Option vesting schedule, repurchase provisions, rights of first refusal, forfeiture
provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, and payment contingencies.
The Award Agreement also shall specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock
Option. Options that are intended to be Incentive Stock Options shall be subject to the limitations set forth in Section 422 of the
Code.
(c) Exercise Price. Except for Options adjusted pursuant to Section 18 herein, and replacement Options granted in
connection with a merger, acquisition, reorganization or similar transaction, the Exercise Price for each grant of an Option shall
not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted. However, in
the case of an Incentive Stock Option granted to a Participant who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the Company or any Subsidiary, the Exercise Price for
each grant of an Option shall not be less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date
the Option is granted.
(d) Term of Options. The term of an Option granted under the Plan shall be determined by the Committee, in its sole
discretion; provided, however, that such term shall not exceed ten (10) years. However, in the case of an Incentive Stock Option
granted to a Participant who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the Award Agreement.
(e) Exercise of Options. Options granted under this Section 6 shall be exercisable at such times and be subject to such
restrictions and conditions as set forth in the Award Agreement and as the Committee shall in each instance approve, which need
not be the same for each grant or for each Participant; provided, however, that except for Options granted to a Director or a
Consultant, or as otherwise provided in a Participant’s Award Agreement upon a termination of employment or service as a
Director or Consultant or pursuant to Section 19 in the event of a Change in Control or Subsidiary Disposition, no Option may
be exercisable prior to one (1) year from the date of grant.
(f) Payments. Options granted under this Section 6 shall be exercised by the delivery of a written notice to the
Company, setting forth the number of Shares with respect to which the Option is to be exercised and specifying the method of
payment of the Exercise Price. The Exercise Price of an Option shall be payable to the Company: (i) in cash or its equivalent,
(ii) by tendering (either actually or constructively by attestation) Shares having an aggregate Fair Market Value at the time of
exercise equal to the Exercise Price, (iii) in any other manner then permitted by the Committee, or (iv) by a combination of any
of the permitted methods of payment. The Committee may limit any method of payment, other than that specified under (i), for
administrative convenience, to comply with Applicable Laws or otherwise.
(g) Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired
pursuant to the exercise of an Option granted under this Section 6 as it may deem advisable, including, without limitation,
restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
(h) Termination of Employment or Service. Each Participant’s Option Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or, if the
Participant is a Director or Consultant, service with the Company and its Subsidiaries. Such provisions shall be determined in
the sole discretion of the Committee, need not be uniform among all Options, and may reflect distinctions based on the reasons
for termination of employment or service.
iii
7.
Stock Appreciation Rights.
(a) Grant of SARs. Subject to the terms and provisions of the Plan, SARs may be granted to Participants in such
amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. The Committee
may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR.
(b) Award Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price,
the term of the SAR, and such other provisions as the Committee shall determine.
(c) Grant Price. The grant price of a Freestanding SAR shall not be less than one hundred percent (100%) of the Fair
Market Value of a Share on the date of grant of the SAR, and the grant price of a Tandem SAR shall equal the Exercise Price of
the related Option; provided, however, that these limitations shall not apply to Awards that are adjusted pursuant to Section 18
herein.
(d) Term of SARs. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole
discretion; provided, however, that such term shall not exceed ten (10) years.
(e) Exercise of Tandem SARs. A Tandem SAR may be exercised only with respect to the Shares for which its related
Option is then exercisable. To the extent exercisable, Tandem SARs may be exercised for all or part of the Shares subject to the
related Option. The exercise of all or part of a Tandem SAR shall result in the forfeiture of the right to purchase a number of
Shares under the related Option equal to the number of Shares with respect to which the SAR is exercised. Conversely, upon
exercise of all or part of an Option with respect to which a Tandem SAR has been granted, an equivalent portion of the Tandem
SAR shall similarly be forfeited.
Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection
with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with
respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Exercise Price
of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is
exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds
the Exercise Price of the ISO.
(f) Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, imposes upon them and sets forth in the Award Agreement; provided, however, that except as
otherwise provided in a Participant’s Award Agreement upon a termination of employment or, if the Participant is a Director or
Consultant, service with the Company and its Subsidiaries, or pursuant to Section 19 in the event of a Change in Control or
Subsidiary Disposition, no Freestanding SARs may be exercisable prior to one (1) year from the date of grant.
(g) Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying:
i) the difference between the Fair Market Value of a Share on the date of exercise over the grant price; times
ii) the number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value or in
some combination thereof as specified in the SAR Award Agreement.
(h) Termination of Employment or Service. Each SAR Award Agreement shall set forth the extent to which the
Participant shall have the right to exercise the SAR following termination of the Participant’s employment or, if the Participant
is a Director or Consultant, service with the Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all SARs, and may reflect distinctions based on the reasons for
termination of employment or service.
8.
Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, Restricted Stock may be granted to
Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the
Committee.
(b) Award Agreement. Each Restricted Stock grant shall be evidenced by an Award Agreement that shall specify the
Period(s) of Restriction, the number of Shares of Restricted Stock granted, the nature of applicable vesting conditions and/or
restrictions on transferability, and such other provisions as the Committee shall determine.
(c) Period of Restriction and Other Restrictions. Except as otherwise provided in a Participant’s Award Agreement
upon a termination of employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries,
or pursuant to Section 19 in the event of a Change in Control or Subsidiary Disposition, an Award of Restricted Stock shall have
a minimum Period of Restriction of one (1) year, which period may, at the discretion of the Committee, lapse in stages over such
period on a pro-rated, graded, or cliff basis (as specified in an Award Agreement.) The Committee shall impose such other
conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including,
iv
without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, a
requirement that the issuance of Shares of Restricted Stock be delayed, restrictions based upon the achievement of specific
performance goals, additional time-based restrictions, and/or restrictions under Applicable Laws or under the requirements of
any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on
the Shares by the Company upon vesting of such Restricted Stock. The Company may retain in its custody any certificate
evidencing the Shares of Restricted Stock and place thereon a legend and institute stop-transfer orders on such Shares, and the
Participant shall be obligated to sign any stock power requested by the Company relating to the Shares to give effect to the
forfeiture provisions of the Restricted Stock.
(d) Removal of Restrictions. Subject to Applicable Laws, Restricted Stock shall become freely transferable by the
Participant after the last day of the Period of Restriction applicable thereto. Once Restricted Stock is released from the
restrictions, the Participant shall be entitled to receive a certificate evidencing the Shares free of all restrictions.
(e) Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement,
to the extent permitted or required by Applicable Laws, as determined by the Committee, Participants holding Shares of
Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares during the Period of Restriction.
(f) Dividends and Other Distributions. Except as otherwise provided in a Participant’s Award Agreement, during the
Period of Restriction, Participants holding Shares of Restricted Stock shall receive all regular cash Dividends paid with respect
to all Shares while they are so held, and, except as otherwise determined by the Committee, all other distributions paid with
respect to such Restricted Stock shall be credited to Participants subject to the same restrictions on transferability and
forfeitability as the Restricted Stock with respect to which they were paid and paid at such time following full vesting as are paid
the Shares of Restricted Stock with respect to which such distributions were made.
(g) Termination of Employment or Service. Each Restricted Stock Award Agreement shall set forth the extent to which
the Participant shall have the right to retain unvested Restricted Stock following termination of the Participant’s employment or,
if the Participant is a Director or Consultant, service with the Company and its Subsidiaries. Such provisions shall be determined
in the sole discretion of the Committee, need not be uniform among all Awards of Restricted Stock, and may reflect distinctions
based on the reasons for termination of employment or service.
9.
Restricted Stock Units.
(a) Grant of Restricted Stock Units. Subject to the terms and provisions of the Plan, Restricted Stock Units may be
granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by
the Committee.
(b) Award Agreement. Each grant of Restricted Stock Units shall be evidenced by an Award Agreement that shall
specify the applicable Period of Restriction, the number of Restricted Stock Units granted, the nature of applicable vesting
conditions and/or restrictions on transferability, and such other provisions as the Committee shall determine.
(c) Value of Restricted Stock Units. The initial value of a Restricted Stock Unit shall equal the Fair Market Value of a
Share on the date of grant; provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to
Section 18 herein.
(d) Period of Restriction. Except as otherwise provided in a Participant’s Award Agreement upon a termination of
employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries, or pursuant to
Section 19 in the event of a Change in Control or Subsidiary Disposition, an Award of Restricted Stock Units shall have a
minimum Period of Restriction of one (1) year, which period may, at the discretion of the Committee, lapse in stages over such
period on a pro-rated, graded, or cliff basis (as specified in an Award Agreement.)
(e) Form and Timing of Payment. Except as otherwise provided in Section 19 herein or a Participant’s Award
Agreement, payment of Restricted Stock Units shall be made at a specified settlement date that shall not be earlier than the last
day of the Period of Restriction. The Committee, in its sole discretion, may pay earned Restricted Stock Units by delivery of
Shares, by payment in cash of an amount equal to the Fair Market Value of such Shares or in some combination thereof as
specified in the Restricted Stock Unit Award Agreement. The Committee may provide that settlement of Restricted Stock Units
shall be deferred, on a mandatory basis or at the election of the Participant.
(f) Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units granted
hereunder.
(g) Termination of Employment or Service. Each Restricted Stock Unit Award Agreement shall set forth the extent to
which the Participant shall have the right to receive a payout with respect to an Award of Restricted Stock Units following
termination of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all
Restricted Stock Units, and may reflect distinctions based on the reasons for termination of employment or service.
v
10.
Performance Shares.
(a) Grant of Performance Shares. Subject to the terms and provisions of the Plan, Performance Shares may be granted
to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the
Committee.
(b) Award Agreement. Each grant of Performance Shares shall be evidenced by an Award Agreement that shall specify
the applicable Performance Period(s) and Performance Measure(s), the number of Performance Shares granted, and such other
provisions as the Committee shall determine; provided, however, that except as otherwise provided in a Participant’s Award
Agreement upon a termination of employment or, if the Participant is a Director or Consultant, service with the Company and
its Subsidiaries, or pursuant to Section 19 in the event of a Change in Control or Subsidiary Disposition, in no case shall a
Performance Period be for a period of less than one (1) year.
(c) Value of Performance Shares. The initial value of a Performance Share shall equal the Fair Market Value of a Share
on the date of grant; provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to Section 18
herein.
(d) Form and Timing of Payment. Subject to Applicable Laws and except as otherwise provided in Section 19 herein
or a Participant’s Award Agreement, payment of Performance Shares shall be made after final determination by the Committee
as to the number of such Performance Shares that have vested upon attainment of the applicable Performance Measure(s) at a
specified settlement date that shall not be earlier than the last day of the Performance Period. The Committee, in its sole
discretion, may pay earned Performance Shares by delivery of Shares, by payment in cash of an amount equal to the Fair Market
Value of such Shares or in some combination thereof. The Committee may provide that settlement of Performance Shares shall
be deferred, on a mandatory basis or at the election of the Participant.
(e) Voting Rights. A Participant shall have no voting rights with respect to any Performance Shares granted hereunder.
(f) Termination of Employment or Service. Each Performance Share Award Agreement shall set forth the extent to
which the Participant shall have the right to receive a payout respecting an Award of Performance Shares following termination
of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries.
Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Participants, and
may reflect distinctions based on the reasons for termination of employment or service
11.
Performance Units.
(a) Grant of Performance Units. Subject to the terms and conditions of the Plan, Performance Units may be granted to
Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the
Committee.
(b) Award Agreement. Each grant of Performance Units shall be evidenced by an Award Agreement that shall specify
the number of Performance Units granted, the Performance Period(s) and Performance Measure(s) and such other provisions as
the Committee shall determine; provided, however, that except as otherwise provided in a Participant’s Award Agreement upon
a termination of employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries, or
pursuant to Section 19 in the event of a Change in Control or Subsidiary Disposition, in no case shall a Performance Period be
for a period of less than one (1) year.
(c) Value of Performance Units. The Committee shall set Performance Measure(s) in its discretion that, depending on
the extent to which they are met, will determine the number and/or value of Performance Units that will be paid out to the
Participant.
(d) Form and Timing of Payment. Except as otherwise provided in Section 19 herein or a Participant’s Award
Agreement, payment of earned Performance Units shall be made after final determination by the Committee as to the number of
such Performance Units that have vested upon attainment of the applicable Performance Measure(s) at a specified settlement
date that shall not be earlier than the last day of the Performance Period. The Committee, in its sole discretion, may pay earned
Performance Units in cash, in Shares that have an aggregate Fair Market Value equal to the value of the earned Performance
Units or in some combination thereof as specified in the Performance Unit Award Agreement. The Committee may provide that
settlement of Performance Units shall be deferred, on a mandatory basis or at the election of the Participant.
(e) Termination of Employment or Service. Each Performance Unit Award Agreement shall set forth the extent to
which the Participant shall have the right to receive a payout respecting an Award of Performance Units following termination
of the Participant’s employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries.
Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Performance Units
and may reflect distinctions based on reasons for termination of employment or service.
12.
Other Stock-Based Awards.
(a) Grant. The Committee shall have the right to grant other Awards that may include, without limitation, the grant of
Shares based on attainment of Performance Measure(s) established by the Committee, the payment of Shares as a bonus in lieu
vi
of cash based on attainment of Performance Measure(s) established by the Committee, and the payment of Shares in lieu of cash
under any Company incentive, bonus or other compensation program.
(b) Award Agreement. Other Stock-Based Awards may be evidenced by an Award Agreement that specifies Period(s)
of Restriction, if any, the number of Shares to be awarded, applicable Performance Period(s) and Performance Measure(s), if
any, the nature of other applicable vesting conditions and/or restrictions on transferability, and such other provisions as the
Committee shall determine.
(c) Period of Restriction. Except as otherwise provided hereinafter, or in a Participant’s Award Agreement upon a
termination of employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries, or
pursuant to Section 19 in the event of a Change in Control or Subsidiary Disposition, Awards granted pursuant to this Section 12
shall have a minimum Period of Restriction of one (1) year, which period may, at the discretion of the Committee, lapse in stages
over such period on a pro-rated, graded, or cliff basis (as specified in an Award Agreement.) Notwithstanding the above, an
Award of payment of Shares in lieu of cash under a Company incentive, bonus or other compensation program shall not be
subject to the minimum Period of Restriction limitations described above.
(d) Payment of Other Stock-Based Awards. Subject to Section 12(c) hereof, payment under or settlement of any such
Other Stock-Based Award shall be made in such manner and at such times as the Committee may specify in the Award Agreement
for such Other Stock-Based Award. The Committee may provide that settlement of Other Stock-Based Awards shall be deferred,
on a mandatory basis or at the election of the Participant.
(e) Termination of Employment or Service. The Committee shall determine the extent to which the Participant shall
have the right to receive Other Stock-Based Awards following termination of the Participant’s employment or, if the Participant
is a Director or Consultant, service with the Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, such provisions may be included in an agreement entered into with each Participant, but need not
be uniform among all Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination of
employment or service.
Dividend Equivalents. Only Award Agreements for Full Value Awards granted pursuant to the Plan may, at the
13.
discretion of the Committee, provide Participants with the right to receive Dividend Equivalents, which may be paid currently or
credited to an account for the Participants, and may be settled in cash and/or Shares, as determined by the Committee in its sole
discretion, subject in each case to such terms and conditions as the Committee shall establish. Under no circumstance will
Dividend Equivalents be paid with respect to any Full Value Award that is subject to performance-based vesting provisions prior
to the vesting thereof.
14.
Performance-Based Exception.
(a) Performance Measures. The Committee may specify that the attainment of one or more of the Performance
Measures set forth in this Section 14 shall determine the degree of granting, vesting and/or payout with respect to Awards that
the Committee intends will qualify for the Performance-Based Exception. The performance goals to be used for such Awards
shall be chosen from among the following performance measures (the “Performance Measures”): total shareholder return, stock
price, net customer sales, volume, gross profit, gross margin, operating profit, operating margin, management profit, earnings
from continuing operations (including derivatives thereof before interest, taxes, depreciation and/or amortization), earnings per
share from continuing operations, net operating profit after tax, net earnings, net earnings per share, brand contribution to
earnings, return on assets, return on investment, return on equity, return on invested capital, cost of capital, average capital
employed, cash value added, economic value added, cash flow, cash flow from operations, working capital, working capital as a
percentage of net customer sales, asset growth, asset turnover, market share, customer satisfaction, and employee satisfaction.
The targeted level or levels of performance with respect to such Performance Measures may be established at such levels and on
such terms as the Committee may determine, in its discretion, on a corporate-wide basis or with respect to one or more business
units, divisions, subsidiaries, business segments or functions, and in either absolute terms or relative to the performance of one
or more comparable companies or an index covering multiple companies. Awards that are not intended to qualify for the
Performance-Based Exception may be based on these or such other performance measures as the Committee may determine.
(b) Excluded Financial Items. Unless otherwise determined by the Committee, measurement of performance goals
with respect to the Performance Measures above shall exclude the impact of charges for restructurings, discontinued operations,
extraordinary items, and other unusual or non-recurring items, as well as the cumulative effects of tax or accounting changes,
each as determined in accordance with generally accepted accounting principles or identified in the Company’s financial
statements, notes to the financial statements, management’s discussion and analysis or other filings with the SEC.
(c) Alternative Performance Measures. Performance Measures may differ for Awards granted to any one Participant
or to different Participants.
(d) Performance Period and Timing of Establishment of Performance Measures. Achievement of Performance
Measures in respect of Awards intended to qualify under the Performance-Based Exception shall be measured over a Performance
Period specified in the Award Agreement, and the goals shall be established not later than 90 days after the beginning of the
Performance Period.
vii
(e) Adjustment of Awards. The Committee shall have the discretion to adjust the determinations of the degree of
attainment of the pre-established Performance Measure(s); provided, however, that such determinations for Awards that are
designed to qualify for the Performance-Based Exception may not be adjusted to increase the prospective Award for attainment
of the Performance Measure(s) (but the Committee may, in its discretion, adjust such determinations in a manner resulting in a
lesser Award.)
15.
Transferability of Awards. Incentive Stock Options may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and distribution, and shall be exercisable during a
Participant’s lifetime only by such Participant. Other Awards shall be transferable to the extent provided in the Award
Agreement, except that no Award may be transferred for consideration.
16.
Taxes. The Company shall have the power and right, prior to the delivery of Shares pursuant to an Award, to deduct
or withhold, or require a participant to remit to the Company (or a Subsidiary), an amount (in cash or Shares) sufficient to satisfy
any applicable tax withholding requirements applicable to an Award. Whenever payments are to be made in cash under the Plan,
such payments shall be net of an amount sufficient to satisfy any applicable tax withholding requirements. Subject to such
restrictions as the Committee may prescribe, a Participant may satisfy all or a portion of any tax withholding requirements by
electing to have the Company withhold Shares having a Fair Market Value equal to the amount to be withheld up to the minimum
statutory tax withholding rate (or such other rate that will not result in a negative accounting impact). Shares withheld in
satisfaction of any tax withholding requirements shall be treated as having been issued under the Plan for purposes of Section
3(b).
17.
Conditions Upon Issuance of Shares.
(a) Compliance with Applicable Laws. Shares shall not be issued pursuant to the exercise or payment of an Award
unless the exercise of such Award and/or the issuance and delivery of such Shares pursuant thereto shall comply with all
Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Required Investment Intent. As a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such
a representation is required by any Applicable Laws.
Adjustments Upon Changes in Capitalization. In the event of any merger, reorganization, consolidation,
18.
recapitalization, liquidation, stock dividend, split-up, spin-off, stock split, reverse stock split, share combination, share exchange,
extraordinary dividend, or any change in the corporate structure affecting the Shares, such adjustment shall be made in the number
and kind of Shares that may be delivered under the Plan, in the limits set forth in Section 3(c), and, with respect to outstanding
Awards, in the number and kind of Shares subject to outstanding Awards, the Exercise Price, grant price or other price of Shares
subject to outstanding Awards, any performance conditions relating to Shares, the market price of Shares, or per Share results,
and other terms and conditions of outstanding Awards, as may be determined to be appropriate and equitable by the Committee,
in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that, unless otherwise determined by the
Committee, the number of Shares subject to any Award shall always be rounded down to a whole number. Adjustments made by
the Committee pursuant to this Section 18 shall be final, binding, and conclusive.
19.
Change in Control, Cash-Out and Termination of Underwater Options/SARs, and Subsidiary Disposition.
(a) Change in Control. Except as otherwise provided in a Participant’s Award Agreement or pursuant to Section 19(b)
hereof, immediately prior to the occurrence of a Change in Control, but conditioned upon the consummation of such Change of
Control, unless otherwise specifically prohibited under Applicable Laws, or by the rules and regulations of any governing
governmental agencies or national securities exchanges:
(i) any and all outstanding Options and SARs granted hereunder shall become immediately exercisable unless
such Awards are assumed, converted or replaced by the continuing entity; provided, however, that in the event of a Participant’s
termination of employment without Cause within twenty-four (24) months following consummation of a Change in Control, any
assumed, converted or replaced Awards will become immediately exercisable;
(ii) any Period of Restriction or other restriction imposed on Restricted Stock, Restricted Stock Units, and
Other Stock-Based Awards shall lapse unless such Awards are assumed, converted or replaced by the continuing entity; provided,
however, that in the event of a Participant’s termination of employment without Cause within twenty-four (24) months following
consummation of a Change in Control, the Period of Restriction on any assumed, converted or replaced Awards shall lapse; and
(iii) any and all Performance Shares, Performance Units and other Awards (if performance-based) shall vest
on a pro rata monthly basis, including full credit for partial months elapsed, and will be paid based on (A) the level of performance
achieved as of the date of the Change in Control, if determinable, or (B) at the target level, if not determinable. The amount of
the vested Award may be computed under the following formula: total Award number of Shares times (number of full months
elapsed in shortest possible vesting period divided by number of full months in shortest possible vesting period) times percent
performance level achieved immediately prior to the specified effective date of the Change in Control.
viii
With respect to paragraphs (i) and (ii) of Section 19(a) above, the Award Agreement may provide that any assumed,
converted or replaced awards will become immediately exercisable or any Period of Restriction shall lapse in the event of a
termination of employment by the Participant for “good reason” as such term is defined in any employment agreement or
severance agreement or policy applicable to such Participant.
(b) Cash-Out and Termination of Underwater Options/SARs. The Committee may, in its sole discretion, provide that
(i) all outstanding Options and SARs shall be terminated upon the occurrence of a Change in Control and that each Participant
shall receive, with respect to each Share subject to such Options or SARs, an amount in cash equal to the excess of the Fair
Market Value of a Share immediately prior to the occurrence of the Change in Control over the Option Exercise Price or the SAR
grant price; and (ii) Options and SARs outstanding as of the date of the Change in Control may be cancelled and terminated
without payment therefore if the Fair Market Value of a Share as of the date of the Change in Control is less than the Option
Exercise Price or the SAR grant price.
(c) Subsidiary Disposition. The Committee shall have the authority, exercisable either in advance of any actual or
anticipated Subsidiary Disposition or at the time of an actual Subsidiary Disposition and either at the time of the grant of an
Award or at any time while an Award remains outstanding, to provide for the automatic full vesting and exercisability of one or
more outstanding unvested Awards under the Plan and the termination of restrictions on transfer and repurchase or forfeiture
rights on such Awards, in connection with a Subsidiary Disposition, but only with respect to those Participants who are at the
time engaged primarily in Continuous Service with the Subsidiary involved in such Subsidiary Disposition. The Committee also
shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the
subsequent termination of the affected Participant’s Continuous Service with that Subsidiary within a specified period following
the effective date of the Subsidiary Disposition. The Committee may provide that any Awards so vested or released from such
limitations in connection with a Subsidiary Disposition shall remain fully exercisable until the expiration or sooner termination
of the Award.
20.
Amendment, Suspension or Termination of the Plan.
(a) Amendment, Modification and Termination. The Board may at any time and from time to time, alter, amend,
suspend or terminate the Plan in whole or in part; provided, however, that no amendment that requires stockholder approval in
order for the Plan to continue to comply with the NASDAQ listing standards or any rule promulgated by the SEC or any securities
exchange on which Shares are listed or any other Applicable Laws shall be effective unless such amendment shall be approved
by the requisite vote of stockholders of the Company entitled to vote thereon within the time period required under such
applicable listing standard, rule or Applicable Law.
(b) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may
make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring
events (including, without limitation, the events described in Section 18 hereof) affecting the Company or the financial statements
of the Company or of changes in Applicable Laws, regulations, or accounting principles, whenever the Committee determines
that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan. With respect to any Awards intended to comply with the Performance-Based Exception, unless
otherwise determined by the Committee, any such adjustments shall be specified at such times and in such manner as will not
cause such Awards to fail to qualify under the Performance-Based Exception.
(c) Awards Previously Granted. No termination, amendment or modification of the Plan or of any Award shall
adversely affect in any material way any Award previously granted under the Plan without the written consent of the participant
holding such Award, unless such termination, modification or amendment is required by Applicable Laws and except as
otherwise provided herein.
(d) No Repricing. Except for adjustments made pursuant to Section 18, no amendment shall reduce the Exercise Price
of outstanding Options or the grant price of outstanding SARs, nor may any outstanding Options or outstanding SARs be
surrendered to the Company for cash or as consideration for the grant of new Options or SARs with a lower Exercise Price or
for the grant of a Full-Value Award without the approval of the stockholders of the Company.
(e) Compliance with the Performance-Based Exception. If it is intended that an Award comply with the requirements
of the Performance-Based Exception, the Committee may apply any restrictions it deems appropriate such that the Awards
maintain eligibility for the Performance-Based Exception. If changes are made to Code Section 162(m) or regulations
promulgated thereunder to permit greater flexibility with respect to any Award or Awards available under the Plan, the Committee
may, subject to this Section 20, make any adjustments to the Plan and/or Award Agreements it deems appropriate.
21.
Reservation of Shares.
(a) Maintenance of Authorized Shares. The Company, during the term of the Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
(b) Inability to Obtain Regulatory Authority. The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale
ix
of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
22.
Rights and Obligations of Participants.
(a) Continued Service. The Plan shall not confer upon any Participant any right with respect to continuation of
employment, service as a director or consulting relationship with the Company, nor shall it interfere in any way with his or her
right or the Company’s right to terminate his or her employment, service as a director or consulting relationship at any time, with
or without cause.
(b) Participant. No Employee, Director or Consultant shall have the right to be selected to receive an Award under the
Plan, or, having been so selected, to be selected to receive future Awards.
(c) Clawback Policy Obligations. All Awards granted to a Participant are subject to forfeiture or repayment pursuant
to the terms of any applicable compensation recovery policy that has been, or will be, adopted by the Company, including any
such policy that may be adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or any rules
or regulations issued by the SEC or any applicable securities exchange thereunder, or to the extent that such forfeiture or
repayment may be required by any other law.
Successors. All obligations of the Company under the Plan and with respect to Awards shall be binding on any
23.
successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger,
consolidation, or other event, or a sale or disposition of all or substantially all of the business and/or assets of the Company and
references to the “Company” herein and in any Award agreements shall be deemed to refer to such successors.
24.
Legal Construction.
(a) Gender, Number and References. Except where otherwise indicated by the context, any masculine term used herein
also shall include the feminine, the plural shall include the singular and the singular shall include the plural. Any reference in the
Plan to a Section of the Plan either in the Plan or any Award agreement or to an act or code or to any section thereof or rule or
regulation thereunder shall be deemed to refer to such Section of the Plan, act, code, section, rule or regulation, as may be
amended from time to time, or to any successor Section of the Plan, act, code, section, rule or regulation.
(b) Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
(c) Requirements of Law. The granting of Awards and the issuance of Shares or cash under the Plan shall be subject
to all Applicable Laws and to such approvals by any governmental agencies or national securities exchanges as may be required.
(d) Governing Law. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule
or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
(e) Non-Exclusive Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the
Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt
such other incentive arrangements as it may deem desirable.
(f) Code Section 409A Compliance. To the extent applicable, it is intended that this Plan and any Awards granted
hereunder comply with the requirements of Section 409A of the Code and any related regulations or other guidance promulgated
with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service (“Section 409A”). Any
provision that would cause the Plan or any Award granted hereunder to fail to satisfy Section 409A shall have no force or effect
until amended to comply with Section 409A, which amendment may be retroactive to the extent permitted by Section 409A.
x
WD-40 COMPANY
2016 STOCK INCENTIVE PLAN
GLOSSARY
As used in the Plan, the following definitions shall apply:
1)
“Applicable Laws” means the legal requirements relating to the administration of stock incentive plans, if any,
under applicable provisions of federal securities laws, state corporate and securities laws, the Code, and the rules of any applicable
stock exchange or national market system.
2)
“Award” means, individually or collectively, Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Stock-Based
Awards granted under the Plan.
3)
“Award Agreement” means an agreement entered into by the Company and a Participant setting forth the terms
and provisions applicable to an Award.
4)
“Board” means the Board of Directors of the Company.
5)
“Cause” means (i) the Participant’s commission of acts subject to prosecution as a felony involving moral
turpitude; (ii) the Participant’s material breach of fiduciary duty as an executive officer or director of the Company which has
resulted, or is likely to result, in material economic damage to the Company; or (iii) the Participant’s willful gross misconduct or
willful gross neglect of duties (other than any such neglect resulting from the Participant's incapacity due to physical or mental
illness); provided that no act or failure to act by the Participant will constitute “Cause” under clause (ii) if the Executive believed
in good faith that such act or failure to act was in the best interest of the Company.
Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer of the Company or a member of the Committee or another authorized officer of the
Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done or omitted to be done
by the Participant in good faith and in the best interests of the Company. The cessation of employment of the Participant shall
not be deemed to be for Cause unless and until the Chief Executive Officer, the Vice President, Global Organization
Development, and the Vice President, General Counsel/Corporate Secretary unanimously agree that, in their good faith opinion,
the Participant is guilty of the conduct described in subsections (i), (ii) or (iii) above, and so notify the Participant specifying the
particulars thereof in detail.
6)
“Change in Control” means
a)
The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act ) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 30% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common
Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection,
the following acquisitions shall not constitute a Change in Control: 1) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege), 2) any acquisition by the Company, including any acquisition
which, by reducing the number of shares outstanding, is the sole cause for increasing the percentage of shares beneficially owned
by any such Person to more than the applicable percentage set forth above, 3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation controlled by the Company or 4) any acquisition by
any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or
b)
Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent Board, shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the Board; or
c)
A reorganization, merger or consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another corporation (a “Business Combination”), in each case, unless,
following such Business Combination, (i) more than 60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including without limitation, a corporation which as a
xi
result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or
more subsidiaries) is represented by Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively, that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares
into which such Outstanding Company Common Stock and Outstanding Company Voting Securities were converted pursuant to
such Business Combination) and such ownership of common stock and voting power among the holders thereof is in substantially
the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business Combination; or
d)
A complete liquidation or dissolution of the Company.
e)
Notwithstanding the foregoing, as to any Participant that is party to a severance agreement with the
Company having provisions for payment of severance compensation in the event of a change of control, the definition of Change
of Control for purposes of the Plan shall be interpreted in a manner consistent with the definition of a change of control under
such severance agreement, provided that Change of Control is assumed to mean, for purposes of Section 19 of the Plan, a
consummated Change of Control as otherwise so defined.
7)
“Code” means the Internal Revenue Code of 1986, as amended.
8)
administer the Plan.
“Committee” means the Committee, as specified in Section 2(a) of the Plan, appointed by the Board to
9)
10)
“Company” means WD-40 Company and any successor thereto as provided in Section 23 of the Plan.
“Consultant” means any consultant or advisor to the Company or a Subsidiary.
11)
“Continuous Service” means that the provision of services to the Company or any Subsidiary in any capacity
of Employee, Director or Consultant is not interrupted or terminated. Continuous Service shall not be considered interrupted in
the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the
Company, any Subsidiary, or any successor. A leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract.
12)
“Director” means any individual who is a member of the Board of Directors of the Company or a Subsidiary
who is not an Employee.
13)
14)
“Dividend” means the dividends declared and paid on Shares subject to an Award.
“Dividend Equivalent” means, with respect to Shares subject to an Award, a right to be paid an amount equal
to the Dividends declared and paid on an equal number of outstanding Shares.
15)
16)
17)
18)
“Employee” means any employee of the Company or a Subsidiary.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
“Fair Market Value” means, as of any date, the value of a Share determined as follows:
a)
Where there exists a public market for the Share, the Fair Market Value shall be (A) the closing sales
price for a Share on the date of the determination (or, if no sales were reported on that date, on the last trading date on which
such sales were reported) on the New York Stock Exchange, the NASDAQ National Market or the principal securities exchange
on which the Share is listed for trading, whichever is applicable, or (B) if the Share is not traded on any such exchange or national
market system, the average of the closing bid and asked prices of a Share on the NASDAQ Small Cap Market, in each case, as
reported in The Wall Street Journal or such other source as the Committee deems reliable; or
In the absence of an established market of the type described above, for the Share, the Fair Market
Value thereof shall be determined by the Committee in good faith, and such determination shall be conclusive and binding on all
persons.
b)
19)
“Freestanding SAR” means an SAR that is granted independently of any Options, as described in Section 7 of
the Plan.
xii
20)
“Full-Value Award” means Awards other than Options, SARs, or other Awards for which the Participant pays,
upon exercise, the grant date intrinsic value directly or by forgoing a right to receive a cash payment from the Company.
21)
“Incentive Stock Option” or “ISO” means an Option intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code.
22)
“Nonqualified Stock Option” means an Option that is not intended to meet the requirement of Section 422 of
the Code.
23)
“Option” means an Incentive Stock Option or a Nonqualified Stock Option granted under the Plan, as described
in Section 6 of the Plan.
24)
“Other Stock-Based Award” means a Share-based or Share-related Award granted pursuant to Section 12 of
the Plan.
25)
outstanding Award.
“Participant” means a current or former Employee, Director or Consultant who has rights relating to an
26)
“Performance-Based Exception” means the performance-based exception from the tax deductibility limitations
of Code Section 162(m).
27)
“Performance Measures” shall have the meaning set forth in Section 14(a) of the Plan.
28)
“Performance Period” means the fiscal period during which a Performance Measure must be attained and
during which an Award is subject to a substantial risk of forfeiture and not transferable, as provided in Sections 10 and 11 of the
Plan. For the sake of clarity, an Award may be granted within ninety (90) days after the commencement of the Performance
Period.
29)
30)
“Performance Share” means an Award granted to a Participant, as described in Section 10 of the Plan.
“Performance Unit” means an Award granted to a Participant, as described in Section 11 of the Plan.
“Period of Restriction” means the period Restricted Stock, Restricted Stock Units or Other Stock-Based
Awards are subject to a substantial risk of forfeiture and/or are not transferable, as provided in Sections 8, 9 and 12 of the Plan.
31)
32)
33)
34)
35)
36)
“Plan” means the WD-40 Company 2016 Stock Incentive Plan.
“Restricted Stock” means an Award granted to a Participant, as described in Section 8 of the Plan.
“Restricted Stock Units” means an Award granted to a Participant, as described in Section 9 of the Plan.
“SEC” means the United States Securities and Exchange Commission.
“Share” means a share of common stock of the Company, par value $.001 per share, subject to adjustment
pursuant to Section 18 herein.
37)
“Stock Appreciation Right” or “SAR” means an Award granted to a Participant, either alone or in connection
with a related Option, as described in Section 7 of the Plan.
38)
“Subsidiary” means any corporation in which the Company owns, directly or indirectly, at least fifty percent
(50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships
and joint ventures) in which the Company owns, directly or indirectly, at least fifty percent (50%) of the combined equity thereof.
Notwithstanding the foregoing, for purposes of determining whether any individual may be a Participant for purposes of any
grant of Incentive Stock Options, the term “Subsidiary” shall have the meaning ascribed to such term in Code Section 424(f).
39)
“Subsidiary Disposition” means the disposition by the Company of its equity holdings in any Subsidiary
effected by a merger or consolidation involving that Subsidiary, the sale of all or substantially all of the assets of that Subsidiary
or the Company’s sale or distribution of substantially all of the outstanding capital stock of such Subsidiary.
40)
“Tandem SAR” means a SAR that is granted in connection with a related Option, as described in Section 7 of
the Plan.
xiii
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ANNUAL REPORT ON FORM 10-K
WD-40_2016AR_10-K_Title.indd 1
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WD-40_2016AR_10-K_Title.indd 2
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:59) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended August 31, 2016
or
(cid:133) 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
(State or other jurisdiction
of incorporation or organization)
1061 Cudahy Place, San Diego, California
(Address of principal executive offices)
95-1797918
(I.R.S. Employer
Identification No.)
92110
(Zip code)
Registrant’s telephone number, including area code: (619) 275-1400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.001 par value
Name of each exchange on which registered
The NASDAQ Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes (cid:59) No (cid:133)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:133) No (cid:59)
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 (cid:59) No (cid:133)(cid:3)
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 (cid:59) No (cid:133)(cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:59)
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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:59) Accelerated filer (cid:133) Non-accelerated filer (cid:133) Smaller reporting company (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes (cid:133) No (cid:59)
The aggregate market value (closing price) of the voting stock held by non-affiliates of the registrant as of February 29, 2016
was approximately $1,492,434,072.
As of October 19, 2016, there were 14,175,738 shares of the registrant’s common stock outstanding.
The Proxy Statement for the annual meeting of stockholders on December 13, 2016 is incorporated by reference into Part III,
Items 10 through 14 of this Annual Report on Form 10-K.
Documents Incorporated by Reference:
WD-40 COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended August 31, 2016
TABLE OF CONTENTS
PART I
Page
Business
Risk Factors
Item 1.
Item 1A.
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9.
Item 9A.
Controls and Procedures
Item 9B. Other Information
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
PART IV
1
5
14
14
14
14
16
17
18
40
41
41
41
42
43
43
43
44
44
45
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Forward-Looking Statements
PART I
This Annual Report on Form 10-K contains forward-looking statements within the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements
which reflect the Company’s current views with respect to future events and financial performance.
These forward-looking statements include, but are not limited to, discussions about future financial and operating results,
including: growth expectations for maintenance products; expected levels of promotional and advertising spending; plans for
and success of product innovation, the impact of new product introductions on the growth of sales; anticipated results from
product line extension sales; and forecasted foreign currency exchange rates and commodity prices. These forward-looking
statements are generally identified with words such as “believe,” “expect,” “intend,” “plan,” “could,” “may,” “aim,” “anticipate,”
“estimate” and similar expressions. The Company undertakes no obligation to revise or update any forward looking statements.
Actual events or results may differ materially from those projected in forward-looking statements due to various factors,
including, but not limited to, those identified in Item 1A of this report. As used in this report, the terms “we,” “our,” “us” and
“the Company” refer to WD-40 Company and its wholly-owned subsidiaries, unless the context suggests otherwise. Amounts
and percentages in tables and discussions may not total due to rounding.
Item 1. Business
Overview
WD-40 Company is a global marketing organization dedicated to creating positive lasting memories by developing and selling
products which 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, the Company sold only one product, WD-40® multi-use product, a maintenance product which acts
as a lubricant, rust preventative, penetrant, cleaner and moisture displacer. Over the last two decades, the Company has evolved
and expanded its product offerings through both research and development activities and through the acquisition of several brands
worldwide. As a result, the Company has built a family of brands and product lines that deliver high quality performance at an
extremely good value to their end users.
The Company currently markets and sells its products in more than 176 countries and territories worldwide primarily through
mass retail and home center stores, warehouse club stores, grocery stores, hardware stores, automotive parts outlets, sport
retailers, independent bike dealers, online retailers and industrial distributors and suppliers.
The Company’s sales come from its 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.
The Company’s strategic initiatives and the areas where it will continue to focus its time, talent and resources in future periods
include: (i) maximizing WD-40 multi-use product sales through geographic expansion and increased market penetration; (ii)
leveraging the WD-40 brand by growing the WD-40 Specialist product line; (iii) leveraging the strengths of the Company through
broadened product and revenue base; (iv) attracting, developing and retaining talented people; and (v) operating with excellence.
The Company is focused on and committed to innovation and renovation of its products. The Company sees innovation and
renovation as important factors to the long-term growth of its brands and product lines, and it intends to continue to work on
future products, product lines, product packaging, product delivery systems and promotional innovations and renovations. The
Company is also focused on expanding its current brands in existing markets with new product development. The Company’s
product development teams support new product development and current product improvement for the Company’s brands. Over
the years, the Company’s research and development team has made an innovation impact on most of the Company’s brands.
Key innovations for the Company’s products include, but are not limited to, WD-40 Smart Straw®, WD-40 Trigger Pro®, WD-
40 Specialist®, WD-40 Bike™, 3-IN-ONE Professional Garage Door Lube™, and Spot Shot Pet Clean™, which is a non-aerosol
Spot Shot trigger product. In late fiscal year 2015, the Company launched a new innovative product called WD-40 EZ Reach
Flexible Straw™ in the United States. WD-40 EZ Reach Flexible Straw features a unique delivery system in the form of an
1
attached 8” flexible straw that bends and keeps its shape to allow for easier use of the WD-40 multi-use product in hard to reach
places.
Financial Information about Operating Segments
The Company’s operating segments are determined consistent with the way management organizes and evaluates financial
information internally for making operating decisions and assessing performance. The Company is organized on the basis of
geographical area into the following three segments:
(cid:120) Americas segment consists of the United States (“U.S.”), Canada and Latin America;
(cid:120)
Europe, Middle East and Africa (“EMEA”) segment consists of countries in Europe, the Middle East, Africa and India;
and
(cid:120) Asia-Pacific segment consists of Australia, China and other countries in the Asia region.
The Company’s management reviews product performance on the basis of sales, which come from its two product groups –
maintenance products and homecare and cleaning products. The financial information required by this item is included in Note
15 – Business Segments and Foreign Operations of the Company’s consolidated financial statements, included in Item 15 of this
report, and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in Item 7 of
this report.
Products
Maintenance Products
Included in the Company’s 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.
The Company’s signature brand in the blue and yellow can with the red top, the WD-40 brand, is included within the maintenance
product category and it accounts for a significant majority of the Company’s sales. The Company has various products and
product lines which it currently sells 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 among multi-purpose maintenance products and
is sold as an aerosol spray, a non-aerosol trigger spray and in liquid 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. The 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 EZ Reach Flexible Straw is the
Company’s latest innovation to its multi-use product. It features a unique delivery system which includes an attached flexible
straw that bends and keeps its shape to allow for easy use of the WD-40 multi-use product in hard to reach places. This new
product was launched at the end of fiscal year 2015 and is currently being marketed in the U.S. and Latin America. WD-40 EZ
Reach Flexible Straw has started to contribute to the overall growth of the WD-40 brand and it is expected to continue to do so
in the future. The launch of the WD-40 EZ Reach Flexible Straw product line has used the same established distribution channels
through which the Company currently sells its existing products.
WD-40 Specialist product line – WD-40 Specialist consists of a line of best-in-class specialty maintenance products that include
penetrants, degreasers, corrosion inhibitors, lubricants and rust removers that are aimed at end users that currently use the WD-
40 multi-use product. The WD-40 Specialist product line is sold primarily in the U.S., Canada, Latin America, Europe, Australia
and Asia. Within the WD-40 Specialist product line, the Company also sells WD-40 Specialist Motorbike in Europe and WD-40
Specialist Lawn and Garden in Australia.
WD-40 Bike product line - The WD-40 Bike product line consists of a comprehensive line of bicycle maintenance products that
include wet and dry chain lubricants, heavy-duty degreasers and foaming wash that are designed for avid and recreational cyclists,
bike enthusiasts and mechanics. The Company launched this product line in the U.S. in fiscal year 2013 in Australia and Europe
in fiscal year 2014, and in Latin America and select countries in Asia in early fiscal year 2016. Although the initial focus for
such sales was on smaller independent bike dealers, distribution of WD-40 Bike products has been expanded to include certain
distributors and retailers in select countries where the Company sells this product. Early in fiscal year 2016, the Company
transitioned the WD-40 Bike business in the U.S. from one with distribution limited primarily to independent bike dealers to one
which also includes a limited group of customers which are currently in place for other maintenance products in the Americas
segment.
2
The Company also has the following additional brands which are included within its 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 for household consumers. 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 a
professional line of products known as 3-IN-ONE Professional, which is a line of high quality, maintenance products. The 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, Australia and Asia.
GT85® - The GT85 brand is a multi-purpose bike maintenance product 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 U.K., with
additional sales in foreign markets including those in Spain and other European countries. GT85 products are also currently sold
in the United States. This brand was acquired by the Company’s U.K. subsidiary in September 2014 and it has helped build upon
the Company’s strategy to develop new product categories for WD-40 Specialist and WD-40 BIKE.
Homecare and Cleaning Products
The Company sells its homecare and cleaning products in certain locations worldwide and they include a portfolio of well-known
brands as follows:
X-14 - The X-14 brand is a line of quality products designed for unique cleaning needs. X-14 is sold as a liquid mildew stain
remover and as an automatic toilet bowl cleaner. X-14 is sold primarily in the U.S. through grocery and mass retail channels as
well as through online retailers.
2000 Flushes - The 2000 Flushes brand is a line of long-lasting automatic toilet bowl cleaners which includes a variety of
formulas. 2000 Flushes is sold primarily in the U.S. and Canada through grocery and mass retail channels as well as through
online retailers.
Carpet Fresh - The Carpet Fresh brand is a line of room and rug deodorizers sold as powder, aerosol quick-dry foam and trigger
spray products. Carpet Fresh is sold primarily through grocery and mass retail channels as well as through online retailers in the
U.S., the U.K. and Australia. In the U.K., these products are sold under the 1001 brand name and in Australia, they are sold under
the No Vac brand name.
Spot Shot - The Spot Shot brand is sold as an aerosol carpet stain remover 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 Clean, 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. and Canada. Spot Shot products
are also sold in the U.K. under the 1001 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. The brand was acquired in order to introduce the Company’s other
homecare and cleaning product formulations under the 1001 brand and to expand the Company’s homecare and cleaning products
business into the U.K. market.
Lava - 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.
The Company’s homecare and cleaning products, particularly those in the U.S., are considered harvest brands which continue to
provide positive returns to the Company but are becoming a smaller part of the business as sales of the maintenance products
grow with the execution of the Company’s strategic initiatives. Although the Company has evaluated strategic alternatives for
certain of its homecare and cleaning products in prior fiscal years, particularly those in the U.S., it has continued to sell these
brands but has done so with a reduced level of investment.
Financial information about operating segments and product lines is included in Note 15 – Business Segments and Foreign
Operations of the consolidated financial statements, included in Item 15 of this report.
3
Sales and Marketing
The Company’s sales do not reflect any significant degree of seasonality. However, it is common for the Company’s 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 the Company gains or loses customers, when it gains or loses store count for a
customer or when its 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, the Company 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 the Company’s
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 the Company’s sales levels to increase or decrease from period to period. It is also
common and/or possible that the Company 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. The Company is accustomed to
such fluctuations and manages this as part of its normal business activities.
Sources and Availability of Components and Raw Materials
The Company relies on a limited number of suppliers, including single or sole suppliers, for certain of its raw materials,
packaging, product components and other necessary supplies. The Company’s primary components and raw materials include
petroleum-based specialty chemicals and aerosol cans, which are manufactured from commodities that are subject to volatile
price changes. The availability of these components and raw materials is affected by a variety of supply and demand factors,
including global market trends, plant capacity decisions and natural disasters. The Company expects these components and raw
materials to continue to be readily available in the future, although the Company will continue to be exposed to volatile price
changes.
Research and Development
The Company recognizes the importance of innovation and renovation to its long-term success and is focused on and committed
to research and new product development activities, primarily in its maintenance product group. The Company’s 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
the Company’s 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 the Company meets all regulatory requirements for the
formulation of its products. The Company incurred research and development expenses of $7.7 million, $9.0 million, and $6.9
million in fiscal years 2016, 2015 and 2014, respectively. None of this research and development activity was customer-
sponsored.
Manufacturing
The Company outsources directly or through its marketing distributors the manufacturing of its finished products to various third-
party contract manufacturers. The Company or its marketing distributors use contract manufacturers in the U.S., Canada, Mexico,
Brazil, Argentina, Columbia, the U.K., Italy, Australia, Japan, China, South Korea and India. Although the Company does not
typically have definitive minimum purchase obligations included in the contract terms with its contract manufacturers, when
such obligations have been included, they have been immaterial to date. Supply needs are communicated by the Company to its
contract manufacturers, and the Company is committed to purchase the products manufactured based on orders and short-term
projections, ranging from two to five months, provided to the contract manufacturers. The Company also formulates and
manufactures concentrate used in its WD-40 products at its own facilities and at third-party contract manufacturers.
In addition to the commitments to purchase products from contract manufacturers described above, the Company 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.
Order Backlog
Order backlog is not a significant factor in the Company’s business.
4
Competition
The markets for the Company’s products, particularly those related to its homecare and cleaning products, are highly
competitive. The Company’s 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. The Company is 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 the Company. The Company relies on the awareness of
its brands among consumers, the value offered by those brands as perceived by consumers, product innovation and renovation
and its multiple channel distributions as its 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
The Company owns a number of patents, but relies primarily upon its 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.
Employees
At August 31, 2016, the Company employed 445 people worldwide: 172 by the U.S. parent corporation; 7 by the Malaysia
subsidiary; 11 by the Canada subsidiary; 177 by the U.K. subsidiary (including 82 in the U.K., 34 in Germany, 32 in France, 18
in Spain and 11 in Italy); 22 by the Australia subsidiary; 54 by the China subsidiary; and 2 by WD-40 Manufacturing Company,
the Company’s manufacturing subsidiary.
Financial Information about Foreign and Domestic Operations
For detailed information about the Company’s foreign and domestic operations, including net sales by reportable segment and
long-lived assets by geography, refer to Note 15 - Business Segments and Foreign Operations of the consolidated financial
statements, included in Item 15 of this report.
Access to SEC Filings
The Company’s 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 the Company’s website at www.wd40company.com. These reports can
be accessed free of charge from the Company’s website as soon as reasonably practicable after the Company electronically files
such materials with, or furnishes them to, the Securities and Exchange Commission (“SEC”). Information contained on the
Company’s website is not included as a part of, or incorporated by reference into, this report.
Interested readers may also read and copy any materials that the Company files at the SEC Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. Readers may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an internet site (www.sec.gov) that contains the Company’s reports.
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.
The Company’s financial results could suffer if the Company is unable to implement and successfully manage its strategic
initiatives or if the Company’s strategic initiatives do not achieve the intended results.
There is no assurance that the Company will be able to implement and successfully manage its strategic initiatives, including its
five major strategic initiatives, or that the strategic initiatives will achieve the intended results, which include sales volume
growth. The Company’s five core strategic initiatives include: (i) maximizing WD-40 multi-use product sales through geographic
expansion and increased market penetration; (ii) leveraging the WD-40 brand by growing the WD-40 Specialist product line;
(iii) leveraging the strengths of the Company through a broadened product and revenue base; (iv) attracting, developing and
retaining talented people; and (v) operating with excellence. An important part of the Company’s success depends on its
continuing ability to attract, retain and develop highly qualified personnel. The Company’s future performance depends in
5
significant part on the continued service of its executive officers, key personnel and other talented people. The loss of the services
of key employees could have a material adverse effect on the Company’s business and prospects. Competition for such personnel
is intense, and there can be no assurance that the Company can retain its key employees or attract, assimilate and retain employee
engagement in the future. If the Company is unable to implement and successfully manage its strategic initiatives in accordance
with its business plans, the Company’s business and financial results could be adversely affected. Moreover, the Company cannot
be certain that the implementation of its strategic initiatives will necessarily advance its business or financial results as intended.
Cost increases or cost volatility in finished goods, components, raw materials, transportation and other necessary supplies or
services could harm or impact the Company’s financial condition and results of operations.
Increases in the cost of finished goods, components and raw materials and increases in the cost of transportation and other
necessary supplies or services may harm the Company’s financial condition and results of operations. Petroleum-based specialty
chemicals and aerosol cans, which constitute a significant portion of the costs for many of the Company’s 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 directly impacts the cost of petroleum-based specialty chemicals which are indexed to the price of crude oil.
Additionally, fluctuations in oil and diesel fuel prices have also historically impacted the Company’s cost of transporting its
products among other input costs. If there are significant increases in the costs of components, raw materials and other expenses,
and the Company is not able to increase the prices of its products or achieve cost savings to offset such cost increases, the
Company’s gross margins and operating results will be negatively impacted. In addition, if the Company increases product sales
prices in response to increases in the cost of such raw materials, and those raw material costs later decline significantly, the
Company may not be able to sustain its 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 the Company’s products, any significant fluctuation in the costs of components
and raw materials could have a material impact on the gross margins realized on the Company’s products. Sustained increases
in the cost of raw materials, components, transportation and other necessary supplies or services, or significant volatility in such
costs, could have a material adverse effect on the Company’s financial condition and results of operations.
Global operations outside the U.S. expose the Company to uncertain conditions, foreign currency exchange rate risk and
other risks in international markets.
The Company’s sales outside of the U.S. were approximately 58% of consolidated net sales in fiscal year 2016 and one of its
strategic initiatives includes maximizing the WD-40 multi-use product through geographic expansion and market penetration.
As a result, the Company currently faces, and will continue to face, substantial risks associated with having increased global
operations outside the U.S., including:
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economic or political instability in the Company’s global markets, including Canada, Latin America, the Middle East,
parts of Asia, Russia, Eastern Europe and the Eurozone countries;
restrictions on or costs relating to the repatriation of foreign profits to the U.S., including possible taxes or withholding
obligations on any repatriations;
challenges associated with conducting business in foreign jurisdictions, including those related to the Company’s
understanding of business laws and regulations in such foreign jurisdictions;
increasing tax complexity associated with operating in multiple tax jurisdictions;
dispersed employee base and compliance with employment regulations and other labor issues, such as labor laws and
minimum wages, in countries outside the U.S.; 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 the Company’s ability to sell its products on a competitive basis in global markets
outside the U.S. and could have a material adverse effect on the Company’s business, financial condition and results of operations.
Approximately 38% of the Company’s revenues in fiscal year 2016 were generated in currencies other than the U.S. dollar, which
is the reporting currency of the Company. In addition, all of the Company’s foreign subsidiaries have functional currencies other
than the U.S. Dollar and the Company’s largest subsidiary is located in the U.K. and generates significant sales in Pound Sterling
and Euro. As a result, the Company is also exposed to foreign currency exchange rate risk with respect to its sales, expenses,
profits, cash and cash equivalents, other assets and liabilities denominated in currencies other than the U.S. Dollar. In particular,
the Company’s financial results are negatively impacted when the foreign currencies in which its subsidiary offices operate
weaken relative to the U.S. Dollar. Although the Company uses instruments to hedge certain foreign currency risks, primarily
those associated with its U.K. subsidiary and converting accounts receivable and accounts payable balances denominated in non-
functional currencies, it is not fully protected against foreign currency fluctuations and, therefore, the Company’s 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.
6
As a result of the June 23, 2016 referendum by British voters to exit the European Union (“Brexit”), global markets and foreign
currencies have been adversely impacted. In particular, the value of the Pound Sterling has sharply declined as compared to the
U.S. Dollar and other currencies in the months following this vote. This volatility in foreign currencies is expected to continue
as the U.K. negotiates and executes its exit from the European Union but it is uncertain over what time period this will occur. A
significantly weaker Pound Sterling compared to the U.S. Dollar over a sustained period of time may have a significant negative
effect on the Company’s results of operations.
Additionally, the Company’s 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.
The uncertainties and likely complications resulting from Brexit may increase these risks for the Company’s European business
operations. As the Company further develops and grows its business operations outside the U.S., the Company is exposed to
additional complexities and risks, particularly in China, Russia and 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 customary. Any failure to comply with
these laws, even if inadvertent, could result in significant penalties or otherwise harm the Company’s reputation and business.
Although the Company has adopted policies and contract terms to mandate compliance with these laws, there can be no assurance
that all of its employees, contractors and agents will comply with the Company’s requirements. Violations of these laws could
be costly and disrupt the Company’s business, which could have a material adverse effect on its business, financial condition and
results of operations
Global economic conditions may negatively impact the Company’s financial condition and results of operations.
A general weakening or decline in the global economy or a reduction in industrial outputs, business or consumer spending or
confidence could delay or significantly decrease purchases of the Company’s products by its customers and end users. Consumer
purchases of discretionary items, which could include the Company’s 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
the Company’s 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 the Company’s competitors may increase their level of
promotional activities to maintain sales volumes, both of which may negatively impact the Company’s financial condition and
results of operations. In addition, the Company’s sales and operating results may be affected by uncertain or changing economic
and market conditions, including inflation, deflation, prolonged weak consumer demand, political instability or other changes
which may affect the principal markets in which the Company conducts its business. If economic or market conditions in key
global markets deteriorate, the Company may experience material adverse effects on its business, financial condition and results
of operations.
Adverse economic and market conditions could also harm the Company’s business by negatively affecting the parties with whom
it does business, including its customers, retailers, distributors and wholesalers, and third-party contract manufacturers and
suppliers. These conditions could impair the ability of the Company’s customers to pay for products they have purchased from
the Company. As a result, allowances for doubtful accounts and write-offs of accounts receivable from the Company’s customers
may increase. In addition, the Company’s third-party contract manufacturers and its suppliers may experience financial
difficulties that could negatively affect their operations and their ability to supply the Company with finished goods and the raw
materials, packaging, and components required for the Company’s products.
If the success and reputation of one or more of the Company’s leading brands erodes, its business, financial condition and
results of operations could be negatively impacted.
The financial success of the Company is directly dependent on the success and reputation of its brands, particularly its WD-40
brand. The success and reputation of the Company’s brands can suffer if marketing plans or product development and
improvement initiatives do not have the desired impact on the brands’ image or do not attract customers as intended. The
Company’s brands can also be adversely impacted due to the activities and pressures placed on them by the Company’s
competitors. Further, the Company’s business, financial condition and results of operations could be negatively impacted if one
of its 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 the Company’s products, can be due to items such as product contamination, regulatory non-
compliance, packaging errors, incorrect ingredients or components in the Company’s product or low quality ingredients in the
Company’s products due to suppliers delivering items that do not meet the Company’s 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 the Company’s brands and a decline in product quality could result in product liability
7
claims. Although the Company makes every effort to prevent brand erosion and preserve its reputation and the reputation of its
brands, there can be no assurance that such efforts will be successful.
Sales unit volume growth may be difficult to achieve.
The Company’s ability to achieve sales volume growth will depend on its ability to (i) execute its strategic initiatives, (ii) drive
growth within its existing markets through innovation, renovation and enhanced merchandising and marketing of its established
brands, and (iii) capture market share from its competitors. It is more difficult for the Company to achieve sales volume growth
in mature markets where the Company’s products are widely used as compared to in developing or emerging markets where the
Company’s products have been newly introduced or are not as well known by consumers. In order to protect the Company’s
existing market share or capture additional market share from its competitors, the Company may need to increase its expenditures
related to promotions and advertising or introduce and establish new products or product lines. In past periods, the Company has
also increased sales prices on certain of its products in response to increased costs for components and raw materials. Sales price
increases may slow sales volume growth or create declines in volume in the short term as customers adjust to sales price increases.
In addition, a change in the strategies of the Company’s existing customers, including shelf simplification, the discontinuation
of certain product offerings or the shift in shelf space to competitors’ products could reduce the Company’s sales and potentially
offset sales volume increases achieved as a result of other sales growth initiatives. If the Company is unable to increase market
share in its existing product lines by developing product improvements, investing adequately in its existing brands, building
usage among new customers, developing, acquiring or successfully launching new products or product line extensions, or
successfully penetrating new and developing markets globally, the Company may not achieve its sales volume growth objectives.
Government laws and regulations, including environmental laws and regulations, could result in material costs or otherwise
adversely affect the Company’s financial condition and results of operations.
The manufacturing, chemical composition, packaging, storage, distribution and labeling of the Company’s products and the
manner in which the Company’s business operations are conducted must comply with an extensive array of federal, state and
foreign laws and regulations. If the Company is not successful in complying with the requirements of all such regulations, it
could be fined or other actions could be taken against the Company by the applicable governing body, including the possibility
of a required product recall. Any such regulatory action could adversely affect the Company’s 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 the Company’s ability to obtain raw materials, components
and/or finished goods or could result in increased costs. In the event that such regulations result in increased product costs, the
Company may not be in a position to raise selling prices, and therefore an increase in costs could have a material adverse effect
on the Company’s business, financial condition and results of operations.
Some of the Company’s products have chemical compositions that are controlled by various state, federal and international laws
and regulations, such as regulations issued by the California Air Resources Board relating to permitted levels of volatile organic
compounds. The Company is required to comply with these laws and regulations and it seeks to anticipate regulatory
developments that could impact the Company’s ability to continue to produce and market its products. The Company invests in
research and development to maintain product formulations that comply with such laws and regulations. There can be no
assurance that the Company will not be required to alter the chemical composition of one or more of the Company’s 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 its products in response to any such regulatory
requirements could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company is 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 the Company’s products and, if so, whether they originate from the Democratic
Republic of Congo (“DRC”) or adjoining countries. Although the Company’s current products do not contain such conflict
minerals and the Company has concluded this in its annual evaluations to date, the Company’s supply chain structure is complex.
As a result, management may have difficulty determining whether these materials exist within the Company’s products in future
periods, and if the Company were to conclude that these materials exist within the Company’s products in future periods, the
Company may have difficulty verifying the origin of such materials for purposes of disclosures required by the SEC rules.
The Company is also subject to numerous environmental laws and regulations that impose various environmental controls on its
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 the Company’s operations. These laws and regulations also impose strict, retroactive and joint and several liability for the
8
costs of, and damages resulting from, cleaning up current sites, past spills, disposals and other releases of hazardous substances.
The Company believes that its expenditures related to environmental matters have not had, and are not currently expected to
have, a material adverse effect on its financial condition, results of operations or cash flows. However, the environmental laws
under which the Company operates are complicated, often become increasingly more stringent and may be applied retroactively.
Accordingly, there can be no assurance that the Company 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 the Company’s business, financial condition or results of operations.
Additional laws and regulations require that the Company carefully manage its supply chain for the production, distribution and
sale of goods. For instance, regulations under the California Transparency in Supply Chains Act and the U.K. Modern Slavery
Act require attention to the employment practices of our suppliers. Various regulations affect the packaging, labelling and
shipment of our products, including the Globally Harmonized System of Classification and Labelling of Chemicals which is
applicable in many countries worldwide, and regulations issued by the U.S. Consumer Product Safety Commission, the U.S.
Environmental Protection Agency, the U.S. Federal Trade Commission, and similar foreign jurisdiction regulatory agencies. Our
failure to comply with any of these regulations or our inability to adequately predict the manner in which these regulations are
interpreted and applied to our business by the applicable enforcement agencies could have a materially adverse effect on our
financial condition and results of operations.
Failure to maximize or to successfully assert the Company’s intellectual property rights or infringement by the Company on
the intellectual property rights of others could impact its competitiveness or otherwise adversely affect the Company’s
financial condition and results of operations.
The Company relies on trademark, trade secret protection, patent and copyright laws to protect its intellectual property rights.
Although the Company maintains a global enforcement program to protect its intellectual property rights, there can be no
assurance that these intellectual property rights will be maximized or that they can be successfully asserted. Trade secret
protection, particularly for the Company’s 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 to maintain the secrecy of the Company’s trade secrets, the loss of trade secret protection could
have an adverse effect on the Company’s financial condition. There is a risk that the Company will not be able to obtain and
perfect its own intellectual property rights or, where appropriate, license intellectual property rights necessary to support new
product introductions or acquired product lines. The Company cannot be certain that these rights, if obtained, will not be
invalidated, circumvented or challenged in the future, and the Company could incur significant costs in connection with legal
actions to defend its intellectual property rights. In addition, even if such rights are obtained in the U.S., it may be that the laws
of some of the other countries in which the Company’s products are or may be sold do not protect intellectual property rights to
the same extent as the laws of the United States, or they may be difficult to enforce. If other companies infringe the Company’s
intellectual property rights or take part in counterfeiting activities, they may dilute the value of the Company’s brands in the
marketplace, which could diminish the value that consumers associate with the Company’s brands and harm its sales. The failure
of the Company to protect or successfully assert its intellectual property rights or to protect its other proprietary information
could make the Company less competitive and this could have a material adverse effect on its business, financial condition and
results of operations.
If the Company is 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 the
Company’s 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 the Company 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 its business, financial condition and results of operations.
Malfunctions of the critical information systems that the Company uses for the daily operations of its business, cyberattacks
and privacy breaches could adversely affect the Company’s ability to conduct business.
To conduct its business, the Company relies extensively on information technology systems, networks and services, some of
which are managed, hosted and provided by third-party service providers. System failure, malfunction or loss of data which is
housed in the Company’s critical information systems could disrupt its ability to timely and accurately process transactions and
produce key financial reports, including information on the Company’s operating results, financial position and cash flows. In
addition, information technology security threats and more sophisticated computer crime pose a potential risk to the security of
the Company’s information technology systems and networks, as well as to the confidentiality, availability and integrity of the
Company’s data. The Company’s information systems could be damaged or cease to function properly due to a number of
reasons, including catastrophic events, power outages and security breaches. A security breach resulting in the unauthorized
release of sensitive data from the Company’s information systems could also materially increase the costs that the Company
9
already incurs to protect against such risks. Although the Company has 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, the Company may experience interruptions in its ability to manage its daily operations and this could
adversely affect the Company’s 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 which is not widely
used by other companies. The company that owns and supports this application may not be able to provide the same level of
support as that of companies which own larger, more widely spread information systems. If the company that 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 the Company’s daily operations or its business, financial condition and results of operations.
In addition, the Company’s U.K. subsidiary has been in the process of implementing a major upgrade to its critical information
system. The final phase of this implementation is expected to be completed in fiscal year 2017. This information system is being
used by the U.K. subsidiary to process all of the daily transactions for the U.K. subsidiary and its branch offices located in Europe
and to produce key financial reports for the European operations. If the U.K. subsidiary experiences difficulties in completing
the final phase of this implementation at its various locations, the Company may experience interruptions in its ability to manage
its daily operations and report financial results and this could adversely affect the Company’s business, financial condition and
results of operations.
The Company faces competition in its markets which could lead to reduced sales and profitability.
The Company encounters competition from similar and alternative products, many of which are produced and marketed by major
national or multinational companies. In addition, the Company frequently discovers products in certain markets that are
counterfeit reproductions of the Company’s WD-40 products as well as products otherwise bearing an infringing trade dress. The
availability of counterfeits and other infringing products, particularly in China, Russia and emerging markets, could adversely
impact the Company’s sales and potentially damage the value and reputation of its brands.
The Company’s 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 the Company’s homecare and cleaning products are larger and have financial resources greater than
those of the Company. 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
the Company.
Competitive activity may require the Company to increase its investment in marketing or reduce its 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 the Company’s 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 the Company or the
infringement of its products and brands will not have a material adverse effect on its business, financial condition and results of
operations.
Dependence on key customers could adversely affect the Company’s business, financial condition and results of operations.
The Company sells its products through a network of domestic and international mass retail and consumer retailers as well as
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 in the U.S. is comprised of several of these large
chain stores that capture the bulk of the market share. Since many of the Company’s customers have been part of the consolidation
in the retail industry, these limited customers account for a large percentage of the Company’s net sales. Although the Company
expects that a significant portion of its revenues will continue to be derived from this limited number of customers, there was no
individual customer that contributed to more than 10% of the Company’s consolidated net sales in fiscal year 2016. As a result,
changes in the strategies of the Company’s 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 the Company’s sales. The loss of, or
reduction in, orders from any of the Company’s most significant customers could have a material adverse effect on the
Company’s brand values, business, financial condition and results of operations. Large customers may seek price reductions,
10
added support or promotional concessions. If the Company agrees to such customer demands and/or requests, it could negatively
impact the Company’s ability to maintain existing profit margins.
In addition, the Company’s business is based primarily upon individual sales orders, and the Company typically does not enter
into long-term contracts with its customers. Accordingly, these customers could reduce their purchasing levels or cease buying
products from the Company at any time and for any reason. The Company is 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 the
Company ceases doing business with a significant customer or if sales of its products to a significant customer materially
decrease, the Company’s business, financial condition and results of operations may be harmed.
The Company may not successfully develop, introduce and /or establish new products and line extensions.
The Company’s future performance and growth depend, in part, on its ability to successfully develop, introduce and/or establish
new products as both brand extensions and/or line extensions. The Company cannot be certain that it will successfully achieve
those goals. The Company competes 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. The ability of the Company to
understand consumer preferences is key to maintaining and improving the competitiveness of its 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 the Company 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 Company not being first to
market. As the Company continues to focus on innovation and renovation of its products, the Company’s business, financial
condition or results of operations could be adversely affected in the event that the Company is not able to effectively develop
and introduce new or renovated products and line or brand extensions.
Goodwill and intangible assets are subject to impairment risk.
In accordance with the authoritative accounting guidance on goodwill and intangibles, the Company assesses the potential
impairment of its 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. The Company also assesses its 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 the Company’s strategy for its overall business or use of acquired assets,
unexpected negative industry or economic trends, decline in the Company’s 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 the Company’s 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. The Company may be required to record a
significant charge in its consolidated financial statements during the period in which any impairment of its goodwill or intangible
assets is identified and this could negatively impact the Company’s financial condition and results of operations. Although the
Company has recorded significant impairments to certain of its intangible assets in prior fiscal years, no such impairments have
been identified or recorded to its goodwill. Changes in management estimates and assumptions as they relate to valuation of
goodwill and intangible assets could affect the Company’s financial condition or results of operations in the future.
The Company may also divest of certain of its assets, businesses or brands that do not align with the Company’s strategic
initiatives. Any divestiture could negatively impact the profitability of the Company 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. The Company may
also be required to recognize impairment charges as a result of a divesture.
11
Changes in marketing distributor relationships that are not managed successfully by the Company could result in a disruption
in the affected markets.
The Company distributes its products throughout the world in one of two ways: the direct distribution model, in which products
are sold directly by the Company to wholesalers and retailers in the U.S., Canada, Australia, China, the U.K. and a number of
other countries 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 certain countries where the
Company does not have direct Company-owned operations. Instead, the Company partners with local companies who perform
the sales, marketing and distribution functions. The Company invests time and resources into these relationships. Should the
Company’s relationship with a marketing distributor change or terminate, the Company’s sales within such marketing
distributor’s territory could be adversely impacted until such time as a suitable replacement could be found and the Company’s
key marketing strategies implemented. There is a risk that changes in such marketing distributor relationships, including changes
in key marketing distributor personnel, that are not managed successfully, could result in a disruption in the affected markets and
that such disruption could have a material adverse effect on the Company’s 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 the Company’s business, 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 the Company’s business and this could adversely affect the Company’s financial
condition and results of operations.
The Company relies on a limited number of third-party contract manufacturers, logistics providers and suppliers, including single
or sole source suppliers for certain of its raw materials, packaging, product components and other necessary supplies. The
Company does not have direct control over the management or business of these third parties, except indirectly through terms
negotiated in service or supply contracts. Should the terms of doing business with the Company’s primary third-party contract
manufacturers, suppliers and/or logistics providers change or should the Company have a disagreement with or be unable to
maintain relationships with such third parties or should such third parties experience financial difficulties, the Company’s
business may be disrupted. In addition, if the Company is unable to contract with third-party manufacturers or suppliers for the
quantity and quality levels needed for its business, the Company could experience disruptions in production and its financial
results could be adversely affected.
Product liability claims and other litigation and/or regulatory action could adversely affect the Company’s sales and operating
results.
While the Company makes every effort to ensure that the products it develops and markets are safe for consumers, the use of the
Company’s products may expose the Company to liability claims resulting from such use. Claims could be based on allegations
that, among other things, the Company’s products 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 the Company’s sales and operating results. The Company maintains product liability insurance that it
believes will be adequate to protect the Company from material loss attributable to such 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 of the Company may also expose the Company to litigation risks, including risks that may
not be covered by insurance such as contract disputes. If successful claims are asserted by third parties against the Company for
uninsured liabilities or liabilities in excess of applicable limits of insurance coverage, the Company’s business, financial condition
and results of operations may be adversely affected. In addition, if one of the Company’s products was determined to be defective,
the Company could be required to recall the product, which could result in adverse publicity, loss of revenues and significant
expenses.
Additionally, the Company’s products may be associated with competitor products or other products in the same category, which
may be alleged to have caused harm to consumers. As a result of this association, the Company may be named in unwarranted
legal actions. The potential costs to defend such claims may materially affect the Company’s business, financial condition and
results of operations.
The Company’s operating results and financial performance may not meet expectations which could adversely affect the
Company’s stock price.
The Company cannot be sure that its operating results and financial performance, which include sales growth, net income,
earnings per common share, gross margin and cash flows, will meet expectations. If the Company’s assumptions and estimates
are incorrect or do not come to fruition, or if the Company does not achieve all of its key goals or strategic initiatives, then the
12
Company’s actual performance could vary materially from its internal expectations and those of the market. Failure to meet or
exceed these expectations could cause the market price of the Company’s stock to decline. The Company’s 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 operating results and financial condition of the Company. To
some extent, the Company plans its 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 due to actual expense levels that are
higher than might otherwise have been appropriate.
Resolution of income tax matters may impact the Company’s financial condition and results of operations.
Significant judgment is required in determining the Company’s effective income tax rate and in evaluating tax positions,
particularly those related to uncertain tax positions. The Company provides 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 the Company’s effective tax rate. When particular tax matters arise,
a number of years may elapse before such matters are audited and finally resolved. Favorable resolution of such matters could
be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable resolution of any tax
matter could increase the Company’s effective tax rate. 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, refer to the information set forth in Note
12 – Income Taxes of the consolidated financial statements, included in Item 15 of this report.
In addition, changes in tax rules may adversely affect the Company’s future financial results or the way management conducts
its business. For example, the Company holds a significant amount of cash outside of the United States. As of August 31, 2016,
the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on $113.4 million of
undistributed earnings of certain foreign subsidiaries since these earnings are considered indefinitely reinvested outside of the
United States. The Company’s future financial results and liquidity may be adversely affected if tax rules regarding un-repatriated
earnings change, if management elects for any reason in the future to repatriate some or all of the foreign earnings that were
previously deemed to be indefinitely reinvested outside of the U.S., or if the U.S. international tax rules change as part of
comprehensive tax reform or other tax legislations.
In the fourth quarter of fiscal year 2016, the Company determined that it would undertake, in fiscal year 2017, a one-time
repatriation of $8.2 million, which represents all of the historical foreign earnings from its Australia subsidiary and 90% of the
historical foreign earnings from its China subsidiary. Management determined that such a foreign distribution was prudent due
to the current favorable tax consequences of such a distribution, stemming principally from the recent significant strengthening
of the U.S. dollar against various currencies in which the Company conducts business. The Company continues to consider the
remaining amount of unremitted foreign earnings, primarily in the U.K. and China, to be indefinitely reinvested outside of the
United States. See Note 12 – Income Taxes for additional information on this one-time repatriation.
The Company may not have sufficient cash to service its indebtedness or to pay cash dividends.
The Company’s debt consists of a revolving credit facility and management has used the proceeds of this revolving credit facility
primarily for stock repurchases. In addition, the Company utilized this revolving credit facility in September 2016 to fund the
purchase of its new headquarters office, which will house both corporate employees and employees in the Company’s Americas
segment. In order to service such debt, the Company is required to use its income from operations to make interest and principal
payments required by the terms of the loan agreement. In addition, the Company’s loan agreement includes covenants to maintain
certain financial ratios and to comply with other financial terms, conditions and covenants. Also, the Company has historically
paid out a large part of its earnings to stockholders in the form of regular quarterly cash dividends. In December 2015, the Board
of Directors declared an 11% increase in the regular quarterly cash dividend, increasing it from $0.38 per share to $0.42 per
share.
The Company may incur substantial debt in the future for acquisitions or other general business or business development
activities. In addition, the Company may continue to use available cash balances to execute share repurchases under approved
share buy-back plans. To the extent that the Company is 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 the Company. If the Company is unable to
obtain such financing or to service its existing or future debt with its operating income, or if available cash balances are affected
by future business performance, liquidity, capital needs, alternative investment opportunities or debt covenants, the Company
could be required to reduce, suspend or eliminate its dividend payments to its stockholders.
13
The Company’s business development activities may not be successful.
The Company seeks to 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 the Company is not able to identify, acquire and
successfully integrate acquired products or companies or successfully manage joint ventures or other strategic partnerships, the
Company 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 materially adversely affect the Company’s business, financial condition
and results of operations. In addition, there can be no assurance that the Company’s 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 the Company’s results of
operations and financial condition. In addition, to the extent that the economic benefits associated with any of the Company’s
business development activities diminish in the future, the Company may be required to record impairments to goodwill,
intangible assets or other assets associated with such activities, which could also adversely affect the Company’s business,
financial condition and results of operations.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Americas
The Company owns and occupies an office and plant facility, consisting of office, plant and storage space, at 1061 Cudahy Place,
San Diego, California 92110. The Company also leases additional office and storage space in San Diego. In addition, the
Company purchased a new building located at 9715 Businesspark Avenue, San Diego, California 92131 in September 2016,
which the Company intends to use to house the corporate employees and employees in the Company’s Americas segment who
are currently located at the owned and leased offices in San Diego. The Company leases a regional sales office in Miami, Florida,
a research and development office in Summit, New Jersey and office space in Toronto, Ontario, Canada.
EMEA
The Company owns and occupies an office and plant facility, consisting of office, plant and storage space, in Milton Keynes,
United Kingdom. In addition, the Company also leases another office in United Kingdom and space for its branch offices in
Germany, France, Italy, Spain, Portugal and the Netherlands.
Asia-Pacific
The Company leases office space in Epping, New South Wales, Australia; Shanghai, China; and Kuala Lumpur, Malaysia.
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 11 — Commitments and Contingencies, in the accompanying notes to the consolidated
financial statements included in this report.
Item 4. Mine Safety Disclosures
Not applicable.
14
Executive Officers of the Registrant
The following table sets forth the names, ages, fiscal year elected to current position and current titles of the executive officers
of the Company as of August 31, 2016:
Name, Age and Year Elected to Current Position
Garry O. Ridge
Jay W. Rembolt
Stanley A. Sewitch
Richard T. Clampitt
Michael L. Freeman
Geoffrey J. Holdsworth
William B. Noble
60
65
63
61
63
54
58
1997
2008
2012
2014
2002
1997
1996
Title
President and Chief Executive Officer
Vice President, Finance, Treasurer and Chief Financial Officer
Vice President, Global Organization Development
Vice President, General Counsel and Corporate Secretary
Division President, The Americas
Managing Director, Asia-Pacific
Managing Director, EMEA
Mr. Ridge joined the Company’s Australian subsidiary, WD-40 Company (Australia) Pty. Limited, in 1987 as Managing
Director. He held several senior management positions prior to his election as Chief Executive Officer in 1997.
Mr. Rembolt joined the Company in 1997 as Manager of Financial Services. He was promoted to Controller in 1999 and to Vice
President, Finance/Controller in 2001. He was then named Vice President, Finance and Chief Financial Officer in 2008.
Mr. Sewitch joined the Company in 2012 as Vice President, Global Organization Development. Prior to joining the Company,
Mr. Sewitch was a founder of four businesses, including a human resources and organizational consulting firm (HRG Inc.) which
he led from 1989 until joining the Company.
Mr. Clampitt joined the Company in 2014 as Vice President, General Counsel and Corporate Secretary. He was named as
Corporate Secretary on October 15, 2013. He has been licensed to practice law in the State of California since 1981. Prior to
joining the Company, Mr. Clampitt served as a partner at Gordon & Rees LLP from 2002 through 2013.
Mr. Freeman joined the Company in 1990 as Director of Marketing and was promoted to Director of Operations in 1994. He
became Vice President, Administration and Chief Information Officer in 1996, and was named Senior Vice President, Operations
in 2001 and Division President, The Americas, in 2002.
Mr. Holdsworth joined the Company’s Australia subsidiary, WD-40 Company (Australia) Pty. Limited, in 1996 as General
Manager and was promoted to his current position of Managing Director, Asia-Pacific and as a Director of WD-40 Company
(Australia) Pty. Limited in 1997.
Mr. Noble joined the Company’s Australia subsidiary, WD-40 Company (Australia) Pty. Limited, in 1993 as International
Marketing Manager for the Asia Region. He was then promoted to his current position of Managing Director, EMEA and as a
Director of the Company’s U.K. subsidiary, WD-40 Company Limited, in 1996.
All executive officers hold office at the discretion of the Board of Directors.
15
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The Company’s common stock is traded on the NASDAQ Global Select Market. The following table sets forth the high and low
sales prices per share of the Company’s common stock for each of the quarterly periods indicated as reported by the NASDAQ
Global Select Market.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
101.00
109.37
111.99
125.00
$
$
$
$
Fiscal Year 2016
Low
81.68
94.00
99.32
109.58
$
$
$
$
Fiscal Year 2015
Dividend
High
Low
Dividend
$
$
$
$
0.38
0.42
0.42
0.42
$
$
$
$
78.14
87.09
89.49
91.78
$
$
$
$
65.19
75.30
80.15
80.86
$
$
$
$
0.34
0.38
0.38
0.38
On October 19, 2016, the last reported sales price of the Company’s common stock on the NASDAQ Global Select Market was
$106.42 per share, and there were 14,175,738 shares of common stock outstanding held by approximately 718 holders of record.
Dividends
The Company has historically paid regular quarterly cash dividends on its common stock. In December 2015, the Board of
Directors declared an 11% increase in the regular quarterly cash dividend, increasing it from $0.38 per share to $0.42 per share.
On October 11, 2016, the Company’s Board of Directors declared a cash dividend of $0.42 per share payable on October 31,
2016 to shareholders of record on October 21, 2016.
The Board of Directors of the Company presently intends to continue the payment of regular quarterly cash dividends on the
Company’s common stock. The Company’s 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 October 14, 2014, the Company’s Board of Directors approved a share buy-back plan. Under the plan, which became
effective at the beginning of the third quarter of fiscal year 2015, once the Company’s previous $60.0 million plan was exhausted,
the Company was authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2016. The timing and
amount of repurchases were based on terms and conditions as may be acceptable to the Company’s Chief Executive Officer and
Chief Financial Officer and in compliance with all laws and regulations applicable thereto. During the period from March 1,
2015 through August 31, 2016, the Company repurchased 503,127 shares at a total cost of $47.8 million under this $75.0 million
plan.
On June 21, 2016, the Company’s Board of Directors approved a new share buy-back plan. Under the plan, which became
effective on September 1, 2016 and will remain in effect through August 31, 2018, the Company is authorized to acquire up to
$75.0 million of its outstanding shares on terms and conditions as may be acceptable to the Company’s Chief Executive Officer
and Chief Financial Officer and in compliance with all laws and regulations applicable thereto.
16
The following table provides information with respect to all purchases made by the Company during the three months ended
August 31, 2016. All purchases listed below were made in the open market at prevailing market prices. Purchase transactions
between June 1, 2016 and July 7, 2016 and between August 17, 2016 and August 26, 2016 were executed pursuant to trading
plans adopted by the Company pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
Total
Number of
Shares
Purchased
Average
Price Paid
Per Share
Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
Maximum
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
25,838
9,200
29,602
64,640
$
$
$
$
113.24
116.18
116.32
115.07
25,838
9,200
29,602
64,640
$
$
$
31,674,365
30,605,297
-
(1)
Period
June 1 - June 30
July 1 - July 31
August 1 - August 31
Total
(1) On August 31, 2016, the previous share buy-back plan which was approved on October 14, 2014 expired with less than the entire $75.0 million of
authorized treasury share purchases having been executed. As a result, no remaining amount of shares may yet be purchased under this plan. The
new June 21, 2016 approved $75.0 million share buy-back plan became effective beginning September 1, 2016.
Item 6. Selected Financial Data
The following data has been derived from the Company’s audited consolidated financial statements. The data should be read in
conjunction with such consolidated financial statements and other financial information included elsewhere in this report (in
thousands, except per share amounts):
Net sales
Cost of products sold
Gross profit
Operating expenses
Income from operations
Interest and other income (expense), net
Income before income taxes
Provision for income taxes
Net income
Earnings per common share:
Basic
Diluted
Dividends per share
Weighted-average shares outstanding -
diluted
Total assets
2016
$ 380,670
166,301
214,369
143,021
71,348
1,441
72,789
20,161
52,628
$
As of and for the Fiscal Year Ended August 31,
2015
$ 378,150
177,972
200,178
134,788
65,390
(2,280)
63,110
18,303
44,807
$
2014
$ 382,997
184,144
198,853
135,116
63,737
(778)
62,959
19,213
43,746
$
2013
$ 368,548
179,385
189,163
132,526
56,637
230
56,867
17,054
39,813
$
2012
$ 342,784
174,302
168,482
116,753
51,729
(816)
50,913
15,428
35,485
$
$
$
$
3.65
3.64
1.64
$
$
$
3.05
3.04
1.48
$
$
$
2.89
2.87
1.33
$
$
$
2.55
2.54
1.22
$
$
$
2.22
2.20
1.14
14,379
$ 339,668
14,649
$ 339,257
15,148
$ 347,680
15,619
$ 323,064
16,046
$ 300,870
Long-term obligations (1)
$ 140,579
$ 133,427
$
26,354
$
25,912
$
25,963
(1) Long-term obligations include long-term debt, deferred tax liabilities, net and other long-term liabilities.
17
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 the Company’s financial statements with a narrative from the perspective of management on the Company’s 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, Recently Issued Accounting Standards and Related Parties. The
MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s audited consolidated financial
statements and the related notes included in Item 15 of this report.
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 and expenses 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. 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. 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.
18
Overview
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 which solve problems in workshops, factories and homes around
the world. We market our maintenance products and our 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.
Our 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. We sell our products primarily through mass retail
and home center stores, warehouse club stores, grocery stores, hardware stores, automotive parts outlets, sport retailers,
independent bike dealers, online retailers and industrial distributors and suppliers.
Highlights
The following summarizes the financial and operational highlights for our business during the fiscal year ended August 31, 2016:
(cid:120)
(cid:120)
Consolidated net sales increased $2.5 million, or 1%, for fiscal year 2016 compared to the prior fiscal year. Changes
in foreign currency exchange rates had an unfavorable impact of $15.2 million on consolidated net sales for fiscal year
2016. Thus, on a constant currency basis, net sales would have increased by $17.7 million, or 5%, for fiscal year 2016
compared to the prior fiscal year. Of the $15.2 million unfavorable impact from changes in foreign currency exchange
rates, $11.3 million came from our EMEA segment, which accounted for 36% of our consolidated sales for the fiscal
year ended August 31, 2016.
Consolidated net sales for the WD-40 Specialist product line were $21.5 million which is a 14% increase for fiscal year
2016 compared to the prior fiscal year. Although the WD-40 Specialist product line is expected to provide the Company
with long-term growth opportunities, we will see some volatility in sales levels from period to period due to the timing
of promotional programs, the building of distribution, and various other factors that come with building a new product
line.
(cid:120) Gross profit as a percentage of net sales increased to 56.3% for fiscal year 2016 compared to 52.9% for the prior fiscal
year.
(cid:120)
Consolidated net income increased $7.8 million, or 17%, for fiscal year 2016 compared to the prior fiscal year. Changes
in foreign currency exchange rates had an unfavorable impact of $2.8 million on consolidated net income for fiscal
year 2016. Thus, on a constant currency basis, net income would have increased by $10.6 million, or 24%, for fiscal
year 2016 compared to the prior fiscal year.
(cid:120) Diluted earnings per common share for fiscal year 2016 were $3.64 versus $3.04 in the prior fiscal year.
(cid:120)
Share repurchases continued to be executed under our $75.0 million share buy-back plan, which was approved by the
Company’s Board of Directors in October 2014 and which expired on August 31, 2016. During the period from
September 1, 2015 through August 31, 2016, the Company repurchased 317,084 shares at an average price of $101.31
per share, for a total cost of $32.1 million.
Our strategic initiatives and the areas where we will continue to focus our time, talent and resources in future periods include: (i)
maximizing WD-40 multi-use product sales through geographic expansion and increased market penetration; (ii) leveraging the
WD-40 brand by growing the WD-40 Specialist product line; (iii) leveraging the strengths of the Company through broadened
product and revenue base; (iv) attracting, developing and retaining talented people; and (v) operating with excellence.
19
Results of Operations
Fiscal Year Ended August 31, 2016 Compared to Fiscal Year Ended August 31, 2015
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
2016
2015
Dollars
Percent
$
$
$
$
339,974
40,696
380,670
166,301
214,369
143,021
71,348
52,628
3.64
$
$
$
$
333,306
44,844
378,150
177,972
200,178
134,788
65,390
44,807
3.04
$
$
$
$
6,668
(4,148)
2,520
(11,671)
14,191
8,233
5,958
7,821
0.60
2%
(9)%
1%
(7)%
7%
6%
9%
17%
20%
Net sales:
Maintenance products
Homecare and cleaning products
Total net sales
Cost of products sold
Gross profit
Operating expenses
Income from operations
Net income
Earnings per common share - diluted
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
2016
191,397
135,235
54,038
380,670
$
$
2015
Dollars
Percent
$
$
187,344
136,847
53,959
378,150
$
$
4,053
(1,612)
79
2,520
2%
(1)%
-
1%
Americas
EMEA
Asia-Pacific
Total
Americas
The following table summarizes net sales by product line for the Americas segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Maintenance products
Homecare and cleaning products
Total
% of consolidated net sales
$
$
2016
163,655
27,742
191,397
50%
$
$
2015
156,937
30,407
187,344
50%
Change from
Prior Year
Dollars
Percent
$
$
6,718
(2,665)
4,053
4%
(9)%
2%
Sales in the Americas segment, which includes the U.S., Canada and Latin America, increased to $191.4 million, up $4.1 million,
or 2%, for the fiscal year ended August 31, 2016 compared to the prior fiscal year. Changes in foreign currency exchange rates
in Canada had an unfavorable impact on sales for the Americas segment from period to period. Sales for the fiscal year ended
20
August 31, 2016 translated at the exchange rates in effect for the prior fiscal year would have been $192.5 million in the Americas
segment. Thus, on a constant currency basis, sales would have increased by $5.2 million, or 3%, from period to period.
Sales of maintenance products in the Americas segment increased $6.7 million, or 4%, for the fiscal year ended August 31, 2016
compared to the prior fiscal year. This sales increase was mainly driven by higher sales of maintenance products in the U.S. and
Latin America, which increased 6% and 3%, respectively, from period to period. The sales increase in the U.S. was primarily
due to a higher level of promotional activities for all maintenance products and the added distribution of our new WD-40 EZ
Reach Flexible Straw product. The sales increase in Latin America was primarily due to the success of certain promotional
programs which were conducted in the second quarter of fiscal year 2016, primarily those in Mexico and Chile, as well as the
continued growth of the WD-40 multi-use product throughout the Latin America region. The sales increases in the U.S. and Latin
America were partially offset by a sales decrease in Canada of 14%, from period to period. This decrease was primarily due to
lower sales associated with promotional programs, most of which was driven by unstable market and economic conditions,
particularly in the industrial channel in Western Canada as a result of reduced activity in the oil industry. In addition, sales in
Canada were negatively impacted by unfavorable changes in foreign currency exchange rates form period to period. Also
contributing to the overall sales increase of maintenance products in the Americas segment was higher sales of the WD-40
Specialist product line, which were up $1.1 million, or 10%, from period to period due to new distribution, particularly of certain
new products within this product line during the fourth quarter of fiscal year 2016.
Sales of homecare and cleaning products in the Americas segment decreased $2.6 million, or 9%, for the fiscal year ended August
31, 2016 compared to the prior fiscal year. This sales decrease was driven primarily by a decrease in sales of Spot Shot carpet
stain remover and 2000 Flushes automatic toilet bowl cleaners, most of which is related to the U.S., of 13% and 7%,
respectively. While each of our homecare and cleaning products continue to generate positive cash flows, we have continued to
experience decreased or flat sales for many of these products primarily due to lost distribution, reduced product offerings,
competition, category declines and the volatility of orders from and promotional programs with certain of our customers,
particularly those in the warehouse club and mass retail channels. At August 31, 2016, the carrying value of definite-lived
intangible assets associated with the Company’s trade names for the homecare and cleaning products was $16.8 million, of which
$9.3 million and $4.3 million were associated with the Spot Shot and 2000 Flushes trade names, respectively.
For the Americas segment, 83% of sales came from the U.S., and 17% of sales came from Canada and Latin America combined
for the fiscal year ended August 31, 2016 compared to the prior fiscal year when 82% of sales came from the U.S., and 18%
of sales came from Canada and Latin America combined.
EMEA
The following table summarizes net sales by product line for the EMEA segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Maintenance products
Homecare and cleaning products
Total (1)
% of consolidated net sales
$
$
2016
129,217
6,018
135,235
36%
$
$
2015
129,730
7,117
136,847
36%
Change from
Prior Year
Dollars
Percent
$
$
(513)
(1,099)
(1,612)
-
(15)%
(1)%
(1) While the Company’s reporting currency is 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 45% of its sales are generated in
Euro and 25% 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.
Sales in the EMEA segment, which includes Europe, the Middle East, Africa and India, decreased to $135.2 million, down $1.6
million, or 1%, for the fiscal year ended August 31, 2016 compared to the prior fiscal year. Changes in foreign currency exchange
rates had an unfavorable impact on sales for the EMEA segment from period to period. Sales for the fiscal year ended August
31, 2016 translated at the exchange rates in effect for the prior fiscal year would have been $146.5 million in the EMEA segment.
Thus, on a constant currency basis, sales would have increased by $9.7 million, or 7%, for the fiscal year ended August 31, 2016
compared to the prior fiscal year.
21
The countries in EMEA where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain
and Portugal) and the Germanics sales region (which includes Germany, Austria, Denmark, Switzerland, Belgium and the
Netherlands). Overall, sales from direct markets increased $1.2 million, or 1%, for the fiscal year ended August 31, 2016
compared to the prior fiscal year. Changes in foreign currency exchange rates had an unfavorable impact on sales in the direct
markets in EMEA from period to period. On a constant currency basis, sales in the direct markets would have increased by 10%
from fiscal year 2016 compared to the prior fiscal year.
We experienced sales increases throughout most of the EMEA direct markets for the fiscal year ended August 31, 2016 compared
to the prior fiscal year, with percentage increases in sales as follows: the Germanics region, 10%; Italy, 9%; and France, 1%.
Sales increases in these direct markets were primarily due to increased sales of the WD-40 multi-use product, particularly in the
Germanics region. Sales in the Germanics increased from period to period due to a change in the distribution model for the do-
it-yourself (DIY) channel that we made for this region in fiscal year 2015. In the third quarter of fiscal year 2015, we
shifted away from a distribution model for this channel where we sold product through a large wholesale customer who then
supplied various retail customers to one where we sell direct to these retail customers. Due to the successful build of our direct
customer base in this new model in fiscal year 2016, sales in this region were positively impacted from period to period. The
increased sales in these regions were partially offset by sales decreases in the U.K. and Iberia of 6% and 1%, respectively. Sales
in the U.K. decreased from period to period primarily due to decreased distribution of our 1001 brand in the retail channel from
period to period. Sales generated in Euro in the direct markets also resulted in slightly higher Pound Sterling sales in fiscal year
2016 due the strengthening of the Euro against the Pound Sterling from period to period. The average exchange rate for the Euro
against the Pound Sterling increased from 0.7497 to 0.7637, or 2%. Also contributing to the overall sales increase in the direct
markets were increased sales of the WD-40 Specialist product line of $1.9 million, or 45%, from period to period due to expanded
distribution. Sales from direct markets accounted for 66% of the EMEA segment’s sales for fiscal year ended August 31,
2016 compared to 63% of the EMEA segment’s sales for the prior fiscal year.
The regions in the EMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and
Northern Europe. Sales in the distributor markets decreased $2.8 million, or 6%, for the fiscal year ended August 31, 2016
compared to the prior fiscal year primarily due to an 11% decrease in sales in Russia as a result of the unstable market
conditions in Eastern Europe which started in the third quarter of our fiscal year 2015. Although the market conditions in Russia
have begun to stabilize, our sales have not returned to the levels that we experienced prior to the third quarter of fiscal year 2015.
Sales were also negatively impacted in fiscal year 2016 by continued political and economic instability in other countries in the
distributor markets. Since a high percentage of sales in the distributor markets in the EMEA segment are generated in U.S.
Dollars, there were insignificant impacts due to changes in the foreign currency exchange rates from period to period. The
distributor markets accounted for 34% of the EMEA segment’s total sales for the fiscal year ended August 31, 2016, compared
to 37% for the prior fiscal year.
Asia-Pacific
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
Maintenance products
Homecare and cleaning products
Total
% of consolidated net sales
2016
2015
Dollars
Percent
$
$
47,102
6,936
54,038
14%
$
$
46,639
7,320
53,959
14%
$
$
463
(384)
79
1%
(5)%
-
Sales in the Asia-Pacific segment, which includes Australia, China and other countries in the Asia region remained constant at
$54.0 million for each of the fiscal years ended August 31, 2016 and 2015. Changes in foreign currency exchange rates had an
unfavorable impact on sales for the Asia Pacific segment from period to period. Sales for the fiscal year ended August 31, 2016
translated at the exchange rates in effect for the prior fiscal year would have been $56.8 million in the Asia-Pacific segment.
Thus, on a constant currency basis, sales would have increased by $2.8 million, or 5%, for the fiscal year ended August 31, 2016
compared to the prior fiscal year.
Sales in Asia, which represented 69% of the total sales in the Asia-Pacific segment, increased $0.8 million, or 2%, for the fiscal
year ended August 31, 2016 compared to the prior fiscal year. Sales in the Asia distributor markets increased $0.7 million, or
3%, from period to period, primarily attributable to increased distribution resulting from the success of certain significant
promotional programs for the WD-40 multi-use product in the Asian distributor markets, particularly those in Vietnam, Sri Lanka,
22
and Thailand. Although sales in China remained relatively constant at $13.3 million and $13.2 million for the fiscal years ended
August 31, 2016 and 2015, respectively, changes in foreign currency exchange rates had an unfavorable impact on sales in China.
On a constant currency basis, sales would have increased by 7% from period to period primarily due to increased distribution,
particularly in Southern China.
Sales in Australia decreased by $0.8 million, or 4%, for the fiscal year ended August 31, 2016 compared to the prior fiscal year.
Changes in foreign currency exchange rates had an unfavorable impact on Australia sales. On a constant currency basis, sales
would have increased by 7% for the fiscal year ended August 31, 2016 compared to the prior fiscal year primarily due to increased
distribution and higher sales levels resulting from successful promotional programs as well as continued growth of our base
business.
Gross Profit
Gross profit increased to $214.4 million for the fiscal year ended August 31, 2016 compared to $200.2 million for the prior fiscal
year. As a percentage of net sales, gross profit increased to 56.3% for the fiscal year ended August 31, 2016 compared to 52.9%
for the prior fiscal year.
Gross margin was positively impacted by 2.4 percentage points from period to period due to favorable net changes in the costs
of petroleum-based specialty chemicals and aerosol cans in all three segments. There is often a delay of one quarter or more
before changes in raw material costs impact cost of products sold due to production and inventory life cycles. The average cost
of crude oil which flowed through our cost of goods sold was significantly lower in fiscal year 2016 as compared to the prior
fiscal year, thus resulting in positive impacts to our gross margin from period to period. Due to the volatility of the price of crude
oil, it is uncertain whether we will realize the same level of benefit in our gross margin related to it in future periods. The
combined effects of favorable sales mix changes and other miscellaneous costs positively impacted gross margin by 0.4
percentage points primarily due to a favorable shift in product mix as a result of a higher portion of sales in the Americas segment
being made of higher margin maintenance products from period to period. Gross margin was also positively impacted by
0.2 percentage points from period to period primarily due to sales price increases implemented in the EMEA and Asia-Pacific
segments over the last twelve months. In addition, advertising, promotional and other discounts that we give to our customers
decreased from period to period positively impacting gross margin by 0.1 percentage points. In general, the timing of advertising,
promotional and other discounts may cause fluctuations in gross margin from period to period. The costs associated with certain
promotional activities are recorded as a reduction to sales while others are recorded as advertising and sales promotion expenses.
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.
Changes in foreign currency exchange rates positively impacted gross margin by 0.4 percentage points primarily due to the
fluctuations in the exchange rates for the Euro and U.S. Dollar against the Pound Sterling in our EMEA segment from period to
period. 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 combined effect of the strengthening of both the Euro and U.S. Dollar
against the Pound Sterling from period to period caused an increase in our Pound Sterling sales, resulting in favorable impacts
to the gross margin. These favorable impacts to gross margin were slightly offset by 0.1 percentage points due to higher
warehousing and in-bound freight costs, particularly in the Americas segment from period to period.
Note that 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 $16.1 million and
$15.8 million for the fiscal years ended August 31, 2016 and 2015, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the fiscal year ended August 31, 2016 increased $8.9 million to
$117.8 million from $108.9 million for the prior fiscal year. As a percentage of net sales, SG&A expenses increased to 30.9%
for the fiscal year ended August 31, 2016 from 28.8% for the prior fiscal year. The increase in SG&A expenses was primarily
attributable to higher employee-related costs, increased freight costs and other miscellaneous expenses. Employee-related costs,
which include salaries, incentive compensation, profit sharing, stock-based compensation and other fringe benefits, increased by
$11.5 million. This increase was primarily due to higher accruals for earned incentive compensation from period to period as
well as annual compensation increases, which take effect in the first quarter of the fiscal year, and increased headcount. Freight
costs associated with shipping products to our customers increased $1.0 million primarily due to higher sales volumes in the
EMEA segment from period to period as well as additional costs associated with the shift in the distribution model in the
23
Germanics region in EMEA. Other miscellaneous expenses, which primarily include sales commissions and depreciation
expense, increased by $0.8 million period over period. These increases were partially offset by changes in foreign currency
exchange rates, which had a favorable impact of $4.4 million on SG&A expenses for the fiscal year ended August 31, 2016
compared to the prior fiscal year.
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, 2016 and 2015 were $7.7 million and $9.0 million, respectively. Our research and development team engages in
consumer research, product development, current product improvement and testing activities. This team leverages its
development capabilities by partnering with a network of outside resources including our current and prospective outsource
suppliers. 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 Expenses
Advertising and sales promotion expenses for the fiscal year ended August 31, 2016 decreased $0.6 million to $22.3 million from
$22.9 million for the prior fiscal year. As a percentage of net sales, these expenses decreased to 5.9% for the fiscal year ended
August 31, 2016 from 6.0% for the prior fiscal year. Changes in foreign currency exchange rates had a favorable impact on such
expenses of $0.9 million from period to period. Thus, on a constant currency basis, advertising and sales promotion expenses for
fiscal year 2016 would have increased by $0.3 million, primarily due to a higher level of promotional programs and marketing
support in the EMEA segment from period to period. Investment in global advertising and sales promotion expenses for fiscal
year 2017 is expected to be close to 6.0% of net sales.
As a percentage of net sales, advertising and sales promotion 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 $16.1 million and $16.0 million for the fiscal years ended August 31, 2016 and 2015, respectively. Therefore, our
total investment in advertising and sales promotion activities totaled $38.4 million and $38.9 million for the fiscal years ended
August 31, 2016 and 2015, respectively.
Amortization of Definite-lived Intangible Assets Expense
Amortization of our definite-lived intangible assets remained constant at $3.0 million for both the fiscal years ended August 31,
2016 and 2015.
Income from Operations by Segment
The following table summarizes income from operations by segment (in thousands, except percentages):
Americas
EMEA
Asia-Pacific
Unallocated corporate (1)
Fiscal Year Ended August 31,
Change from
Prior Year
2016
2015
Dollars
Percent
$
$
48,404
31,702
15,162
(23,920)
71,348
$
$
46,674
30,173
12,602
(24,059)
65,390
$
$
1,730
1,529
2,560
139
5,958
4%
5%
20%
(1)%
9%
(1)
Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the operating segments. These expenses are
reported separate from the Company’s identified segments and are included in Selling, General and Administrative expenses on the Company’s consolidated
statements of operations.
Americas
Income from operations for the Americas segment increased to $48.4 million, up $1.7 million, or 4%, for the fiscal year ended
August 31, 2016 compared to the prior fiscal year, primarily due to a $4.1 million increase in sales and a higher gross margin.
As a percentage of net sales, gross profit for the Americas segment increased from 52.6% to 55.1% period over period. This
24
increase in the gross margin was primarily due to the combined positive impacts of decreased costs of petroleum-based specialty
chemicals and aerosol cans as well as favorable sales mix changes, which were slightly offset by increased warehousing and in-
house freight costs from period to period. The higher level of sales from period to period was accompanied by a $5.1 million
increase in operating expenses, most of which related to increased headcount and higher earned incentive compensation expenses
period over period. Operating income as a percentage of net sales increased from 24.9% to 25.3% period over period.
EMEA
Income from operations for the EMEA segment increased to $31.7 million, up $1.5 million, or 5%, for the fiscal year ended
August 31, 2016 compared to the prior fiscal year, primarily due to a higher gross margin, which was partially offset by a $1.6
million decrease in sales and higher operating expenses. As a percentage of net sales, gross profit for the EMEA segment
increased from 54.6% to 58.7% period over period primarily due to the combined positive impacts of decreased costs of
petroleum-based specialty chemicals and aerosol cans as well as sales price increases. Fluctuations in foreign currency exchange
rates also had a significant favorable impact on gross margin from period to period. Operating expenses increased $3.1 million
mainly related to higher earned incentive compensation expenses period over period. Operating income as a percentage of net
sales increased from 22.0% to 27.0% period over period.
Asia-Pacific
Income from operations for the Asia-Pacific segment increased to $15.2 million, up $2.6 million, or 20%, the fiscal year ended
August 31, 2016 compared to the prior fiscal year, primarily due to a higher gross margin. As a percentage of net sales, gross
profit for the Asia-Pacific segment increased from 49.9% to 54.8% period over period primarily due to the combined positive
impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans, sales price increases, and a lower level
of advertising, promotional and other discounts that we gave to our customers from period to period. Also contributing to the
increased gross margin from period to period was the write-off of product and other costs related to a quality issue that occurred
during fiscal year 2015 in the Asia distributor markets. Operating income as a percentage of net sales increased from 23.4% to
28.1% period over period.
Non-Operating Items
The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):
Interest income
Interest expense
Other income (expense), net
Provision for income taxes
Interest Income
Fiscal Year Ended August 31,
2016
2015
Change
$
$
$
$
683
1,703
2,461
20,161
$
$
$
$
584
1,205
(1,659)
18,303
$
$
$
$
99
498
4,120
1,858
Interest income remained relatively constant for the fiscal year ended August 31, 2016 compared to the prior fiscal year.
Interest Expense
Interest expense increased $0.5 million for the fiscal year ended August 31, 2016 compared to the prior fiscal year primarily due
to higher interest rates and an increased outstanding balance on our revolving credit facility period over period.
Other Income (Expense), Net
Other income (expense), net changed by $4.1 million for the fiscal year ended August 31, 2016 compared to the prior fiscal year
primarily due to net foreign currency exchange gains which were recorded for fiscal year ended August 31, 2016 compared to
net foreign currency exchange losses which were recorded in the prior fiscal year as a result of significant fluctuations in the
foreign currency exchange rates for both the Euro and the U.S. Dollar against the Pound Sterling.
25
Provision for Income Taxes
The provision for income taxes was 27.7% of income before income taxes for the fiscal year ended August 31, 2016 compared
to 29.0% for the prior fiscal year. The decrease in the effective income tax rate from period to period was driven by an increase
in the portion of taxable earnings attributable to foreign operations, particularly those in the U.K., which are taxed at lower tax
rates.
Net Income
Net income was $52.6 million, or $3.64 per common share on a fully diluted basis, for fiscal year 2016 compared to $44.8
million, or $3.04 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 $2.8 million on net income for fiscal year 2016. Thus, on a constant currency basis,
net income for fiscal year 2016 would have been $55.4 million.
26
Fiscal Year Ended August 31, 2015 Compared to Fiscal Year Ended August 31, 2014
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
2015
2014
Dollars
Percent
$
$
$
$
333,306
44,844
378,150
177,972
200,178
134,788
65,390
44,807
3.04
$
$
$
$
337,825
45,172
382,997
184,144
198,853
135,116
63,737
43,746
2.87
$
$
$
$
(4,519)
(328)
(4,847)
(6,172)
1,325
(328)
1,653
1,061
0.17
(1)%
(1)%
(1)%
(3)%
1%
-
3%
2%
6%
Net sales:
Maintenance products
Homecare and cleaning products
Total net sales
Cost of products sold
Gross profit
Operating expenses
Income from operations
Net income
Earnings per common share - diluted
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
2015
187,344
136,847
53,959
378,150
$
$
2014
Dollars
Percent
$
$
180,806
151,368
50,823
382,997
$
$
6,538
(14,521)
3,136
(4,847)
4%
(10)%
6%
(1)%
Americas
EMEA
Asia-Pacific
Total
Americas
The following table summarizes net sales by product line for the Americas segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Maintenance products
Homecare and cleaning products
Total
% of consolidated net sales
$
$
2015
156,937
30,407
187,344
50%
$
$
2014
149,899
30,907
180,806
47%
Change from
Prior Year
Dollars
Percent
$
$
7,038
(500)
6,538
5%
(2)%
4%
Sales in the Americas segment, which includes the U.S., Canada and Latin America, increased to $187.3 million, up $6.5 million,
or 4%, for the fiscal year ended August 31, 2015 compared to fiscal year 2014. Changes in foreign currency exchange rates did
not have a material impact on sales for the fiscal year ended August 31, 2015 compared to fiscal year 2014.
Sales of maintenance products in the Americas segment increased $7.0 million, or 5%, for the fiscal year ended August 31, 2015
compared to fiscal year 2014. This sales increase was primarily driven by higher sales of WD-40 maintenance products in Latin
America and the U.S., which were up 7% and 5%, respectively, for the fiscal year ended August 31, 2015 compared to fiscal
27
year 2014. The increase in Latin America was primarily due to new distribution and successful promotional programs that were
conducted during fiscal year 2015 throughout the Latin America region, particularly those in Brazil and Mexico. The sales
increase in the U.S. from period to period was primarily due to a higher level of promotional activities and increased distribution
for the WD-40 multi-use product. Sales in the U.S. were also positively impacted from period to period due to the launch of our
new innovative WD-40 EZ Reach Flexible Straw product in the last quarter of fiscal year 2015. These sales increases in Latin
America and the U.S. were slightly offset by a sales decrease of 3% for maintenance products in Canada, primarily due to changes
in foreign currency exchange rates. In functional currency, which is the Canadian Dollar, sales of maintenance products in Canada
increased by 8% from period to period. Also contributing to the overall sales increase of the maintenance products in the Americas
segment from period to period were higher sales of the WD-40 Specialist product line, which were up $2.3 million, or 26%, due
to increased promotional activities and new distribution during fiscal year 2015.
Sales of homecare and cleaning products in the Americas segment decreased $0.5 million, or 2%, for the fiscal year ended August
31, 2015 compared to fiscal year 2014. While total sales of homecare and cleaning products in the U.S., which is where the
majority of such sales originate, remained relatively constant from period to period, sales of such products decreased in Canada
for fiscal year 2015 as compared to fiscal year 2014. In Canada, sales of homecare and cleaning products decreased 22% driven
primarily by the unfavorable impacts of changes in foreign currency exchange rates from period to period and lower sales of
2000 Flushes automatic toilet bowl cleaners and Spot Shot, which were down 24% and 19%, respectively, for fiscal
year 2015 compared to fiscal year 2014. In functional currency, sales of homecare and cleaning products in Canada decreased
by 13% from period to period. While each of our homecare and cleaning products continue to generate positive cash flows, we
have continued to experience decreased or flat sales for many of these products primarily due to lost distribution, reduced product
offerings, competition, category declines and the volatility of orders from and promotional programs with certain of our
customers, particularly those in the warehouse club and mass retail channels.
For the Americas segment, 82% of sales came from the U.S., and 18% of sales came from Canada and Latin America combined
for the fiscal year ended August 31, 2015 compared to the distribution for fiscal year 2014 when 81% of sales came from the
U.S., and 19% of sales came from Canada and Latin America combined.
EMEA
The following table summarizes net sales by product line for the EMEA segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Maintenance products
Homecare and cleaning products
Total (1)
% of consolidated net sales
$
$
2015
129,730
7,117
136,847
36%
$
$
2014
144,255
7,113
151,368
40%
Change from
Prior Year
Dollars
Percent
$
$
(14,525)
4
(14,521)
(10)%
-
(10)%
(1) While the Company’s reporting currency is 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 45% of its sales are generated in
Euro and 25% 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.
Sales in the EMEA segment, which includes Europe, the Middle East, Africa and India, decreased to $136.9 million, down $14.5
million, or 10%, for the fiscal year ended August 31, 2015 compared to fiscal year 2014. Changes in foreign currency exchange
rates for the fiscal year ended August 31, 2015 compared to fiscal year 2014 had an unfavorable impact on sales. Sales for the
fiscal year ended August 31, 2015 translated at the exchange rates in effect for fiscal year 2014 would have been $144.3 million
in the EMEA segment. Thus, on a constant currency basis, sales would have decreased by $7.1 million, or 5%, for the fiscal year
ended August 31, 2015 compared to fiscal year 2014.
The countries in Europe where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain
and Portugal) and the Germanics sales region (which includes Germany, Austria, Denmark, Switzerland, Belgium and the
Netherlands). Overall, sales from direct markets decreased $6.6 million, or 7%, for the fiscal year ended August 31, 2015
compared to fiscal year 2014. We experienced sales decreases throughout most of the Europe direct markets for the fiscal year
ended August 31, 2015 compared to fiscal year 2014, with percentage decreases in sales as follows: Italy, 23%; the Germanics
region, 12%; Iberia, 8%; and France, 7%. The decreased sales in these regions were slightly offset by the sales increase of 3%
28
in the U.K. from period to period. The overall sales decline was primarily due to the continued weakening of the Euro, the
currency in which a substantial portion of the direct markets sales are generated, relative to the Pound Sterling from period to
period. The average exchange rate for the Euro against the Pound Sterling decreased by 9% to 0.7497 during fiscal year 2015
from 0.8265 for fiscal year 2014. As a result of this change in the foreign currency exchange rates, our sales in the direct markets
decreased from period to period in Pound Sterling. Although sales in the direct markets decreased from period to period, sales of
the WD-40 Specialist product line increased $0.9 million, or 26%, due to expanded distribution of the product line in fiscal year
2015. Sales from direct markets accounted for 63% of the EMEA segment’s sales for fiscal year ended August 31, 2015 compared
to 62% of the EMEA segment’s sales for fiscal year 2014.
The regions in the EMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and
Northern Europe. Sales in the distributor markets decreased $7.9 million, or 14%, for the fiscal year ended August 31, 2015
compared to fiscal year 2014 primarily due to a significant decrease in sales in Russia and Ukraine as a result of the political and
economic instability in Eastern Europe. Sales to Russia and Ukraine decreased by approximately 30% and 77%, respectively,
from fiscal year 2014 to fiscal year 2015. Sales also decreased in the Middle East from fiscal year 2014 to fiscal year 2015,
primarily due to lower sales of the WD-40 multi-use product in Afghanistan. These overall sales decreases were slightly offset
by the general strengthening of the U.S. Dollar against the Pound Sterling from period to period, which increased sales, and
higher sales volume of WD-40 multi-use product in Northern Europe due to the continued growth of our base business. The
distributor markets accounted for 37% of the total EMEA segment sales for the fiscal year ended August 31, 2015, compared to
38% for fiscal year 2014.
Asia-Pacific
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
Maintenance products
Homecare and cleaning products
Total
% of consolidated net sales
2015
2014
Dollars
Percent
$
$
46,639
7,320
53,959
14%
$
$
43,670
7,153
50,823
13%
$
$
2,969
167
3,136
7%
2%
6%
Sales in the Asia-Pacific segment, which includes Australia, China and other countries in the Asia region increased
to $54.0 million, up $3.1 million, or 6% for the fiscal year ended August 31, 2015 compared to fiscal year 2014. Changes in
foreign currency exchange rates for the fiscal year ended August 31, 2015 compared to fiscal year 2014 had an unfavorable
impact on sales. Sales for the fiscal year ended August 31, 2015 translated at the exchange rates in effect for fiscal year 2014
would have been $56.1 million in the Asia-Pacific segment. Thus, on a constant currency basis, sales would have increased by
$5.3 million, or 10%, for the fiscal year ended August 31, 2015 compared to fiscal year 2014.
Sales in Asia, which represented 68% of the total sales in the Asia-Pacific segment, increased $3.6 million, or 11%, for fiscal
year ended August 31, 2015 compared to fiscal year 2014. Sales in the Asia distributor markets increased $2.4 million, or 11%,
from period to period primarily due to increased sales of the WD-40 multi-use product throughout most of the distributor markets,
including those in South Korea, the Philippines and Indonesia. Sales in China increased $1.2 million, or 10%, for the fiscal year
ended August 31, 2015 compared to fiscal year 2014 primarily due to new distribution, much of which came from Southern
China, and increased promotional activities from period to period.
Sales in Australia decreased by $0.5 million, or 3%, for the fiscal year ended August 31, 2015 compared to fiscal year 2014.
Changes in foreign currency exchange rates had an unfavorable impact on Australia sales. In functional currency, which is the
Australian Dollar, sales increased by 10%, for the fiscal year ended August 31, 2015 compared to fiscal year 2014 primarily due
to increased distribution and promotional activities from period to period as well as a price increase which was implemented at
the end of the second quarter of fiscal year 2015.
29
Gross Profit
Gross profit increased to $200.2 million for the fiscal year ended August 31, 2015 compared to $198.9 million for fiscal year
2014. As a percentage of net sales, gross profit increased to 52.9% for the fiscal year ended August 31, 2015 compared to 51.9%
for fiscal year 2014.
Gross margin was positively impacted by 1.6 percentage points from period to period due to favorable net changes in the costs
of petroleum-based specialty chemicals and aerosol cans in all three segments. Gross margin was also positively impacted by 0.3
percentage points from period to period due to sales price increases. These sales price increases were implemented in certain
locations and markets in the Asia-Pacific and EMEA segments over the last twelve months of fiscal year 2015. In addition, gross
margin was positively impacted by 0.1 percentage points from period to period due to lower warehousing and in-bound freight
costs, particularly in the Americas segment.
These favorable impacts to gross margin were partially offset by 0.3 percentage points due to a higher level of advertising,
promotional and other discounts that we give to our customers from period to period. The increase in such discounts was due to
a higher percentage of sales being subject to promotional allowances during the fiscal year ended August 31, 2015 compared to
fiscal year 2014, primarily in the Asia-Pacific and Americas segments. In general, the timing of advertising, promotional and
other discounts may cause fluctuations in gross margin from period to period. The costs associated with certain promotional
activities are recorded as a reduction to sales while others are recorded as advertising and sales promotion expenses. 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. Changes in foreign currency exchange rates also negatively impacted gross margin by 0.5 percentage points
primarily due to the fluctuations in the exchange rates for the Euro and U.S. Dollar against the Pound Sterling in our EMEA
segment from period to period. 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 net effect of the general weakening of the Euro
against the Pound Sterling and the strengthening of the U.S. Dollar against the Pound Sterling from period to period caused a
decrease in our sales, resulting in unfavorable impacts to the gross margin. The combined effects of unfavorable sales mix
changes and other miscellaneous costs also negatively impacted gross margin by 0.2 percentage points from period to period.
Note that 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 $15.8 million
and $16.2 million for the fiscal years ended August 31, 2015 and 2014, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the fiscal year ended August 31, 2015 increased $0.3 million to
$108.9 million from $108.6 million for fiscal year 2014. As a percentage of net sales, SG&A expenses increased to 28.8% for
the fiscal year ended August 31, 2015 from 28.3% for fiscal year 2014. The increase in SG&A expenses was primarily attributable
to higher employee-related costs, a higher level of expenses associated with travel and meetings, higher costs associated with
new product exploration, and increased depreciation expense, from period to period. Employee-related costs, which include
salaries, incentive compensation, profit sharing, stock-based compensation and other fringe benefits, increased by $1.7 million
from period to period primarily due to annual compensation increases, higher staffing levels and other employee-related costs
we incurred associated with changes that we made to our WD-40 Bike business in the United States. These increases were
partially offset by lower earned incentive compensation, from period to period. Travel and meeting expenses increased $0.8
million due to a higher level of travel expenses associated with various sales meetings and activities in support of our strategic
in research and
initiatives. The $0.8 million increase
development costs, was primarily due to an increased level of spending during fiscal year 2015 related to the continued
development of our products within the WD-40 brand. Depreciation expense increased by $0.5 million from period to period
primarily due to our continued investment in computer system related assets and other capital assets which support our general
business operations. Other miscellaneous expenses, which primarily include general office overhead, sales commission, and
insurance costs, also increased by $0.5 million period over period. These increases were partially offset by a decrease of $1.4
million in professional services costs from period to period, primarily due to lower legal fees associated with litigation activities
and general consulting services in our Americas and EMEA segments. Changes in foreign currency exchange rates had a
favorable impact of $2.6 million on SG&A expenses for the fiscal year ended August 31, 2015 compared to fiscal year 2014.
in new product exploration expenses, which are
included
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, 2015 and 2014 were $9.0 million and $6.9 million, respectively. Our research and development team engages in
30
consumer research, product development, current product improvement and testing activities. This team leverages its
development capabilities by partnering with a network of outside resources including our current and prospective outsource
suppliers. 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 Expenses
Advertising and sales promotion expenses for the fiscal year ended August 31, 2015 decreased $1.0 million, or 4%, to
$22.9 million from $23.9 million for fiscal year 2014. As a percentage of net sales, these expenses decreased to 6.0% for the
fiscal year ended August 31, 2015 from 6.2% for fiscal year 2014. The decrease in advertising and sales promotion expenses was
primarily due to a lower level of promotional programs and marketing support in the EMEA segment from period to
period. Changes in foreign currency exchange rates did not have a material impact on advertising and sales promotion expenses
for the fiscal year ended August 31, 2015 compared to fiscal year 2014.
As a percentage of net sales, advertising and sales promotion 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 $16.0 million and $16.2 million for the fiscal years ended August 31, 2015 and 2014, respectively. Therefore, our
total investment in advertising and sales promotion activities totaled $38.9 million and $40.1 million for the fiscal years ended
August 31, 2015 and 2014, respectively.
Amortization of Definite-lived Intangible Assets Expense
Amortization of our definite-lived intangible assets was $3.0 million and $2.6 million for the fiscal years ended August 31, 2015
and 2014, respectively. This $0.4 million increase from period to period was primarily due to the GT85 Limited acquisition,
which we completed in September 2014.
Income from Operations by Segment
The following table summarizes income from operations by segment (in thousands, except percentages):
Americas
EMEA
Asia-Pacific
Unallocated corporate (1)
Fiscal Year Ended August 31,
Change from
Prior Year
2015
2014
Dollars
Percent
$
$
46,674
30,173
12,602
(24,059)
65,390
$
$
41,356
34,003
10,364
(21,986)
63,737
$
$
5,318
(3,830)
2,238
(2,073)
1,653
13%
(11)%
22%
9%
3%
(1) Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the operating segments. These expenses are
reported separate from the Company’s identified segments and are included in Selling, General and Administrative expenses on the Company’s consolidated
statements of operations.
Americas
Income from operations for the Americas segment increased to $46.7 million, up $5.3 million, or 13%, for the fiscal year ended
August 31, 2015 compared to fiscal year 2014, primarily due to a $6.5 million increase in sales and a higher gross margin. As a
percentage of net sales, gross profit for the Americas segment increased from 51.0% to 52.6% period over period. This increase
in the gross margin was primarily due to the combined positive impacts of decreased costs of petroleum-based specialty chemicals
and aerosol cans as well as decreased warehousing and in-bound freight costs from period to period. The higher level of sales
from period to period in the Americas segment was accompanied by a $1.0 million increase in total operating expenses. Operating
income as a percentage of net sales increased from 22.9% to 24.9% period over period.
EMEA
Income from operations for the EMEA segment decreased to $30.2 million, down $3.8 million, or 11%, for the fiscal year ended
August 31, 2015 compared to fiscal year 2014, primarily due to a $14.5 million decrease in sales. As a percentage of net sales,
31
gross profit for the EMEA segment increased from 54.0% to 54.6% period over period primarily due to the combined positive
impacts of decreased costs of petroleum-based specialty chemicals and aerosol cans and price increases, both of which were
significantly offset by the unfavorable impacts of changes in sales mix and fluctuations in foreign currency exchange rates from
period to period. 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 U.S. Dollar. The net effects of the continued weakening of the Euro against the Pound
Sterling and the strengthening of the U.S. Dollar against the Pound Sterling from period to period has caused our sales to decrease,
resulting in unfavorable impacts to the gross margin. The lower level of sales was accompanied by a $3.2 million decrease in
total operating expenses driven mainly by lower advertising and sales promotion expenses, freight costs and earned incentive
compensation. Operating income as a percentage of net sales decreased from 22.5% to 22.0% period over period.
Asia-Pacific
Income from operations for the Asia-Pacific segment increased to $12.6 million, up $2.2 million, or 22%, for the fiscal year
ended August 31, 2015 compared to fiscal year 2014, primarily due to a $3.1 million increase in sales and a higher gross margin.
As a percentage of net sales, gross profit for the Asia-Pacific segment increased from 48.9% to 49.9% from period to period due
to the combined positive impacts of sales price increases and decreased costs of petroleum-based specialty chemicals and aerosol
cans, both of which were partially offset by a higher level of advertising, promotional and other discounts that we gave to our
customers from period to period. Operating income as a percentage of net sales increased from 20.4% to 23.4% period over
period.
Non-Operating Items
The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):
Interest income
Interest expense
Other expense
Provision for income taxes
Interest Income
Fiscal Year Ended August 31,
2015
2014
Change
$
$
$
$
584
1,205
1,659
18,303
$
$
$
$
596
1,002
372
19,213
$
$
$
$
(12)
203
1,287
(910)
Interest income remained relatively constant for the fiscal year ended August 31, 2015 compared to fiscal year 2014.
Interest Expense
Interest expense increased $0.2 million for the fiscal year ended August 31, 2015 compared to fiscal year 2014 primarily due to
a higher outstanding balance on our revolving credit facility period over period.
Other Expense
Other expense increased by $1.3 million for the fiscal year ended August 31, 2015 compared to fiscal year 2014 primarily due
to higher net foreign currency exchange losses from period to period as a result of significant fluctuations in the foreign currency
exchange rates for the Euro and U.S. Dollar against the Pound Sterling.
Provision for Income Taxes
The provision for income taxes was 29.0% of income before income taxes for the fiscal year ended August 31, 2015 compared
to 30.5% for fiscal year 2014. The decrease in the effective income tax rate from period to period was primarily attributable to
an increase in the taxable income in the U.K., which is taxed at lower statutory income tax rates.
Net Income
Net income was $44.8 million, or $3.04 per common share on a fully diluted basis, for fiscal year 2015 compared to
$43.7 million, or $2.87 per common share on a fully diluted basis, for fiscal year 2014. Changes in foreign currency exchange
rates year over year had an unfavorable impact of $1.7 million on net income for fiscal year 2015. Thus, on a constant currency
basis, net income for fiscal year 2015 would have been $46.5 million.
32
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 (loss) before interest, income
taxes, depreciation and amortization. Beginning in fiscal year 2016, we changed to this new 55/30/25 business model from our
previous 50/30/20 business model. This means that we now target our gross margin to be 55% of net sales, our cost of doing
business to be 30% of net sales, and our EBITDA to be 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. The targets for these performance measures are long-term in nature, particularly those for cost of doing
business and EBITDA, and we expect to make progress towards achieving them over time as our revenues increase.
The following table summarizes the results of these performance measures:
Gross margin - GAAP
Cost of doing business as a percentage of net sales - non-GAAP
EBITDA as a percentage of net sales - non-GAAP (1)
Fiscal Year Ended August 31,
2016
2015
2014
56%
36%
21%
53%
34%
19%
52%
34%
18%
(1) Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the
Company’s 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 the comparative performance
of the Company from period to period. We believe that these measures provide our shareholders with additional insights into the
Company’s results of operations and how we run our business. The 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 the Company’s 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. 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):
Total operating expenses - GAAP
Amortization of definite-lived intangible assets
Depreciation (in operating departments)
Cost of doing business
Net sales
Cost of doing business as a percentage of net sales - non-GAAP
$
$
$
2016
143,021
(2,976)
(2,744)
137,301
380,670
36%
Fiscal Year Ended August 31,
2015
$
$
$
134,788
(3,039)
(2,664)
129,085
378,150
34%
$
$
$
2014
135,116
(2,617)
(2,218)
130,281
382,997
34%
33
EBITDA (in thousands, except percentages):
Net income - GAAP
Provision for income taxes
Interest income
Interest expense
Amortization of definite-lived
intangible assets
Depreciation
EBITDA
Net sales
EBITDA as a percentage of net sales - non-GAAP
Liquidity and Capital Resources
Overview
2016
Fiscal Year Ended August 31,
2015
2014
52,628
20,161
(683)
1,703
2,976
3,489
80,274
380,670
21%
$
$
$
44,807
18,303
(584)
1,205
3,039
3,425
70,195
378,150
19%
$
$
$
43,746
19,213
(596)
1,002
2,617
3,243
69,225
382,997
18%
$
$
$
The Company’s financial condition and liquidity remain strong. Net cash provided by operations was $60.6 million for fiscal
year 2016 compared to $55.1 million for fiscal year 2015. We believe we continue to be well positioned to weather any
uncertainty in the capital markets and global economy due to our strong balance sheet and efficient business model, along with
our growing and diversified global revenues. We continue to manage all aspects of our business including, but not limited to,
monitoring 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 our existing cash and cash equivalents, short-term investments, cash generated from
operations and cash currently available from our existing $175.0 million revolving credit facility with Bank of America, N.A.
(“Bank of America”), which expires on May 13, 2020. To date, we have used the proceeds of the revolving credit facility for our
stock repurchases and plan to continue using such proceeds for our general working capital needs and stock repurchases
under our board approved share buy-back plan. The Company also utilized this revolving credit facility in September 2016 to
fund the purchase of its new headquarters office, which will house both corporate employees and employees in the Company’s
Americas segment. During the fiscal year ended August 31, 2016, we had net new borrowings of $14.0 million U.S. dollars under
the revolving credit facility. We regularly convert existing draws on our line of credit to new draws with new maturity dates and
interest rates. As of August 31, 2016, we had a $122.0 million outstanding balance on the revolving credit facility, all of which
was classified as long-term, and there were no other letters of credit outstanding or restrictions on the amount available on this
line of credit. Per the terms of the revolving credit facility agreement, our consolidated leverage ratio cannot be greater than three
to one and our consolidated interest coverage ratio cannot be less than three to one. See Note 7 – Debt for additional information
on these financial covenants. At August 31, 2016, we were in compliance with all debt covenants as required by the revolving
credit facility and believe it is unlikely we will fail to comply with any of these covenants over the next twelve months. We
would need to have a significant decrease in sales and/or a significant increase in expenses in order for us to not comply with the
debt covenants.
At August 31, 2016, we had a total of $108.5 million in cash and cash equivalents and short-term investments. Of this balance,
$102.2 million was held in Europe, Australia and China in foreign currencies. In the fourth quarter of fiscal year 2016,
management determined that it would undertake, in fiscal year 2017, a one-time repatriation of $8.2 million, which represents
all of the historical foreign earnings from its Australia subsidiary and 90% of the historical foreign earnings from its China
subsidiary. Management determined that such a foreign distribution was prudent due to the current favorable tax consequences
of such a distribution, stemming principally from the recent significant strengthening of the U.S. dollar against various currencies
in which the Company conducts business. Accordingly, we determined that we were no longer indefinitely reinvested with respect
to this amount of unremitted earnings and recorded the impact of this decision in the 2016 income tax provision, which resulted
in the recognition of an incremental immaterial tax benefit. It is the Company’s current intention to indefinitely reinvest any
future foreign earnings of its Australia and China subsidiaries. However, management will make such determination based on an
evaluation of facts and circumstances at each future reporting date.
We believe that our future cash from domestic operations, together with our access to funds available under our unsecured
revolving credit facility will provide adequate resources to fund both short-term and long-term operating requirements, capital
expenditures, share repurchases, dividend payments, acquisitions and new business development activities in the United States.
34
Although we hold a significant amount of cash outside of the United States and the draws on the credit facility to date have been
made by our entity in the United States, we do not foresee any ongoing issues with repaying or refinancing these loans with
domestically generated funds since we closely monitor the use of this credit facility. In the event that management elects for any
reason in the future to repatriate additional foreign earnings that were previously deemed to be indefinitely reinvested outside of
the U.S., we would be required to record additional tax expense at the time when we determine that such foreign earnings are no
longer deemed to be indefinitely reinvested outside of the United States. As of August 31, 2016, we have not provided for U.S.
federal and state income taxes and foreign withholding taxes on $113.4 million of undistributed earnings of certain foreign
subsidiaries, mostly attributable to the U.K., since these earnings are considered indefinitely reinvested outside of the United
States.
We believe that our existing consolidated cash and cash equivalents at August 31, 2016, the liquidity provided by our $175.0
million revolving credit facility and our anticipated cash flows from operations will be sufficient to meet our projected
consolidated operating and capital requirements for at least the next twelve months. We consider various factors when reviewing
liquidity needs and plans for available cash on hand including: future debt, principal and interest payments, future capital
expenditure requirements, future share repurchases, future dividend payments (which are determined on a quarterly basis by the
Company’s Board of Directors), alternative investment opportunities, debt covenants and any other relevant considerations
currently facing our business.
Cash Flows
The following table summarizes our cash flows by category for the periods presented (in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Operating Activities
Fiscal Year Ended August 31,
2016
60,604
(20,920)
(38,536)
(4,153)
(3,005)
$
$
2015
55,064
(16,951)
(38,663)
(3,357)
(3,907)
$
$
2014
38,730
(10,503)
(25,842)
1,984
4,369
$
$
Net cash provided by operating activities increased $5.5 million to $60.6 million for fiscal year 2016 from $55.1 million for
fiscal year 2015. 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, 2016 was net income of $52.6 million,
which increased $7.8 million from period to period. This increase was slightly offset by changes in our working capital, which
were primarily attributable to an overall increase in the trade accounts receivable balance due to increased sales volumes in the
fourth quarter of fiscal year 2016 as compared to the same quarter in the prior fiscal year and the timing of payments received
from our customers from period to period. Also contributing to the change in working capital from period to period were lower
earned incentive payouts in the first quarter of fiscal year 2016 compared to the same period of the prior fiscal year as well as
significantly higher accruals for earned incentive compensation in fiscal year 2016 as compared to the prior year period.
Net cash provided by operating activities increased $16.4 million to $55.1 million for fiscal year 2015 from $38.7 million for
fiscal year 2014. 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, 2015 was net income of $44.8 million. The changes
in our working capital from period to period were primarily attributable to an overall decrease in the trade accounts
receivable balance due to decreased sales volumes and the timing of payments received from our customers from period to
period. In addition, the net cash provided by operating activities was impacted by the overall decrease in inventory levels due to
the timing of our inventory purchases from period to period. Also contributing to the changes in working capital from period to
period were lower earned incentive payouts and accruals in fiscal year 2015 compared to fiscal year 2014. The settlement of an
insurance reimbursable item in the second quarter of fiscal year 2015, which was recorded in the third quarter of fiscal year
2014, and lower income taxes receivable balances also contributed to the overall increase in cash provided by operating activities
from period to period.
Investing Activities
Net cash used in investing activities increased $4.0 million to $20.9 million for fiscal year 2016 from $16.9 million for fiscal
year 2015 primarily due to a $9.5 million increase in net purchases of short-term investments that were made by our U.K. and
Australia subsidiaries. This increase was partially offset by a decrease of $4.1 million in cash outflow related to the GT85 Limited
35
acquisition which was completed by our U.K. subsidiary in early fiscal year 2015 and a $1.4 million decrease in capital
expenditures from period to period.
Net cash used in investing activities increased $6.4 million to $16.9 million for fiscal year 2015 from $10.5 million for fiscal
year 2014 primarily due to a $4.1 million cash outflow related to the GT85 Limited acquisition which was completed by our
U.K. subsidiary in September 2014. Of this $4.1 million purchase consideration, $3.7 million was paid in early fiscal year 2015
and the remaining balance was paid in the last quarter of fiscal year 2015. Also contributing to the total cash outflows were a
$2.9 million increase in purchases of short-term investments that were made by our U.K. and Australia subsidiaries, and a $1.7
million increase in capital expenditures from period to period. These increases were slightly offset by a decrease in cash outflow
related to the Belgium customer list which was acquired by our U.K. subsidiary for $1.8 million in fiscal year 2014.
Financing Activities
Net cash used in financing activities decreased $0.2 million to $38.5 million for fiscal year 2016 from $38.7 million for the fiscal
year 2015 primarily due to a $4.0 million increase in cash proceeds from our revolving credit facility, which was almost
completely offset by a $1.9 million increase in dividends paid and a $1.9 million increase in cash outflow for treasury stock
purchases from period to period.
Net cash used in financing activities increased $12.9 million to $38.7 million for fiscal year 2015 from $25.8 million for fiscal
year 2014 primarily due to a $25.0 million decrease in cash proceeds from our revolving credit facility, which was partially offset
by a $12.5 million decrease in treasury stock purchases. Dividends paid also increased by $1.5 million from period to period.
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 $4.2 million and $3.4 million for
fiscal years 2016 and 2015, respectively, and an increase in cash of $2.0 million for fiscal year 2014. 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.
Share Repurchase Plans
On October 14, 2014, the Company’s Board of Directors approved a share buy-back plan. Under the plan, which became
effective at the beginning of the third quarter of fiscal year 2015, once the Company’s previous $60.0 million plan was exhausted,
the Company was authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2016. The timing and
amount of repurchases were based on terms and conditions as may be acceptable to the Company’s Chief Executive Officer and
Chief Financial Officer and in compliance with all laws and regulations applicable thereto. During the period from March 1,
2015 through August 31, 2016, the Company repurchased 503,127 shares at a total cost of $47.8 million under this $75.0 million
plan.
On June 21, 2016, the Company’s Board of Directors approved a new share buy-back plan. Under the plan, which became
effective on September 1, 2016 and will remain in effect through August 31, 2018, the Company is authorized to acquire up to
$75.0 million of its outstanding shares on terms and conditions as may be acceptable to the Company’s Chief Executive Officer
and Chief Financial Officer and in compliance with all laws and regulations applicable thereto.
Dividends
The Company has historically paid regular quarterly cash dividends on its common stock. In December 2015, the Board of
Directors declared an 11% increase in the regular quarterly cash dividend, increasing it from $0.38 per share to $0.42 per share.
On October 11, 2016, the Company’s Board of Directors declared a cash dividend of $0.42 per share payable on October 31,
2016 to shareholders of record on October 21, 2016. Our ability to pay dividends could be affected by future business
performance, liquidity, capital needs, alternative investment opportunities and loan covenants.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of Regulation S-K.
36
Contractual Obligations
The following table sets forth our best estimates as to the amounts and timing of minimum contractual payments for our most
significant contractual obligations and commitments as of August 31, 2016 for the next five years and thereafter (in thousands).
Future events could cause actual payments to differ significantly from these amounts.
Operating leases
Total
1 year
2-3 years
4-5 years
$
4,340
$
1,996
$
1,774
$
540
Thereafter
30
$
The following summarizes other commitments which are excluded from the contractual obligations table above as of August
31, 2016:
(cid:120) We have ongoing relationships with various suppliers (contract manufacturers) who manufacture our products. 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 typically do not have definitive minimum purchase
obligations included in the contract terms with our contract manufacturers, when such obligations have been included,
they have been immaterial. 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 five 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.
(cid:120) Under the current terms of the credit facility agreement with Bank of America, we may borrow funds in U.S. dollars or
in foreign currencies from time to time during the five-year period commencing March 13, 2015 through May 13, 2020.
As of August 31, 2016, we had $122.0 million outstanding on this credit facility. Based on our most recent cash
projections and anticipated business activities, we expect to borrow additional amounts against this credit facility
ranging from $20.0 million to $25.0 million in fiscal year 2017. We estimate that the interest associated with these
borrowings will be approximately $0.6 million for fiscal year 2017 based on estimated applicable interest rates and the
expected dates of future borrowings. For additional details on this revolving line of credit, refer to the information set
forth in Note 7 – Debt.
(cid:120) At August 31, 2016, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was
approximately $1.2 million. We have estimated that up to $0.4 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
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 the Company’s 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. Our critical accounting policies have been
reviewed with the Audit Committee of the Board of Directors.
Revenue Recognition and Sales Incentives
Sales are recognized as revenue at the time of delivery to our customer when risks of loss and title have passed. Sales are recorded
net of allowances for damaged goods and other sales returns, sales incentives, trade promotions and cash discounts. For certain
of our sales we must make judgments and certain assumptions in order to determine when delivery has occurred. Through an
37
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 incentives are recorded as a reduction of sales in our consolidated statements of operations. Sales incentives include on-
going trade promotion programs with customers and consumer coupon programs that require us to estimate and accrue for the
expected costs of such programs. These programs include cooperative marketing programs, shelf price reductions, coupons,
rebates, consideration and allowances given to retailers for shelf space and/or favorable display positions in their stores and other
promotional activities. Costs related to these sales incentive programs, with the exception of coupon costs, are recorded as a
reduction to sales upon delivery of products to customers. Coupon costs are based upon historical redemption rates and are
recorded as a reduction to sales as incurred, which is when the coupons are circulated.
Sales incentives are calculated based primarily on historical rates and consideration of recent promotional activities. The
determination of sales incentive costs and the related liabilities require us to use judgment for estimates that include current and
past trade promotion spending patterns, status of trade promotion activities and the interpretation of historical spending trends
by customer and category. We review our assumptions and adjust our sales incentive allowances 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, 2016 were to differ by 10%, the impact on net sales would be
approximately $0.7 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. 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.
U.S. federal income tax expense is provided on remittances of foreign earnings and on unremitted foreign earnings that are not
indefinitely reinvested. U.S. federal income taxes and foreign withholding taxes are not provided when foreign earnings are
indefinitely reinvested. We determine whether our foreign subsidiaries will invest their undistributed earnings indefinitely based
on the capital needs of the foreign subsidiaries. We reassess this determination each reporting period. Changes to this
determination may be warranted based on our experience as well as plans regarding future international operations and expected
remittances.
Valuation of Goodwill
The carrying value of goodwill is reviewed for possible impairment in accordance with the authoritative guidance on goodwill,
intangibles and other. We assess for possible impairments to goodwill at least annually during our second fiscal quarter and
otherwise when events or changes in circumstances indicate that an impairment condition may exist.
During the second quarter of fiscal year 2016, we performed our annual goodwill impairment test. The annual goodwill
impairment test was performed at the reporting unit level as required by the authoritative guidance. In accordance
with ASU No. 2011-08, “Testing Goodwill for Impairment”, companies are permitted to first assess qualitative factors to
determine whether it is necessary to perform the two-step quantitative goodwill impairment test. We performed a qualitative
assessment of each reporting unit to determine whether it was more likely than not that the fair value of a reporting unit was less
than its carrying amount. In performing this qualitative assessment, we assessed relevant events and circumstances that may
impact the fair value and the carrying amount of each of our reporting units. Factors that were considered included, but were not
limited to, the following: (1) macroeconomic conditions; (2) industry and market conditions; (3) historical financial performance
and expected financial performance; (4) other entity specific events, such as changes in management or key personnel; and
(5) events affecting the Company’s reporting units, such as a change in the composition of net assets or any expected dispositions.
Based on the results of this qualitative assessment, we determined that it is more likely than not that the carrying value of each
of our reporting units is less than its fair value and, thus, the two-step quantitative analysis was not required. As a result, we
38
concluded that no impairment of our goodwill existed as of February 29, 2016. We also did not identify or record any impairment
losses related to our goodwill during our annual impairment tests performed in fiscal years 2015 and 2014.
While we believe that the estimates and assumptions used in our goodwill impairment test and analyses are reasonable, actual
events and results could differ substantially from those included in the calculation. In the event that business conditions change
in the future, we may be required to reassess and update our forecasts and estimates used in subsequent goodwill impairment
analyses. If the results of these future analyses are lower than current estimates, an impairment charge to our goodwill balances
may result at that time.
In addition, there were no indicators of impairment identified as a result of our review of events and circumstances related to our
goodwill subsequent to February 29, 2016.
Impairment of Definite-Lived Intangible Assets
We assess for potential impairments to our long-lived assets when there is evidence that events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and/or its estimated remaining useful life may no longer be
appropriate. Any required impairment loss would be measured as the amount by which the asset’s carrying amount exceeds its
fair value, which is the amount at which the asset could be bought or sold in a current transaction between willing market
participants and would be recorded as a reduction in the carrying amount of the related asset and a charge to results of operations.
An impairment loss would be recognized when the sum of the expected future undiscounted net cash flows is less than the
carrying amount of the asset.
There were no indicators of potential impairment identified as a result of the Company’s review of events and circumstances
related to its existing definite-lived intangible assets for the periods ended August 31, 2016, 2015 and 2014.
Recently Issued Accounting Standards
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-
15, “Classification of Certain Cash Receipts and Cash Payments”. The amendments address eight specific cash flow issues to
reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the
statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods
within that reporting period. Early adoption is permitted and should be applied using a retrospective approach. The Company is
in the process of evaluating the potential impacts of this new guidance on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments”, which requires
entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the
reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance
also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models
and methods for estimating expected credit losses. This guidance is effective for fiscal years beginning after December 15, 2019,
including interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating
the potential impacts of this new guidance on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The
amendments in this updated guidance include changes to simplify the Codification for several aspects of the accounting for share-
based payment transactions, including those related to the income tax consequences, classification of awards as either equity or
liabilities, accounting for forfeitures, minimum statutory withholding requirements and classification of certain items on the
statement of cash flows. Certain of these changes are required to be applied retrospectively while other changes are required to
be applied prospectively. This guidance is effective for fiscal years beginning after December 15, 2016, including interim periods
within that reporting period. Early adoption is permitted. The Company is still evaluating whether it will adopt this updated
guidance in fiscal year 2017 or in fiscal year 2018, as required, but it expects that the adoption of this new guidance will have a
more than inconsequential impact on the Company’s consolidated financial statements. For example, if the Company had
adopted this updated guidance in fiscal year 2016, its income tax expense for the year would have been reduced by approximately
$2.1 million due to the recognition of excess tax benefits in the provision for income taxes rather than through additional paid-
in-capital. The Company also expects to change its policy related to forfeitures upon adoption of this new guidance such that it
will recognize the impacts of forfeitures as they occur rather than recognizing them based on an estimated forfeiture rate.
Although the Company is still assessing the impacts of this change in policy for forfeitures on its consolidated financial
statements, it does not expect that the impact will be material.
In February 2016, the FASB issued ASU No. 2016-02, “Leases”. 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 all leases with terms longer than twelve months.
39
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. Early adoption is permitted and should be applied using a modified retrospective approach. The Company is
in the process of evaluating the impacts of this new guidance on its consolidated financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, 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
rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from
customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain
or fulfill a contract. This guidance was originally to be effective for annual reporting periods beginning after December 15, 2016,
including interim periods within that reporting period. In July 2015, the FASB approved a one year deferral for the effective
date of this guidance. Early adoption is permitted but only to the original effective date. Companies are permitted to adopt this
new rule following either a full or modified retrospective approach. The Company does not intend to adopt this guidance early
and it will become effective for the Company on September 1, 2018. The Company has not yet decided which implementation
method it will adopt. Although management has completed its initial evaluation of this new guidance as it pertains to the
Company, it is still in the process of determining the impacts that this updated guidance will have on the Company's consolidated
financial statements.
Related Parties
On October 11, 2011, the Company’s Board of Directors elected Mr. Gregory A. Sandfort as a director of WD-40 Company. Mr.
Sandfort is the Chief Executive Officer of Tractor Supply Company (“Tractor Supply”), which is a WD-40 Company customer
that acquires products from the Company in the ordinary course of business.
The consolidated financial statements include sales to Tractor Supply of $1.2 million and $1.1 million for fiscal years 2016 and
2015, respectively. Accounts receivable from Tractor Supply were not material as of August 31, 2016.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Risk
The Company is exposed to a variety of risks, including foreign currency exchange rate fluctuations. In the normal course of
business, the Company employs established policies and procedures to manage its exposure to fluctuations in foreign currency
values.
All of the Company’s international subsidiaries operate in functional currencies other than the U.S. dollar. As a result, the
Company is exposed to foreign currency related risk when the financial statements of its 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. The Company does not enter
into any hedging activities to mitigate this foreign currency translation risk.
The Company’s U.K. subsidiary, whose functional currency is Pound Sterling, utilizes foreign currency forward contracts to
limit its exposure in converting accounts receivable and accounts payable balances denominated in non-functional currencies.
The principal currency that creates the foreign currency exposures at the U.K. subsidiary is the Euro. The Company regularly
monitors its foreign exchange 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.
Interest Rate Risk
As of August 31, 2016, the Company had a $122.0 million outstanding balance on its existing $175.0 million revolving credit
facility agreement with Bank of America. This $175.0 million revolving credit facility is subject to interest rate fluctuations.
Under the terms of the credit facility agreement, the Company may borrow loans in U.S. dollars or in foreign currencies from
time to time until May 13, 2020. All loans denominated in U.S. dollars will accrue interest at the bank’s Prime rate or at LIBOR
plus a margin of 0.85 percent (together with any applicable mandatory liquid asset costs imposed by non-U.S. banking regulatory
authorities). All loans denominated in foreign currencies will accrue interest at LIBOR plus 0.85 percent. Any significant increase
in the bank’s Prime rate and/or LIBOR rate could have a material effect on interest expense incurred on any borrowings
outstanding under the credit facility.
40
Item 8. Financial Statements and Supplementary Data
The Company’s consolidated financial statements at August 31, 2016 and 2015 and for each of the three fiscal years in the period
ended August 31, 2016, and the Report of Independent Registered Public Accounting Firm, are included in Item 15 of this report.
Quarterly Financial Data (Unaudited)
The following table sets forth certain unaudited quarterly consolidated financial data (in thousands, except per share data):
Net sales
Gross profit
Net income
Diluted earnings per common share
Net sales
Gross profit
Net income
Diluted earnings per common share
1st
92,522
51,408
12,062
0.83
1st
96,353
49,701
10,786
0.73
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Fiscal Year Ended August 31, 2016
2nd
94,550
52,362
13,669
0.94
3rd
96,446
54,811
12,665
0.88
$
$
$
$
4th
97,152
55,788
14,232
0.99
$
$
$
$
Total
$ 380,670
$ 214,369
52,628
$
3.64
$
Fiscal Year Ended August 31, 2015
2nd
97,331
51,233
11,333
0.76
3rd
92,485
49,272
10,965
0.75
$
$
$
$
4th
91,981
49,972
11,723
0.80
$
$
$
$
Total
$ 378,150
$ 200,178
44,807
$
3.04
$
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
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 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, 2016, 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, 2016.
41
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, 2016, as stated in their report included in Item 15 of this report.
Changes in Internal Control over Financial Reporting
For the quarter ended August 31, 2016, there were no significant changes to the Company’s internal control over financial
reporting that materially affected, or would be reasonably likely to materially affect, its internal control over financial reporting.
Item 9B. Other Information
None.
42
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Certain information required by this item is set forth under the headings “Security Ownership of Directors and Executive
Officers,” “Nominees for Election as Directors,” “Audit Committee” and “Section 16(a) Beneficial Ownership Reporting
Compliance” in the Company’s Proxy Statement to be filed with the Securities and Exchange Commission in connection with
the 2016 Annual Meeting of Stockholders on December 13, 2016 (“Proxy Statement”), which information is incorporated by
reference herein. Additional information concerning executive officers of the Registrant required by this item is included in this
report following Item 4 of Part I under the heading, "Executive Officers of the Registrant."
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.
Item 11. Executive Compensation
Information required by this item is incorporated by reference to the Proxy Statement under the headings “Board of Directors
Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,”
“Compensation Committee Report,” “Executive Compensation,” “Supplemental Death Benefit Plans and Supplemental
Insurance Benefits” and “Change of Control Severance Agreements.”
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 headings “Principal
Security Holders” and “Security Ownership of Directors and Executive Officers.”
Equity Compensation Plan Information
The following table provides information regarding shares of the Company’s common stock authorized for issuance under equity
compensation plans as of August 31, 2016:
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted-average exercise
price of outstanding options
warrants and rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
229,878 (1) $
n/a
229,878 (1) $
35.59 (2)
n/a
35.59 (2)
1,696,909
n/a
1,696,909
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
(1) Includes 27,820 securities to be issued upon exercise of outstanding stock options; 130,035 securities to be issued pursuant to outstanding restricted stock
units; 45,700 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; and 26,323 securities to be issued pursuant to outstanding deferred
performance units (“DPUs”) based on 100% of the maximum number of DPU shares to be issued upon achievement of the applicable performance measure
specified for such DPUs.
(2) Weighted average exercise price only applies to stock options outstanding of 27,820, which is included as a component of the number of securities to be
issued upon exercise of outstanding options, warrants and rights.
43
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”, “Audit Committee” and “Related Party Transactions Review and Oversight.”
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.”
44
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as part of this report
(1) Report of Independent Registered Public Accounting Firm
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
Page
F-1
F-2
F-3
F-4
F-5
F-6
F-7
(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
3(a)
3(b)
10(a)
10(b)
10(c)
10(d)
10(e)
10(f)
10(g)
10(h)
10(i)
10(j)
10(k)
Articles of Incorporation and Bylaws.
Certificate of Incorporation, incorporated by reference from the Registrant’s Form 10-K filed October 22, 2012, Exhibit 3(a)
thereto.
Amended and Restated Bylaws of WD-40 Company, incorporated by reference from the Registrant’s Form 8-K filed July 18,
2016, Exhibit 3(a) thereto.
Material Contracts.
Executive Compensation Plans and Arrangements (Exhibits 10(a) through 10(p) are management contracts and compensatory
plans or arrangements required to be filed as exhibits pursuant to Item 15(b)).
WD-40 Company 2007 Stock Incentive Plan, incorporated by reference from the Registrant’s Form 10-K filed October 22,
2012, Exhibit 10(a) thereto.
Fourth Amended and Restated WD-40 Company 1990 Incentive Stock Option Plan, incorporated by reference from the
Registrant’s Form 10-K filed October 22, 2015, Exhibit 10(b) thereto.
WD-40 Directors’ Compensation Policy and Election Plan dated October 12, 2015, incorporated by reference from the
Registrant’s Form 8-K filed June 24, 2016, Exhibit 10(a) thereto.
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.
Form of Restricted Stock Unit Agreement for grants of Restricted Stock Units to Executive Officers in fiscal years 2014, 2015
and 2016.
Form of Market Share Unit Award Agreement for grants of Market Share Units to Executive Officers in fiscal years 2014,
2015 and 2016, incorporated by reference from the Registrant’s Form 8-K filed October 25, 2012, Exhibit 10(a) thereto.
Form of Deferred Performance Unit Award Agreement for grants of Deferred Performance Units to Executive Officers in fiscal
year 2016.
Amended and Restated of WD-40 Company’s Performance Incentive Compensation Plan, incorporated by reference from the
Registrant’s Proxy Statement filed November 1, 2012, Appendix A thereto.
Form of WD-40 Company Supplemental Death Benefit Plan applicable to certain executive officers of the Registrant.
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.
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.
45
10(l)
10(m)
10(n)
10(o)
10(p)
10(q)
10(r)
10(s)
10(t)
10(u)
10(v)
21
23
31(a)
31(b)
32(a)
32(b)
Change of Control Severance Agreement between WD-40 Company and Stanley A. Sewitch dated October 15, 2014,
incorporated by reference from the Registrant’s Form 10-K filed October 21, 2014, Exhibit 10(j) thereto.
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 20, 2011, Exhibit 10(h) thereto.
Change of Control Severance Agreement between WD-40 Company and Michael L. Freeman dated February 14, 2006,
incorporated by reference from the Registrant’s Form 10-K filed October 20, 2011, Exhibit 10(j) thereto.
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 20, 2011, Exhibit 10(h) thereto.
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 20, 2011, Exhibit 10(m) thereto.
Credit Agreement dated June 17, 2011 among WD-40 Company and Bank of America, N.A., incorporated by reference from
the Registrant’s Form 8-K filed June 17, 2011, Exhibit 10(a) thereto.
First Amendment to Credit Agreement dated January 7, 2013 among WD-40 Company and Bank of America, N.A.,
incorporated by reference from the Registrant’s Form 10-Q filed January 9, 2013, Exhibit 10(b) thereto.
Second Amendment to Credit Agreement dated May 13, 2015 among WD-40 Company and Bank of America, N.A.,
incorporated by reference from the Registrant’s Form 8-K/A filed May 18, 2015, Exhibit 10(a) thereto.
Third Amendment to Credit Agreement dated November 16, 2015 among WD-40 Company and Bank of America, N.A.,
incorporated by reference from the Registrant’s Form 8-K filed November 19, 2015, Exhibit 10(a) thereto.
Fourth Amendment to Credit Agreement dated September 1, 2016 among WD-40 Company and Bank of America, N.A.,
incorporated by reference from the Registrant’s Form 8-K filed September 2, 2016, Exhibit 10(a) thereto.
Purchase and Sale Agreement and Escrow Instructions dated July 29, 2016, incorporated by reference from the Registrant’s
Form 8-K filed August 4, 2016, Exhibit 10(a) thereto.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm dated October 24, 2016.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101. INS
XBRL Instance Document
101. SCH
XBRL Taxonomy Extension Schema Document
101. CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101. DEF
XBRL Taxonomy Extension Definition Linkbase Document
101. LAB
XBRL Taxonomy Extension Labels Linkbase Document
101. PRE
XBRL Taxonomy Extension Presentation Linkbase Document
46
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
WD-40 COMPANY
Registrant
/s/ JAY W. REMBOLT
JAY W. REMBOLT
Vice President, Finance
Treasurer and Chief Financial Officer
Date: October 24, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ GARRY O. RIDGE
GARRY O. RIDGE
Chief Executive Officer and Director
(Principal Executive Officer)
Date: October 24, 2016
/s/ GILES H. BATEMAN
GILES H. BATEMAN, Director
Date: October 24, 2016
/s/ PETER D. BEWLEY
PETER D. BEWLEY, Director
Date: October 24, 2016
/s/ DANIEL T. CARTER
DANIEL T. CARTER, Director
Date: October 24, 2016
/s/ MELISSA CLAASSEN
MELISSA CLAASSEN, Director
Date: October 24, 2016
/s/ RICHARD A. COLLATO
RICHARD A. COLLATO, Director
Date: October 24, 2016
/s/ MARIO L. CRIVELLO
MARIO L. CRIVELLO, Director
Date: October 24, 2016
/s/ LINDA A. LANG
LINDA A. LANG, Director
Date: October 24, 2016
/s/ DANIEL E. PITTARD
DANIEL E. PITTARD, Director
Date: October 24, 2016
/s/ GREGORY A. SANDFORT
GREGORY A. SANDFORT, Director
Date: October 24, 2016
/s/ NEAL E. SCHMALE
NEAL E. SCHMALE, Director
Date: October 24, 2016
47
[This page intentionally left blank.]
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of WD-40 Company
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of
comprehensive income, of shareholders’ equity, and of cash flows present fairly, in all material respects, the financial position
of WD-40 Company and its subsidiaries at August 31, 2016 and August 31, 2015, and the results of their operations and their
cash flows for each of the three years in the period ended August 31, 2016 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of August 31, 2016, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. The
Company's management is responsible for these financial statements, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report
on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial
statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
As discussed in Note 2, the consolidated financial statements, the Company changed the manner in which it classifies deferred
taxes on the consolidated balance sheet in fiscal year 2016.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
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.
/s/ PricewaterhouseCoopers LLP
San Diego, CA
October 24, 2016
F-1
WD-40 COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Trade accounts receivable, less allowance for doubtful
accounts of $394 and $491 at August 31, 2016
and 2015, respectively
Inventories
Current deferred tax assets, net
Other current assets
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Deferred tax assets, net
Other assets
Total assets
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
Accrued liabilities
Accrued payroll and related expenses
Income taxes payable
Total current liabilities
Revolving credit facility
Deferred tax liabilities, net
Other long-term liabilities
Total liabilities
Commitments and Contingencies (Note 11)
Shareholders' equity:
(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:650)(cid:3)(cid:68)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)36,000,000 shares, $0.001 par value;
19,621,820 and 19,546,888 shares issued at August 31, 2016 and 2015,
respectively; and 14,208,338 and 14,450,490 shares outstanding at
August 31, 2016 and 2015, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:75)(cid:72)(cid:79)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:85)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:92)(cid:15)(cid:3)(cid:68)(cid:87)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:650)(cid:3)5,413,482 and 5,096,398
shares at August 31, 2016 and 2015, respectively
Total shareholders' equity
Total liabilities and shareholders' equity
August 31,
2016
August 31,
2015
$
50,891
57,633
$
53,896
48,603
64,680
31,793
-
4,475
209,472
11,545
95,649
19,191
621
3,190
339,668
18,690
15,757
20,866
3,381
58,694
122,000
16,365
2,214
199,273
20
145,936
289,642
(27,298)
(267,905)
140,395
339,668
$
$
$
58,750
32,052
5,824
6,127
205,252
11,376
96,409
22,961
-
3,259
339,257
17,128
15,200
13,357
2,287
47,972
108,000
23,145
2,282
181,399
20
141,651
260,683
(8,722)
(235,774)
157,858
339,257
$
$
$
See accompanying notes to consolidated financial statements.
F-2
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Net sales
Cost of products sold
Gross profit
Operating expenses:
Selling, general and administrative
Advertising and sales promotion
Amortization of definite-lived intangible assets
Total operating expenses
Income from operations
Other income (expense):
Interest income
Interest expense
Other income (expense), net
Income before income taxes
Provision for income taxes
Net income
Earnings per common share:
Basic
Diluted
Shares used in per share calculations:
Basic
Diluted
$
$
$
$
Fiscal Year Ended August 31,
2016
2015
2014
$
$
$
$
380,670
166,301
214,369
117,767
22,278
2,976
143,021
71,348
683
(1,703)
2,461
72,789
20,161
52,628
3.65
3.64
14,332
14,379
$
$
$
$
378,150
177,972
200,178
108,873
22,876
3,039
134,788
65,390
584
(1,205)
(1,659)
63,110
18,303
44,807
3.05
3.04
14,582
14,649
382,997
184,144
198,853
108,577
23,922
2,617
135,116
63,737
596
(1,002)
(372)
62,959
19,213
43,746
2.89
2.87
15,072
15,148
See accompanying notes to consolidated financial statements.
F-3
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive (loss) income:
Foreign currency translation adjustment
Total comprehensive income
Fiscal Year Ended August 31,
2016
2015
2014
$
$
52,628
(18,576)
34,052
$
$
44,807
(9,825)
34,982
$
$
43,746
6,146
49,892
See accompanying notes to consolidated financial statements.
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WD-40 COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fiscal Year Ended August 31,
2016
2015
2014
$
52,628
$
44,807
$
43,746
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Net gains on sales and disposals of property and equipment
Deferred income taxes
Excess tax benefits from settlements of stock-based equity awards
Stock-based compensation
Unrealized foreign currency exchange (gains) losses, net
Provision for bad debts
Changes in assets and liabilities:
Trade accounts receivable
Inventories
Other assets
Accounts payable and accrued liabilities
Accrued payroll and related expenses
Income taxes payable
Other long-term liabilities
Net cash provided by operating activities
Investing activities:
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible assets
Acquisition of business
Purchases of short-term investments
Maturities of short-term investments
Net cash used in investing activities
Financing activities:
Treasury stock purchases
Dividends paid
Proceeds from issuance of common stock
Excess tax benefits from settlements of stock-based equity awards
Net proceeds from revolving credit facility
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Cash paid for:
Interest
Income taxes, net of tax refunds received
$
$
$
6,465
(75)
(2,227)
(2,064)
3,655
(986)
52
(9,936)
(1,001)
1,557
2,871
5,486
4,235
(56)
60,604
(4,354)
301
-
-
(24,899)
8,032
(20,920)
(32,131)
(23,669)
1,200
2,064
14,000
(38,536)
(4,153)
(3,005)
53,896
50,891
1,573
16,494
$
$
$
6,464
(71)
(1,334)
(1,205)
2,782
2,086
302
(314)
2,037
1,731
(2,464)
(2,722)
2,737
228
55,064
(5,784)
333
-
(4,117)
(10,575)
3,192
(16,951)
(30,259)
(21,720)
2,111
1,205
10,000
(38,663)
(3,357)
(3,907)
57,803
53,896
1,168
15,414
$
$
$
5,860
(39)
(736)
(831)
2,263
(66)
218
(5,821)
(2,237)
(2,209)
(560)
(3,047)
2,001
188
38,730
(4,085)
331
(1,799)
-
(7,710)
2,760
(10,503)
(42,773)
(20,184)
1,284
831
35,000
(25,842)
1,984
4,369
53,434
57,803
915
18,147
See accompanying notes to consolidated financial statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 which 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, sport 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 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.
Supplier Risk
The Company relies on a limited number of suppliers, including single or sole source suppliers for certain of its raw materials,
packaging, product components and other necessary supplies. Where possible and where it makes business sense, the Company
works with secondary or multiple suppliers to qualify additional supply sources. To date, the Company has been able to obtain
adequate supplies of these materials which are used in the production of its maintenance products and homecare and cleaning
products in a timely manner from existing sources.
Cash and Cash Equivalents
Cash equivalents are highly liquid investments purchased with an original maturity of three months or less.
Short-term Investments
The Company's short-term investments consist of term deposits and callable time deposits. These short-term investments had a
carrying value of $57.6 million and $48.6 million at August 31, 2016 and 2015, respectively. The term deposits are subject to
penalty for early redemption before their maturity, and the callable time deposits require a notice before redemption.
Trade Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is
the Company’s best estimate of the amount of probable credit losses in existing accounts receivable. The Company determines
the allowance for doubtful accounts based on historical write-off experience and the identification of specific balances deemed
uncollectible. Trade accounts receivable are charged against the allowance when the Company believes it is probable that the
trade accounts receivable will not be recovered. The Company does not have any off-balance sheet credit exposure related to its
customers. Allowance for doubtful accounts related to the Company’s trade accounts receivable were not significant at August
31, 2016 and 2015.
F-7
Inventories
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. When necessary, the Company adjusts the carrying value of its inventory
to the lower of cost or market, including any costs to sell or dispose of such inventory. Appropriate consideration is given by the
Company to obsolescence, excessive inventory levels, product deterioration and other factors when evaluating net realizable
value for the purposes of determining the lower of cost or market.
Included in inventories are amounts for certain raw materials and components that the Company has provided to its third-party
contract manufacturers but that remain unpaid to the Company as of the balance sheet date. The Company’s contract
manufacturers package products to the Company’s specifications and, upon order from the Company, ship ready-to-sell inventory
to either the Company’s third-party distribution centers or directly to its customers. The Company transfers certain raw materials
and components to these contract manufacturers for use in the manufacturing process. Contract manufacturers are obligated to
pay the Company for these raw materials and components upon receipt. Amounts receivable from the contract manufacturers as
of the balance sheet date related to transfers of these raw materials and components by the Company to its contract manufacturers
are considered product held at third-party contract manufacturers and are included in inventories in the accompanying
consolidated balance sheets.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method based upon estimated useful
lives of ten to forty years for buildings and improvements, three to fifteen years for machinery and equipment, three to five years
for vehicles, three to ten years for furniture and fixtures and three to five years for software and computer equipment. Depreciation
expense totaled $3.5 million, $3.4 million and $3.2 million for fiscal years 2016, 2015 and 2014, respectively. These amounts
include factory depreciation expense which is recognized as cost of products sold and totaled $0.8 million for each of the fiscal
years ended August 31, 2016 and 2015 and $1.0 million for fiscal year 2014.
Software
The Company capitalizes costs related to computer software obtained or developed for internal use. Software obtained for internal
use has generally been enterprise-level business and finance software that the Company customizes to meet its specific
operational needs. Costs incurred in the application development phase are capitalized and amortized over their useful lives,
which are generally three to five years.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of tangible and intangible assets acquired. The carrying
value of goodwill is reviewed for possible impairment in accordance with the authoritative guidance on goodwill, intangibles
and other. The Company assesses possible impairments to goodwill at least annually during its second fiscal quarter and otherwise
when events or changes in circumstances indicate that an impairment condition may exist. In performing the annual impairment
test of its goodwill, the Company considers the fair value concepts of a market participant and the highest and best use for its
intangible assets. In addition to the annual impairment test, goodwill is evaluated each reporting period to determine whether
events and circumstances would more likely than not reduce the fair value of a reporting unit below its carrying value.
When testing goodwill for impairment, the Company first assesses qualitative factors to determine whether it is necessary to
perform the two-step quantitative goodwill impairment test. If, after assessing qualitative factors, the Company determines it is
not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing additional
quantitative tests is unnecessary. Otherwise, a two-step quantitative test is performed to identify the potential impairment and to
measure the amount of goodwill impairment, if any. Any required impairment losses are recorded as a reduction in the carrying
amount of the related asset and charged to results of operations. No impairments to its goodwill were identified by the Company
during fiscal years 2016, 2015 and 2014.
Long-lived Assets
The Company’s long-lived assets consist of property and equipment and definite-lived intangible assets. Long-lived assets are
depreciated or amortized, as applicable, on a straight-line basis over their estimated useful lives. The Company assesses potential
impairments to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable and/or its remaining useful life may no longer be appropriate. Any required impairment
loss would be measured as the amount by which the asset’s carrying amount exceeds its fair value, which is the amount at which
the asset could be bought or sold in a current transaction between willing market participants and would be recorded as a reduction
in the carrying amount of the related asset and a charge to results of operations. An impairment loss would be recognized when
F-8
the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. No impairments to its
long-lived assets were identified by the Company during fiscal years 2016, 2015 and 2014.
Fair Value of Financial Instruments
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 August 31, 2016, 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. During the fiscal years ended August 31, 2016, 2015 and 2014, the Company
did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial
recognition.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of
cash and cash equivalents, short-term investments and trade accounts receivable. The Company’s policy is to place its cash in
high credit quality financial institutions, in investments that include demand deposits, term deposits and callable time deposits.
The Company’s trade accounts receivable are derived from customers located in North America, South America, Asia-Pacific,
Europe, the Middle East, Africa and India. The Company limits its credit exposure from trade accounts receivable by performing
on-going credit evaluations of customers, as well as insuring its trade accounts receivable in selected markets.
Insurance Coverage
The Company carries insurance policies to cover insurable risks such as property damage, business interruption, product liability,
workers’ compensation and other risks, with coverage and other terms that it believes to be adequate and appropriate. These
policies may be subject to applicable deductible or retention amounts, coverage limitations and exclusions. The Company does
not maintain self-insurance with respect to its material risks; therefore, the Company has not provided for self-insurance reserves
as of August 31, 2016 and 2015.
Revenue Recognition and Sales Incentives
Sales are recognized as revenue at the time of delivery to the customer when risks of loss and title have passed. Sales are recorded
net of allowances for damaged goods and other sales returns, sales incentives, trade promotions and cash discounts.
The Company records the costs of promotional activities such as sales incentives, trade promotions, coupon offers and cash
discounts that are given to its customers as a reduction of sales in its consolidated statements of operations. The Company offers
on-going trade promotion programs with customers and consumer coupon programs that require the Company to estimate and
accrue the expected costs for such programs. Programs include cooperative marketing programs, shelf price reductions, coupons,
rebates, consideration and allowances given to retailers for shelf space and/or favorable display positions in their stores and other
promotional activities. Costs related to rebates, cooperative advertising and other promotional activities are recorded as a
reduction to sales upon delivery of the Company’s products to its customers. Coupon costs are based upon historical redemption
rates and are recorded as a reduction to sales as incurred, which is when the coupons are circulated.
Cost of Products Sold
Cost of products sold primarily includes the cost of products manufactured on the Company’s behalf by its third-party contract
manufacturers, net of volume and other rebates. Cost of products sold also includes the costs to manufacture WD-40 concentrate,
which is done at the Company’s own facilities or at third-party contract manufacturers. When the concentrate is manufactured
F-9
by the Company, cost of products sold includes direct labor, direct materials and supplies; in-bound freight costs related to
purchased raw materials and finished product; and depreciation of machinery and equipment used in the manufacturing process.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs related to selling the Company’s products, such as the cost of the sales
force and related sales and broker commissions; shipping and handling costs paid to third-party companies to distribute finished
goods from the Company’s third-party contract manufacturers and distribution centers to its customers; other general and
administrative costs related to the Company’s business such as general overhead, legal and accounting fees, insurance, and
depreciation; and other employee-related costs to support marketing, human resources, finance, supply chain, information
technology and research and development activities.
Shipping and Handling Costs
Shipping and handling costs associated with in-bound freight and movement of product from third-party contract manufacturers
to the Company’s third-party warehouses are capitalized in the cost of inventory and subsequently included in cost of sales when
recognized in the statement of operations. Shipping and handling costs associated with out-bound transportation are included in
selling, general and administrative expenses and are recorded at the time of shipment of product to the Company’s customers.
Out-bound shipping and handling costs were $16.1 million, $15.8 million and $16.2 million for fiscal years 2016, 2015 and 2014,
respectively.
Advertising and Sales Promotion Expenses
Advertising and sales promotion expenses are expensed as incurred. Advertising and sales promotion expenses include costs
associated with promotional activities that the Company pays to third parties, which include costs for advertising (television,
print media and internet), administration of coupon programs, consumer promotions, product demonstrations, public relations,
agency costs, package design expenses and market research costs. Total advertising and sales promotion expenses were $22.3
million, $22.9 million and $23.9 million for fiscal years 2016, 2015 and 2014, respectively.
Research and Development
The Company is involved in research and development efforts that include the ongoing development or innovation of new
products and the improvement, extension or renovation of existing products or product lines. All research and development costs
are expensed as incurred and are included in selling, general and administrative expenses. Research and development expenses
were $7.7 million, $9.0 million and $6.9 million in fiscal years 2016, 2015 and 2014, respectively. These expenses include costs
associated with general research and development activities, as well as those associated with internal staff, overhead, design
testing, market research and consultants.
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. 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, the Company provides 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. The Company recognizes accrued interest and penalties related to uncertain tax positions as a component
of income tax expense.
U.S. federal income tax expense is provided on remittances of foreign earnings and on unremitted foreign earnings that are not
indefinitely reinvested. U.S. federal income taxes and foreign withholding taxes are not provided when foreign earnings are
indefinitely reinvested. The Company determines whether its foreign subsidiaries will invest their undistributed earnings
indefinitely based on the capital needs of the foreign subsidiaries and reassesses this determination each reporting period.
Changes to the Company’s determination may be warranted based on the Company’s experience as well as its plans regarding
future international operations and expected remittances.
Foreign Currency
The Company translates the assets and liabilities of its foreign subsidiaries into U.S. dollars at current rates of exchange in effect
at the end of the reporting period. Income and expense items are translated at rates that approximate the rates in effect at the
transaction date. Gains and losses from translation are included in accumulated other comprehensive income or loss. Gains or
F-10
losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional
currency) are included as other income (expense) in the Company’s consolidated statements of operations. The Company had
$2.4 million of net gains in foreign currency transactions in fiscal year 2016 and $1.7 million and $0.4 million of net losses in
fiscal years 2015 and 2014, respectively.
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 in converting accounts receivable and accounts payable balances
denominated in non-functional currencies. The principal currency affected is the Euro. 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.
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 August 31, 2016, the Company had a notional amount of $5.3 million outstanding in foreign
currency forward contracts, which mature from September 2016 through October 2016. Unrealized net gains related to foreign
currency forward contracts were not significant at August 31, 2016 and 2015. Realized net gains and losses related to foreign
currency forward contracts were not material for each of the twelve month periods ended August 31, 2016 and 2015.
Earnings per Common Share
Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or
unpaid, are participating securities that are required to be included in the computation of earnings per common share pursuant to
the two-class method. Accordingly, the Company’s outstanding unvested, if any, and outstanding vested stock-based equity
awards that provide such nonforfeitable rights to dividend equivalents are included as participating securities in the calculation
of earnings per common share (“EPS”) pursuant to the two-class method.
The Company calculates EPS using the two-class method, which provides for an allocation of net income between common stock
and other participating securities based on their respective participation rights to share in dividends. Basic EPS is calculated by
dividing net income available to common shareholders for the period by the weighted-average number of common shares
outstanding during the period. Net income available to common shareholders for the period includes dividends paid to common
shareholders during the period plus a proportionate share of undistributed net income allocable to common shareholders for the
period; the proportionate share of undistributed net income allocable to common shareholders for the period is based on the
proportionate share of total weighted-average common shares and participating securities outstanding during the period.
Diluted EPS is calculated by dividing net income available to common shareholders for the period by the weighted-average
number of common shares outstanding during the period increased by the weighted-average number of potentially dilutive
common shares (dilutive securities) that were outstanding during the period if the effect is dilutive. Dilutive securities are
comprised of stock options, restricted stock units, market share units and deferred performance units granted under the
Company’s prior stock option plan and current equity incentive plan.
Stock-based Compensation
The Company accounts for stock-based equity awards exchanged for employee and non-employee director services in accordance
with the authoritative guidance for share-based payments. Under such guidance, stock-based compensation expense is measured
at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over
the requisite service period. Compensation expense is amortized on a straight-line basis over the requisite service period for the
entire award, which is generally the maximum vesting period of the award.
The fair value of stock options is determined using a Black-Scholes option pricing model. The fair values of restricted stock unit
awards and deferred performance unit awards are based on the fair value of the Company’s common stock on the date that such
awards are granted. The fair value of market share unit awards is determined using a Monte Carlo simulation model. For the
deferred performance unit awards, the Company adjusts the compensation expense over the service period based upon the
expected achievement level of the applicable performance condition. As the grant date fair value of market share unit awards
reflects the probabilities of the actual number of such awards expected to vest, compensation expense for such awards is not
adjusted based on the expected achievement level of the applicable performance condition. An estimated forfeiture rate is applied
and included in the calculation of stock-based compensation expense at the time that the stock-based equity awards are granted
F-11
and revised, if necessary, in subsequent periods if actual forfeiture rates differ from those estimates. Compensation expense
related to the Company’s stock-based equity awards is recorded as selling, general and administrative expenses in the Company’s
consolidated statements of operations.
The Company calculates its windfall tax benefits additional paid-in capital pool that is available to absorb tax deficiencies in
accordance with the short-cut method provided for by the authoritative guidance for share-based payments. As of August 31,
2016, the Company determined that it has a remaining pool of windfall tax benefits.
Segment Information
The Company discloses certain information about its business segments, which are determined consistent with the way the
Company’s Chief Operating Decision Maker organizes and evaluates financial information internally for making operating
decisions and assessing performance. In addition, the Chief Operating Decision Maker assesses and measures revenue based on
product groups.
Recently Adopted Accounting Standards
In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.
2015-17, “Balance Sheet Classification of Deferred Taxes”, which requires that all deferred tax liabilities and assets be classified
as noncurrent on the balance sheet, and eliminates the current requirement for an entity to separate these liabilities and assets into
current and noncurrent amounts based on the classification of the related asset or liability. The Company early adopted this
updated guidance in the fourth quarter of fiscal year 2016 on a prospective basis and it only resulted in a change of presentation
of the deferred taxes on the consolidated balance sheet as of August 31, 2016. This change was not retrospectively applied to
prior period balances.
Recently Issued Accounting Standards
In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments”. The
amendments address eight specific cash flow issues to reduce the existing diversity in practice in how certain cash receipts and
cash payments are presented and classified in the statement of cash flows. This guidance is effective for fiscal years beginning
after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted and should be
applied using a retrospective approach. The Company is in the process of evaluating the potential impacts of this
new guidance on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments”, which requires
entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the
reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance
also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models
and methods for estimating expected credit losses. This guidance is effective for fiscal years beginning after December 15, 2019,
including interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating
the potential impacts of this new guidance on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The
amendments in this updated guidance include changes to simplify the Codification for several aspects of the accounting for share-
based payment transactions, including those related to the income tax consequences, classification of awards as either equity or
liabilities, accounting for forfeitures, minimum statutory withholding requirements and classification of certain items on the
statement of cash flows. Certain of these changes are required to be applied retrospectively while other changes are required to
be applied prospectively. This guidance is effective for fiscal years beginning after December 15, 2016, including interim periods
within that reporting period. Early adoption is permitted. The Company is still evaluating whether it will adopt this updated
guidance in fiscal year 2017 or in fiscal year 2018, as required, but it expects that the adoption of this new guidance will have a
more than inconsequential impact on the Company’s consolidated financial statements. For example, if the Company had
adopted this updated guidance in fiscal year 2016, its income tax expense for the year would have been reduced by approximately
$2.1 million due to the recognition of excess tax benefits in the provision for income taxes rather than through additional paid-
in-capital. The Company also expects to change its policy related to forfeitures upon adoption of this new guidance such that it
will recognize the impacts of forfeitures as they occur rather than recognizing them based on an estimated forfeiture rate.
Although the Company is still assessing the impacts of this change in policy for forfeitures on its consolidated financial
statements, it does not expect that the impact will be material.
In February 2016, the FASB issued ASU No. 2016-02, “Leases”. 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 all leases with terms longer than twelve months.
Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the
F-12
income statement. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within
that reporting period. Early adoption is permitted and should be applied using a modified retrospective approach. The Company is
in the process of evaluating the impacts of this new guidance on its consolidated financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, 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
rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from
customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain
or fulfill a contract. This guidance was originally to be effective for annual reporting periods beginning after December 15, 2016,
including interim periods within that reporting period. In July 2015, the FASB approved a one year deferral for the effective
date of this guidance. Early adoption is permitted but only to the original effective date. Companies are permitted to adopt this
new rule following either a full or modified retrospective approach. The Company does not intend to adopt this guidance early
and it will become effective for the Company on September 1, 2018. The Company has not yet decided which implementation
method it will adopt. Although management has completed its initial evaluation of this new guidance as it pertains to the
Company, it is still in the process of determining the impacts that this updated guidance will have on the Company's consolidated
financial statements.
Note 3. Inventories
Inventories consisted of the following (in thousands):
Product held at third-party contract manufacturers
Raw materials and components
Work-in-process
Finished goods
Total
Note 4. Property and Equipment
Property and equipment, net, consisted of the following (in thousands):
Machinery, equipment and vehicles
Buildings and improvements
Computer and office equipment
Software
Furniture and fixtures
Capital in progress
Land
Subtotal
Less: accumulated depreciation and amortization
Total
August 31,
2016
August 31,
2015
$
$
$
$
3,521
2,996
163
25,113
31,793
August 31,
2016
14,892
4,223
3,605
7,392
1,286
2,200
254
33,852
(22,307)
11,545
$
$
$
$
3,224
3,597
141
25,090
32,052
August 31,
2015
14,419
4,258
3,709
6,835
1,414
1,552
282
32,469
(21,093)
11,376
F-13
Note 5. Goodwill and Other Intangible Assets
Acquisitions
During the first quarter of fiscal year 2015, the Company entered into an agreement by and between GT 85 Limited (“GT85”)
and WD-40 Company Limited, which is the Company’s U.K. subsidiary, to acquire the GT85 business and certain of its assets
for a purchase consideration of $4.1 million. Of this purchase consideration, $3.7 million was paid in cash upon completion of
the acquisition (“completion”) and the remaining balance was paid in June 2015. Located in the U.K., the GT85 business was
engaged in the marketing and sale of the GT85® and SG85 brands of maintenance products. This acquisition complements the
Company’s maintenance products and will help to build upon its strategy to develop new product categories for WD-40 Specialist
and WD-40 BIKE.
The purchase price was allocated to certain customer-related, trade name-related, and technology-based intangible assets in the
amount of $1.7 million, $0.9 million, and $0.2 million, respectively. The Company began to amortize these definite-lived
intangible assets on a straight-line basis over their estimated useful lives of eight, ten, and four years, respectively, in the first
quarter of fiscal year 2015. The purchase price exceeded the fair value of the intangible assets acquired and, as a result, the
Company recorded goodwill of $1.3 million in connection with this transaction. This acquisition did not have a material impact
on the Company’s condensed consolidated financial statements, and as a result no pro forma disclosures have been presented.
During the second quarter of fiscal year 2014, the Company entered into an Asset Purchase Agreement (the “Purchase
Agreement”) by and between Etablissements Decloedt SA/NV (“Etablissements”) and WD-40 Company Limited. From January
1998 through the date of this Purchase Agreement, Etablissements acted as one of the Company’s international marketing
distributors located in Belgium where it marketed and distributed certain of the WD-40 products. Pursuant to the Purchase
Agreement, the Company acquired the list of customers and related information (the “customer list”) from Establissements for a
purchase consideration of $1.8 million in cash. The Company has been using this customer list since its acquisition to solicit and
transact direct sales of its products in Belgium. The Company began to amortize this customer list definite-lived intangible asset
on a straight-line basis over its estimated useful life of five years in the second quarter of fiscal year 2014.
Goodwill
The following table summarizes the changes in the carrying amounts of goodwill by segment (in thousands):
Balance as of August 31, 2014
GT85 acquisition
Translation adjustments
Balance as of August 31, 2015
Translation adjustments
Balance as of August 31, 2016
Americas
EMEA
Asia-Pacific
Total
$
$
85,581
-
(49)
85,532
(80)
85,452
$
$
8,707
1,231
(271)
9,667
(680)
8,987
$
$
1,211
-
(1)
1,210
-
1,210
$
$
95,499
1,231
(321)
96,409
(760)
95,649
During the second quarter of fiscal year 2016, the Company performed its annual goodwill impairment test. The annual goodwill
impairment test was performed at the reporting unit level as required by the authoritative guidance. The Company performed a
qualitative assessment of each reporting unit to determine whether it was more likely than not that the fair value of a reporting
unit was less than its carrying amount. In performing this qualitative assessment, the Company assessed relevant events and
circumstances that may impact the fair value and the carrying amount of each of its reporting units. Factors that were considered
included, but were not limited to, the following: (1) macroeconomic conditions; (2) industry and market conditions; (3) historical
financial performance and expected financial performance; (4) other entity specific events, such as changes in management or
key personnel; and (5) events affecting the Company’s reporting units, such as a change in the composition of net assets or any
expected dispositions. Based on the results of this qualitative assessment, the Company determined that it is more likely than not
that the carrying value of each of its reporting units is less than its fair value and, thus, the two-step quantitative analysis was not
required. As a result, the Company concluded that no impairment of its goodwill existed as of February 29, 2016.
In addition, there were no indicators of impairment identified as a result of the Company’s review of events and circumstances
related to its goodwill subsequent to February 29, 2016, the date of its most recent annual goodwill impairment test. To date,
there have been no impairment losses identified and recorded related to the Company’s goodwill.
F-14
Definite-lived Intangible Assets
The Company’s definite-lived intangible assets, which include the 2000 Flushes, Spot Shot, Carpet Fresh, 1001 and GT85 trade
names, the Belgium customer list, the GT85 customer relationships and the GT85 technology are included in other intangible
assets, net in the Company’s condensed consolidated balance sheets. The following table summarizes the definite-lived intangible
assets and the related accumulated amortization (in thousands):
Gross carrying amount
Accumulated amortization
Net carrying amount
August 31,
2016
$
$
36,009
(16,818)
19,191
August 31,
2015
$
$
37,805
(14,844)
22,961
There has been no impairment charge for the period ended August 31, 2016 as a result of the Company’s review of events and
circumstances related to its existing definite-lived intangible assets.
Changes in the carrying amounts of definite-lived intangible assets by segment are summarized below (in thousands):
Balance as of August 31, 2014
Amortization expense
GT85 customer relationships
GT85 trade name
GT85 technology
Translation adjustments
Balance as of August 31, 2015
Amortization expense
Translation adjustments
Balance as of August 31, 2016
Americas
EMEA
Asia-Pacific
Total
$
$
19,328
(2,207)
-
-
-
-
17,121
(2,208)
-
14,913
$
$
4,343
(832)
1,570
896
159
(296)
5,840
(768)
(794)
4,278
$
$
-
-
-
-
-
-
-
-
-
-
$
$
23,671
(3,039)
1,570
896
159
(296)
22,961
(2,976)
(794)
19,191
The estimated amortization expense for the Company’s definite-lived intangible assets in future fiscal years is as follows (in
thousands):
Fiscal year 2017
Fiscal year 2018
Fiscal year 2019
Fiscal year 2020
Fiscal year 2021
Thereafter
Total
Trade Names
Customer-Based
Technology
$
$
2,422
2,417
2,417
2,022
1,232
6,947
17,457
$
$
452
452
262
167
167
167
1,667
$
$
34
33
-
-
-
-
67
Included in the total estimated future amortization expense is the amortization expense for the 1001 trade name and the GT85
intangible assets, which are based on current foreign currency exchange rates, and as a result amounts in future periods may
differ from those presented due to fluctuations in those rates.
F-15
Note 6. Accrued and Other Liabilities
Accrued liabilities consisted of the following (in thousands):
August 31,
2016
August 31,
2015
Accrued advertising and sales promotion expenses
Accrued professional services fees
Accrued sales taxes and other taxes
Other
Total
$
$
9,763
1,262
954
3,778
15,757
Accrued payroll and related expenses consisted of the following (in thousands):
Accrued incentive compensation
Accrued payroll
Accrued profit sharing
Accrued payroll taxes
Other
Total
Note 7. Debt
Revolving Credit Facility
August 31,
2016
12,203
3,559
2,716
1,744
644
20,866
$
$
$
$
$
$
9,259
1,207
1,043
3,691
15,200
August 31,
2015
5,530
3,644
2,508
1,189
486
13,357
On June 17, 2011, the Company entered into an unsecured credit agreement with Bank of America, N.A. (“Bank of America”).
Since June 17, 2011 and through August 31, 2016, this unsecured credit agreement has been amended three times, most recently
on November 16, 2015 (the “Third Amendment”). This Third Amendment increased the revolving commitment from an amount
not to exceed $150.0 million to an amount not to exceed $175.0 million. The Third Amendment also increased the aggregate
amount of the Company’s capital stock that it may repurchase from $125.0 million to $150.0 million during the period from and
including the Third Amendment effective date to the maturity date of the agreement so long as no default exists immediately
prior and after giving effect thereto. This revolving credit facility matures on May 13, 2020, and includes representations,
warranties and covenants customary for credit facilities of this type, as well as customary events of default and remedies.
Per the terms of the amended agreement, the Company and Bank of America may enter into an autoborrow agreement in form
and substance satisfactory to Bank of America, providing for the automatic advance of revolving loans in U.S. Dollars to the
Company’s designated account at Bank of America. On February 10, 2016, the Company entered into an autoborrow agreement
with Bank of America and this agreement has been in effect since that date. For the financial covenants, the definition of
consolidated EBITDA includes the add back of non-cash stock-based compensation to consolidated net income when arriving at
consolidated EBITDA. The terms of the financial covenants are as follows:
(cid:120)
(cid:120)
The consolidated leverage ratio cannot be greater than three to one. The consolidated leverage ratio means, as of any
date of determination, the ratio of (a) consolidated funded indebtedness as of such date to (b) consolidated EBITDA for
the most recently completed four fiscal quarters.
The consolidated interest coverage ratio cannot be less than three to one. The consolidated interest coverage ratio means,
as of any date of determination, the ratio of (a) consolidated EBITDA for the most recently completed four fiscal quarters
to (b) consolidated interest charges for the most recently completed four fiscal quarters.
While each of the borrowings under the line of credit have a maturity date within twelve months, the Company has classified the
borrowings as long-term liabilities as it has the ability and intent to refinance the draws on the line of credit for a period in excess
of one year through successive conversions of the borrowings to new borrowings under the line of credit. Since the autoborrow
feature provides for borrowings to be made and repaid by the Company on a daily basis, any such borrowings made under an
active autoborrow agreement are classified as short-term on the Company’s consolidated balance sheets. During the fiscal year
ended August 31, 2016, the Company borrowed an additional $14.0 million U.S. dollars under the revolving credit facility. As
of August 31, 2016, the Company had no balance under the autoborrow agreement. The Company regularly converts existing
draws on its line of credit to new draws with new maturity dates and interest rates. As of August 31, 2016, the Company had a
F-16
$122.0 million outstanding balance on the revolving credit facility and was in compliance with all debt covenants under this
credit facility.
On September 1, 2016, the Company entered into a fourth amendment (the “Fourth Amendment”) to the existing unsecured
credit agreement with Bank of America. See Note 16 – Subsequent Events for additional information on a fourth amendment
to the revolving credit facility.
Note 8. Share Repurchase Plans
On October 14, 2014, the Company’s Board of Directors approved a share buy-back plan. Under the plan, which became effective
at the beginning of the third quarter of fiscal year 2015, once the Company’s previous $60.0 million plan was exhausted, the
Company was authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2016. The timing and
amount of repurchases were based on terms and conditions as may be acceptable to the Company’s Chief Executive Officer and
Chief Financial Officer and in compliance with all laws and regulations applicable thereto. During the period from March 1,
2015 through August 31, 2016, the Company repurchased 503,127 shares at a total cost of $47.8 million under this $75.0 million
plan.
On June 21, 2016, the Company’s Board of Directors approved a new share buy-back plan. Under the plan, which became
effective on September 1, 2016 and will remain in effect through August 31, 2018, the Company is authorized to acquire up to
$75.0 million of its outstanding shares on terms and conditions as may be acceptable to the Company’s Chief Executive Officer
and Chief Financial Officer and in compliance with all laws and regulations applicable thereto.
Note 9. Earnings per Common Share
The table below reconciles net income to net income available to common shareholders (in thousands):
Net income
Less: Net income allocated to participating securities
Net income available to common shareholders
2016
52,628
(334)
52,294
$
$
Fiscal Year Ended August 31,
2015
$
$
44,807
(271)
44,536
$
$
2014
43,746
(238)
43,508
The table below summarizes the weighted-average number of common shares outstanding included in the calculation of basic
and diluted EPS (in thousands):
Weighted-average common shares outstanding, basic
Weighted-average dilutive securities
Weighted-average common shares outstanding, diluted
2016
14,332
47
14,379
Fiscal Year Ended August 31,
2015
14,582
67
14,649
2014
15,072
76
15,148
For the fiscal years ended August 31, 2016, 2015 and 2014, weighted-average stock-based equity awards outstanding that are
non-participating securities in the amounts of 4,501, 1,337 and 4,454, respectively, were excluded from the calculation of diluted
EPS under the treasury stock method as they were anti-dilutive.
Note 10. Related Parties
On October 11, 2011, the Company’s Board of Directors elected Mr. Gregory A. Sandfort as a director of WD-40 Company. Mr.
Sandfort is the Chief Executive Officer of Tractor Supply Company (“Tractor Supply”), which is a WD-40 Company customer
that acquires products from the Company in the ordinary course of business.
The consolidated financial statements include sales to Tractor Supply of $1.2 million and $1.1 million for fiscal years 2016 and
2015, respectively. Accounts receivable from Tractor Supply were not material as of August 31, 2016 and 2015.
F-17
Note 11. Commitments and Contingencies
Leases
The Company was committed under certain non-cancelable operating leases at August 31, 2016 which provide for the following
future fiscal year minimum payments (in thousands):
Operating leases
$
1,996
$
1,144
$
630
$
350
$
190
2017
2018
2019
2020
2021
Thereafter
30
$
Rent expense was $1.9 million for the fiscal year ended August 31, 2016 and $2.1 million for each of the fiscal years ended
August 31, 2015 and 2014.
Purchase Commitments
The Company has ongoing relationships with various suppliers (contract manufacturers) who manufacture the Company’s
products. 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 the Company’s customers or third-party distribution
centers in accordance with agreed upon shipment terms. Although the Company typically does not have definitive minimum
purchase obligations included in the contract terms with its contract manufacturers, when such obligations have been included,
they have been immaterial. In the ordinary course of business, supply needs are communicated by the Company to its contract
manufacturers based on orders and short-term projections, ranging from two to five months. The Company is committed to
purchase the products produced by the contract manufacturers based on the projections provided.
Upon the termination of contracts with contract manufacturers, the Company obtains certain inventory control rights and is
obligated to work with the contract manufacturer to sell through all product held by or manufactured by the contract manufacturer
on behalf of the Company during the termination notification period. If any inventory remains at the contract manufacturer at the
termination date, the Company is 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, the Company may also enter
into commitments with other manufacturers to purchase finished goods and components to support innovation and renovation
initiatives and/or supply chain initiatives. As of August 31, 2016, no such commitments were outstanding.
Litigation
The Company is party to various claims, legal actions and complaints, including product liability litigation, arising in the ordinary
course of business.
On May 31, 2012, a legal action was filed against the Company in a United States District Court, in Texas (IQ Products Company
v. WD-40 Company). The complaint alleged that the Company wrongfully terminated a contract manufacturing relationship.
Pursuant to a court order, the dispute was submitted to arbitration. On November 19, 2015, a panel of three arbitrators issued
their Final Award denying the claims of IQ Products Company (“IQPC”). The Final Award included an award of attorney’s fees
and costs in the amount of $1.5 million in favor of the Company, and such amount was not recorded in the Company’s
consolidated financial statements at August 31, 2016. On August 25, 2016, the United States District Court in Texas entered
judgment in favor of the Company, confirming the arbitration panel’s Final Award. On September 6, 2016, IQPC filed a notice
of appeal from the judgment to the Fifth Circuit United States Court of Appeals.
Indemnifications
As permitted under Delaware law, the Company has agreements whereby it indemnifies senior officers and directors for certain
events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum
potential amount of future payments the Company could be required to make under these indemnification agreements is
unlimited; however, the Company maintains Director and Officer insurance coverage that mitigates the Company’s exposure
with respect to such obligations. As a result of the Company’s insurance coverage, management believes that the estimated fair
value of these indemnification agreements is minimal. Thus, no liabilities have been recorded for these agreements as of August
31, 2016.
From time to time, the Company enters into indemnification agreements with certain contractual parties in the ordinary course
of business, including agreements with lenders, lessors, contract manufacturers, marketing distributors, customers and certain
vendors. All such indemnification agreements are entered into in the context of the particular agreements and are provided in an
F-18
attempt to properly allocate risk of loss in connection with the consummation of the underlying contractual arrangements.
Although the maximum amount of future payments that the Company could be required to make under these indemnification
agreements is unlimited, management believes that the Company maintains adequate levels of insurance coverage to protect the
Company with respect to most potential claims arising from such agreements and that such agreements do not otherwise have
value separate and apart from the liabilities incurred in the ordinary course of the Company’s business. Thus, no liabilities have
been recorded with respect to such indemnification agreements as of August 31, 2016.
Note 12. Income Taxes
Income before income taxes consisted of the following (in thousands):
United States
Foreign (1)
Income before income taxes
2016
41,128
31,661
72,789
$
$
Fiscal Year Ended August 31,
2015
$
$
38,044
25,066
63,110
2014
41,537
21,422
62,959
$
$
(1)
Included in these amounts are income before income taxes for the EMEA segment of $28.3 million, $21.9 million and $18.4 million for the fiscal years
ended August 31, 2016, 2015 and 2014, respectively.
The provision for income taxes consisted of the following (in thousands):
Current:
Federal
State
Foreign
Total current
Deferred:
United States
Foreign
Total deferred
Provision for income taxes
2016
Fiscal Year Ended August 31,
2015
2014
$
$
13,269
894
7,593
21,756
(1,100)
(495)
(1,595)
20,161
$
$
12,302
966
5,886
19,154
(870)
19
(851)
18,303
$
$
12,663
972
5,489
19,124
(11)
100
89
19,213
F-19
Deferred tax assets and deferred tax liabilities consisted of the following (in thousands):
Deferred tax assets:
Accrued payroll and related expenses
Accounts receivable
Reserves and accruals
Unrealized exchange loss
Stock-based compensation expense
Uniform capitalization
Tax credit carryforwards
Other
Total gross deferred tax assets
Valuation allowance
Total net deferred tax assets
Deferred tax liabilities:
Property and equipment, net
Amortization of tax goodwill and intangible assets
Investments in partnerships
Total deferred tax liabilities
Net deferred tax liabilities
August 31,
2016
August 31,
2015
$
$
1,621
498
2,292
992
2,976
1,473
2,038
2,043
13,933
(2,054)
11,879
(558)
(26,321)
(744)
(27,623)
(15,744)
$
$
1,680
532
2,450
416
2,610
1,335
2,040
1,258
12,321
(2,052)
10,269
(470)
(26,334)
(786)
(27,590)
(17,321)
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes”, which requires that
all deferred tax liabilities and assets be classified as noncurrent on the balance sheet, and eliminates the current requirement for
an entity to separate these liabilities and assets into current and noncurrent amounts based on the classification of the related asset
or liability. The Company early adopted this updated guidance in the fourth quarter of fiscal year 2016 on a prospective basis
and, as a result, classified all deferred taxes and liabilities as non-current on the consolidated balance sheet as of August 31, 2016.
As the Company elected to apply this guidance prospectively, no changes were made to the consolidated balance sheet as of
August 31, 2015.
The Company had state net operating loss (“NOL”) carryforwards of $2.4 million and $1.3 million as of August 31, 2016 and
2015, which generated a net deferred tax asset of $0.2 million and $0.1 million for fiscal years 2016 and 2015, respectively. The
state NOL carryforwards, if unused, will expire between fiscal year 2017 and 2036. The Company also had cumulative tax credit
carryforwards of $2.0 million as of both August 31, 2016 and 2015, of which $1.9 million for both periods, is attributable to a
U.K. tax credit carryforward, which does not expire. Future utilization of the tax credit carryforwards and certain state NOL
carryovers is uncertain and is dependent upon several factors that may not occur, including the generation of future taxable
income in certain jurisdictions. At this time, management cannot conclude that it is “more likely than not” that the related deferred
tax assets will be realized. Accordingly, a full valuation allowance has been recorded against the related deferred tax asset
associated with cumulative tax credit carryforwards. In addition, a valuation allowance has been recorded against the deferred
tax asset associated with certain state NOL carryfowards in the amount of $0.1 million as of both August 31, 2016 and 2015.
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows (in thousands):
Amount computed at U.S. statutory federal tax rate
State income taxes, net of federal tax benefits
Effect of foreign operations
Benefit from qualified domestic production deduction
Other
Provision for income taxes
2016
Fiscal Year Ended August 31,
2015
2014
25,476
397
(4,382)
(1,190)
(140)
20,161
$
$
22,088
578
(3,221)
(1,131)
(11)
18,303
$
$
22,036
674
(2,270)
(1,048)
(179)
19,213
$
$
Historically, the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on the
undistributed earnings of its foreign subsidiaries in the U.K., Australia, and China as the Company had considered those earnings
indefinitely reinvested outside the United States. In the fourth quarter of fiscal year 2016, the Company determined that it would
F-20
undertake, in fiscal year 2017, a one-time repatriation of $8.2 million, which represents all of the historical foreign earnings from
its Australia subsidiary and 90% of the historical foreign earnings from its China subsidiary. Management determined that such
a foreign distribution was prudent due to the current favorable tax consequences of such a distribution, stemming principally
from the recent significant strengthening of the U.S. dollar against various currencies in which the Company conducts business.
Accordingly, the Company determined that it was no longer indefinitely reinvested with respect to this amount of unremitted
earnings and recorded the impact of this decision in the 2016 income tax provision, which resulted in the recognition of an
incremental immaterial tax benefit.
As of August 31, 2016, the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on
$113.4 million of the remaining undistributed earnings of certain foreign subsidiaries, mostly attributable to the U.K., since these
earnings are considered indefinitely reinvested outside of the United States. The amount of unrecognized deferred U.S. federal
and state income tax liability, net of unrecognized foreign tax credits, is estimated to be approximately $8.8 million as of August
31, 2016. This net liability is impacted by changes in foreign currency exchange rates and, as a result, will fluctuate with any
changes in such rates. If management decides to repatriate foreign earnings in future periods, the Company would be required to
provide for the incremental U.S. federal and state income taxes as well as foreign withholding taxes on such amounts in the
period in which the decision is made. The Company continues to provide for U.S. income taxes and foreign withholding taxes
on the undistributed earnings of its Canada and Malaysia subsidiaries, whose earnings are not considered indefinitely reinvested.
Reconciliations of the beginning and ending amounts of the Company’s gross unrecognized tax benefits, excluding interest and
penalties, are as follows (in thousands):
Unrecognized tax benefits - beginning of fiscal year
Gross increases - current period tax positions
Expirations of statute of limitations for assessment
Settlements
Unrecognized tax benefits - end of fiscal year
Fiscal Year Ended August 31,
2016
2015
$
$
1,279
211
(251)
-
1,239
$
$
1,248
222
(63)
(128)
1,279
There were no material interest or penalties included in income tax expense for the fiscal years ended August 31, 2016 and 2015.
The total balance of accrued interest and penalties related to uncertain tax positions was also immaterial at August 31, 2016 and
2015.
The Company is subject to taxation in the U.S. and in various state and foreign jurisdictions. Due to expired statutes, the
Company’s federal income tax returns for years prior to fiscal year 2013 are not subject to examination by the U.S. Internal
Revenue Service. The Company was recently notified by the U.S. Internal Revenue Service of its plans to perform an income
tax audit for the tax period ended August 31, 2014. The Company is also currently under audit in various state and local
jurisdictions for fiscal years 2013 through 2015. Generally, for the majority of state and foreign jurisdictions where the Company
does business, periods prior to fiscal year 2012 are no longer subject to examination. The Company has estimated that up to $0.4
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. Audit outcomes and the timing of settlements are subject to
significant uncertainty.
Note 13. Stock-based Compensation
As of August 31, 2016, the Company had one stock incentive plan, the WD-40 Company 2007 Stock Incentive Plan (“2007
Plan”), which permits the granting of various stock-based equity awards, including non-qualified stock options, incentive stock
options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other stock-
based awards to employees, directors and consultants. To date through August 31, 2016, the Company had granted awards of
restricted stock units (“RSUs”), performance share units (“PSUs”), market share units (“MSUs”) and deferred performance units
(“DPUs”) under the 2007 Plan. Additionally, as of August 31, 2016, there were still outstanding stock options which had been
granted under the Company’s prior stock option plan. Fiscal year 2012 was the last fiscal period in which the Company granted
PSUs and no PSUs remained outstanding as of the prior fiscal year ended August 31, 2015. The 2007 Plan is administered by
the Board of Directors (the “Board”) or the Compensation Committee or other designated committee of the Board (the
“Committee”). All stock-based equity awards granted under the 2007 Plan are subject to the specific terms and conditions as
determined by the Committee at the time of grant of such awards in accordance with the various terms and conditions specified
for each award type per the 2007 Plan. The total number of shares of common stock authorized for issuance pursuant to grants
of awards under the 2007 Plan is 2,957,830. As of August 31, 2016, 1,696,909 shares of common stock remained available for
future issuance pursuant to grants of awards under the 2007 Plan. The shares of common stock to be issued pursuant to awards
F-21
under the 2007 Plan may be authorized but unissued shares or treasury shares. The Company has historically issued new
authorized but unissued shares upon the settlement of the various stock-based equity awards under the 2007 Plan.
Vesting of the RSUs granted to directors is immediate, with shares to be issued pursuant to the vested RSUs upon termination of
each director’s service as a director of the Company. Vesting of the one-time grant of RSUs granted to certain key executives of
the Company in March 2008 in settlement of these key executives’ benefits under the Company’s supplemental employee
retirement plan agreements was over a period of three years from the date of grant, with shares to be issued pursuant to the vested
RSUs six months following the day after each executive officer’s termination of employment with the Company. Vesting of the
RSUs granted to certain high level employees is over a period of three years from the date of grant, with shares to be issued
pursuant to the vested RSUs at the time of vest. The director RSU holders and the executive officer March 2008 grant date RSU
holders are entitled to receive dividend equivalents with respect to their RSUs, payable in cash as and when dividends are declared
by the Company’s Board of Directors.
Vesting of the MSUs granted to certain high level employees follows a performance measurement period of three fiscal years
commencing with the Company’s fiscal year in which the MSU awards are granted (the “Measurement Period”). Shares will be
issued pursuant to the vested MSUs following the conclusion of the applicable MSU Measurement Period after the Committee’s
certification of achievement of the applicable performance measure for such awards and the vesting of the MSU awards and the
applicable percentage of the target number of MSU shares to be issued. The recipient must remain employed with the Company
for vesting purposes until the date on which the Committee certifies achievement of the applicable performance measure for the
MSU awards.
Vesting of the DPUs granted to certain high level employees follows a performance measurement period of one fiscal year that
is the same fiscal year in which the DPU awards are granted (the “Measurement Year”). A number of DPUs equal to the
applicable percentage of the maximum number of DPUs awarded will be confirmed as vested following the conclusion of the
applicable DPU Measurement Year after the Committee’s certification of achievement of the applicable performance measure
for such awards (the “Vested DPUs”). The recipient must remain employed with the Company for vesting purposes until August
31 of the Measurement Year. For recipients who are residents of the United States, the Vested DPUs must be held until
termination of employment, with shares to be issued pursuant to the Vested DPUs six months following the day after each such
recipient’s termination of employment with the Company. For recipients who are not residents of the United States, the
Committee has discretion to either defer settlement of each such recipient’s Vested DPUs by issuance of shares following
termination of employment or settle each Vested DPU in cash by payment of an amount equal to the closing price of one share
of the Company’s common stock as of the date of the Committee’s certification of the relative achievement of the applicable
performance measure for the DPU awards. Until issuance of shares in settlement of the Vested DPUs, the holders of each Vested
DPU that is not settled in cash are entitled to receive dividend equivalents with respect to their Vested DPUs, payable in cash as
and when dividends are declared by the Company’s Board of Directors.
Stock-based compensation expense is amortized on a straight-line basis over the requisite service period for the entire award.
Stock-based compensation expense related to the Company’s stock-based equity awards totaled $3.7 million, $2.8 million and
$2.3 million for the fiscal years ended August 31, 2016, 2015 and 2014, respectively. The Company recognized income tax
benefits related to such stock-based compensation of $1.2 million, $0.9 million and $0.8 million for the fiscal years ended August
31, 2016, 2015 and 2014, respectively. As of August 31, 2016, the total unamortized compensation cost related to non-vested
stock-based equity awards was $1.3 million and $1.7 million for RSUs and MSUs, respectively, which the Company expects to
recognize over remaining weighted-average vesting periods of 1.8 and 1.9 years for RSUs and MSUs, respectively. No
unamortized compensation cost for DPUs remained as of August 31, 2016.
Stock Options
Fiscal year 2008 was the last fiscal period in which the Company granted stock options. The estimated fair value of each of the
Company’s stock option awards granted in and prior to fiscal year 2008 was determined on the date of grant using the Black-
Scholes option pricing model.
F-22
A summary of the Company’s stock option award activity is as follows (in thousands, except share and per share amounts and
contractual term in years data):
Stock Options
Outstanding at August 31, 2015
Granted
Exercised
Forfeited or expired
Outstanding at August 31, 2016
Exercisable at August 31, 2016
Number of
Shares
Weighted-Average
Exercise Price
Per Share
62,620
-
(34,800)
-
27,820
27,820
$
$
$
$
$
$
34.97
-
34.48
-
35.59
35.59
Weighted-Average
Remaining
Contractual Term
Per Share
(in years)
Aggregate
Intrinsic Value
1.0
1.0
$
$
2,302
2,302
The total intrinsic value of stock options exercised was $2.5 million, $3.3 million and $1.4 million for the fiscal years ended
August 31, 2016, 2015 and 2014, respectively.
The income tax benefits from stock options exercised totaled $0.7 million, $1.1 million and $0.4 million for the fiscal years
ended August 31, 2016, 2015 and 2014, respectively.
Restricted Stock Units
The estimated fair value of each of the Company’s RSU awards was determined on the date of grant based on the closing market
price of the Company’s common stock on the date of grant for those RSUs which are entitled to receive dividend equivalents
with respect to the RSUs, or based on the closing market price of the Company’s common stock on the date of grant less the
grant date present value of expected dividends during the vesting period for those RSUs which are not entitled to receive dividend
equivalents with respect to the RSUs.
A summary of the Company’s restricted stock unit activity is as follows (in thousands, except share and per share amounts):
Restricted Stock Units
Outstanding at August 31, 2015
Granted
Converted to common shares
Forfeited
Outstanding at August 31, 2016
Vested at August 31, 2016
Number of
Shares
136,895
23,201
(27,595)
(2,466)
130,035
99,228
$
$
$
$
$
$
Weighted-Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic Value
47.19
95.89
50.24
69.99
54.80
47.47
$
$
15,390
11,744
The weighted-average grant date fair value of all RSUs granted during the fiscal years ended August 31, 2016, 2015 and 2014
was $95.89, $69.35 and $66.82, respectively. The total intrinsic value of all RSUs converted to common shares was $2.8 million,
$1.8 million and $2.7 million for the fiscal years ended August 31, 2016, 2015 and 2014, respectively.
The income tax benefits from RSUs converted to common shares totaled $1.0 million, $0.6 million and $0.9 million for the fiscal
years ended August 31, 2016, 2015 and 2014, respectively.
Market Share Units
The MSUs are market performance-based awards that shall vest with respect to the applicable percentage of the target number
of MSU shares based on relative total stockholder return (“TSR”) for the Company as compared to the total return for the Russell
2000 Index (“Index”) over the performance Measurement Period. The ultimate number of MSUs that vest may range from 0%
to 200% of the original target number of shares depending on the relative achievement of the TSR performance measure at the
end of the Measurement Period. The probabilities of the actual number of MSUs expected to vest and resultant actual number of
shares of common stock expected to be awarded are reflected in the grant date fair values of the various MSU awards; therefore,
the compensation expense for the MSU awards will be recognized assuming the requisite service period is rendered and will not
be adjusted based on the actual number of such MSU awards to ultimately vest.
F-23
The estimated fair value of each of the Company’s MSU awards, which are not entitled to receive dividend equivalents with
respect to the MSUs, was determined on the date of grant using the Monte Carlo simulation model, which utilizes multiple input
variables to simulate a range of possible future stock prices for both the Company and the Index and estimates the probabilities
of the potential payouts. The determination of the estimated grant date fair value of the MSUs is affected by the Company’s stock
price and a number of assumptions including the expected volatilities of the Company’s stock and the Index, the Company’s
risk-free interest rate and expected dividends. The following weighted-average assumptions for MSU grants for the last three
fiscal years were used in the Monte Carlo simulation model:
Expected volatility
Risk-free interest rate
Expected dividend yield
2016
Fiscal Year Ended August 31,
2015
2014
22.2%
0.9%
0.0%
22.0%
0.8%
0.0%
25.2%
0.6%
0.0%
The expected volatility utilized was based on the historical volatilities of the Company’s common stock and the Index in order
to model the stock price movements. The volatility used was calculated over the most recent 2.89-year period for MSUs granted
during the fiscal year ended August 31, 2016 and over the most recent 2.88-year periods for MSUs granted during each of the
fiscal years ended August 31, 2015 and 2014, which were the remaining terms of the performance Measurement Period at the
dates of grant. The risk-free interest rates used were based on the implied yield available on a U.S. Treasury zero-coupon bill
with a remaining term equivalent to the remaining performance Measurement Period. The MSU awards stipulate that, for
purposes of computing the relative TSR for the Company as compared to the return for the Index, dividends paid with respect to
both the Company’s stock and the Index are to be treated as being reinvested into the stock of each entity as of the ex-dividend
date. Accordingly, an expected dividend yield of zero was used in the Monte Carlo simulation model, which is the mathematical
equivalent to reinvesting dividends in the issuing entity over the performance Measurement Period.
A summary of the Company’s market share unit activity is as follows (in thousands, except share and per share amounts):
Market Share Units
Outstanding at August 31, 2015
Granted
Performance factor adjustments
Converted to common shares
Forfeited
Outstanding at August 31, 2016
Number of
Shares
57,604
15,590
17,098
(40,077)
(4,515)
45,700
$
$
$
$
$
$
Weighted-Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic Value
57.37
120.99
39.26
38.17
70.58
87.82
$
5,409
The weighted-average grant date fair value of all MSUs granted during the fiscal years ended August 31, 2016, 2015 and 2014
was $120.99, $71.66 and $69.58 respectively. The total intrinsic value of all MSUs converted to common shares was $3.7 million
for the fiscal year ended August 31, 2016. No MSUs were converted to common shares during the fiscal years ended August 31,
2015 or 2014.
The income tax benefits from MSUs converted to common shares totaled $1.2 million for the fiscal year ended August 31, 2016.
Deferred Performance Units
In November 2014, the Company began granting DPU awards to certain high level employees. The DPUs provide for
performance-based vesting over a performance measurement period of the fiscal year in which the DPU awards are granted. The
performance vesting provisions of the DPUs are based on relative achievement within an established performance measure range
of the Company’s reported earnings before interest, income taxes, depreciation and amortization computed on a consolidated
basis before deduction of the stock-based compensation expense for the Vested DPUs (“Adjusted Global EBITDA”) for the
Measurement Year. The ultimate number of DPUs that vest may range from 0% to 100% of the original maximum number of
DPUs awarded depending on the relative achievement of the Adjusted Global EBITDA performance measure at the end of the
Measurement Year.
F-24
The estimated fair value of each of the Company’s DPU awards was determined on the date of grant based on the closing market
price of the Company’s common stock on the date of grant less the grant date present value of expected dividends during the
vesting period for the DPUs, which are not entitled to receive dividend equivalents with respect to the unvested DPUs.
A summary of the Company’s deferred performance unit activity is as follows (in thousands, except share and per share
amounts):
Deferred Performance Units
Outstanding at August 31, 2015
Granted
Performance factor adjustments
Converted to common shares
Forfeited
Outstanding at August 31, 2016
Vested at August 31, 2016
Number of
Shares
Weighted-Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic Value
30,798
27,809
(30,798)
-
(1,486)
26,323
5,081
$
$
$
$
$
$
$
75.14
94.54
75.14
-
94.54
94.54
94.54
$
$
3,115
601
The weighted-average grant date fair value of all DPUs granted during the fiscal years ended August 31, 2016 and 2015 was
$94.54 and $75.14, respectively. No DPUs were granted during the fiscal year ended August 31, 2014. No DPUs were converted
to common shares during the fiscal years ended August 31, 2016 or 2015.
Note 14. Other Benefit Plans
The Company has a WD-40 Company Profit Sharing/401(k) Plan and Trust (the “Profit Sharing/401(k) Plan”) whereby regular
U.S. employees who have completed certain minimum service requirements can defer a portion of their income through
contributions to a trust. The Profit Sharing/401(k) Plan provides for Company contributions to the trust, as approved by the Board
of Directors, as follows: 1) matching contributions to each participant up to 50% of the first 6.6% of compensation contributed
by the participant; 2) fixed non-elective contributions in the amount equal to 10% of eligible compensation; and 3) a discretionary
non-elective contribution in an amount to be determined by the Board of Directors up to 5% of eligible compensation. The
Company’s contributions are subject to overall employer contribution limits and may not exceed the amount deductible for
income tax purposes. The Profit Sharing/401(k) Plan may be amended or discontinued at any time by the Company. The
Company’s contribution expense for the Profit Sharing/401(k) Plan was $3.2 million, $3.1 million and $2.6 million for the fiscal
years ended August 31, 2016, 2015 and 2014, respectively.
The Company’s international subsidiaries have similar benefit plan arrangements, dependent upon the local applicable laws and
regulations. The plans provide for Company contributions to an appropriate third-party plan, as approved by the subsidiary’s
Board of Directors. The Company’s contribution expense related to the international plans was $1.5 million for each of the fiscal
years ended August 31, 2016 and 2015 and $1.4 million for the fiscal year ended August 31, 2014.
F-25
Note 15. Business Segments and Foreign Operations
The Company evaluates the performance of its segments and allocates resources to them based on sales and operating income.
The Company is organized on the basis of geographical area into the following three segments: the Americas; EMEA; and Asia-
Pacific. Segment data does not include inter-segment revenues. Unallocated corporate expenses are general corporate overhead
expenses not directly attributable to the operating segments and are reported separate from the Company’s identified segments.
The corporate overhead costs include expenses for the Company’s accounting and finance, information technology, human
resources, research and development, quality control and executive management functions, as well as all direct costs associated
with public company compliance matters including legal, audit and other professional services costs.
Fiscal Year Ended August 31, 2016
Net sales
Income from operations
Depreciation and
amortization expense
Interest income
Interest expense
Fiscal Year Ended August 31, 2015
Net sales
Income from operations
Depreciation and
amortization expense
Interest income
Interest expense
Fiscal Year Ended August 31, 2014
Net sales
Income from operations
Depreciation and
amortization expense
Interest income
Interest expense
Americas
EMEA
Asia-Pacific
Unallocated
Corporate (1)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
191,397
48,404
4,071
5
1,689
187,344
46,674
4,078
9
1,197
180,806
41,356
4,229
7
994
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
135,235
31,702
2,084
485
-
136,847
30,173
2,102
417
-
151,368
34,003
1,363
417
-
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
54,038
15,162
280
193
14
53,959
12,602
253
158
8
50,823
10,364
244
172
8
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
-
(23,920)
30
-
-
-
(24,059)
31
-
-
-
(21,986)
24
-
-
Total
380,670
71,348
6,465
683
1,703
378,150
65,390
6,464
584
1,205
382,997
63,737
5,860
596
1,002
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1)
Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the operating segments. These expenses
are reported separate from the Company’s identified segments and are included in Selling, General and Administrative expenses on the Company’s
consolidated statements of operations.
The Company’s Chief Operating Decision Maker does not review assets by segment as part of the financial information provided
and therefore, no asset information is provided in the above table.
Net sales by product group are as follows (in thousands):
Maintenance products
Homecare and cleaning products
Total
2016
339,974
40,696
380,670
$
$
Fiscal Year Ended August 31,
2015
$
$
333,306
44,844
378,150
$
$
2014
337,825
45,172
382,997
F-26
Net sales and long-lived assets by geographic area are as follows (in thousands):
Net Sales by Geography:
United States
International
Total
Long-lived Assets by Geography (2) :
United States
International
Total
2016
Fiscal Year Ended August 31,
2015
2014
$
$
$
$
158,139
222,531
380,670
6,419
5,126
11,545
$
$
$
$
153,116
225,034
378,150
5,955
5,421
11,376
$
$
$
$
147,033
235,964
382,997
4,470
5,232
9,702
(2) Includes tangible assets and property and equipment, net, attributed to the geographic location in which such assets are located.
Note 16. Subsequent Events
On October 11, 2016, the Company’s Board of Directors declared a cash dividend of $0.42 per share payable on October 31,
2016 to shareholders of record on October 21, 2016.
On September 1, 2016, the Company entered into a fourth amendment (the “Fourth Amendment”) to its existing unsecured credit
agreement dated June 17, 2011 with Bank of America. The Fourth Amendment amended the credit agreement in contemplation
of the previously announced purchase of the Company’s new headquarters office and land located at 9715 Business Park Avenue,
San Diego, California (the “Property”). The Fourth Amendment permits the Company to spend an aggregate amount not to
exceed $18.0 million for the acquisition and improvement costs for the Property and also includes changes to the agreement that
will allow, as a permitted lien, any agreement with Bank of America for secured debt. See Note 7 – Debt for additional
information on the Company’s existing unsecured credit agreement and related financial covenants.
On September 13, 2016, the Company closed escrow and completed the acquisition of the Property, which consists of 2.23 acres
of land and a building comprising of approximately 41,500 square feet of office space. The Property was acquired for an
aggregate purchase price of $10.7 million and the Company expects to incur approximately $4.5 million in capital costs related
to the buildout of the acquired building and for the purchase of new furniture, fixtures and equipment. The Company intends to
use the Property for its headquarters office, replacing its current Company-owned headquarters located at 1061 Cudahy Place,
San Diego, California which houses both corporate employees and employees in the Company’s Americas segment. The
Company utilized its existing unsecured $175.0 million revolving credit facility with Bank of America in order to fund the
purchase of the Property.
F-27
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
San Diego, California
TRANSFER AGENT
Computershare
P.O. Box 30170
College Station, TX 77842-3170
Phone: +1-312-588-4180
https://www-us.computershare.com/investor/
contact
ANNUAL MEETING
December 13, 2016, 2:00 PM
Joan B. Kroc Institute for Peace & Justice
University of San Diego
5998 Alcala Park
San Diego, California 92110
INVESTOR RELATIONS
Wendy D. Kelley
Director, Investor Relations and
Corporate Communications
Phone: +1-619-275-9304
investorrelations@wd40.com
GLOBAL CORPORATE HEADQUARTERS
WD-40 Company
1061 Cudahy Place
San Diego, California 92110
Phone: +1-619-275-1400
OPERATING SUBSIDIARIES
WD-40 Company Ltd.
Milton Keynes, United Kingdom
WD-40 Company (Canada) Ltd.
Etobicoke, Canada
WD-40 Company (Australia) Pty. Ltd.
Epping, Australia
Wu Di (Shanghai) Industrial Co., Ltd.
Shanghai, China
WD-40 Company (Malaysia) SDN. BHD.
Selangor, Malaysia
STOCK INFORMATION
The common stock of the Company is traded
on the NASDAQ® Global Select Market under
the symbol “WDFC.” The Company’s publicly
filed reports, including financial statements and
supporting exhibits, are available on the Securities
and Exchange Commission’s EDGAR system, on
the Company’s website at www.wd40company.
com, or by writing to the Corporate Secretary,
WD-40 Company, P.O. Box 80607, San Diego,
California 92138-0607
LEGAL DISCLAIMERS
This annual report contains “forward-looking
statements” within the meaning of the Private
Securities Litigation Reform Act of 1995.
Such statements reflect management’s
current expectations for the Company’s future
performance but are subject to risks, uncertainties
and assumptions that could cause actual results
to differ materially from those anticipated in or
implied by the forward-looking statements.
The Company’s expectations, beliefs and
projections are expressed in good faith but there
can be no assurance that they will be achieved or
accomplished. Our forward-looking statements
are generally identified with words such as
“believe,” “expect,” “intend,” “plan,” “could,”
“may” and similar expressions. Actual events or
results can differ materially from those expressed
or implied. Please refer to the information set forth
under the captions “Risk Factors” and “Forward-
Looking Statements” in our Annual Report on
Form 10-K for the year ended August 31, 2016
and other reports and documents that we file from
time to time with the Securities and Exchange
Commission for some of the factors that may
cause actual results to differ materially from the
forward-looking statements. Except as required
by law, we undertake no obligation to update any
forward-looking statement.
Copyrighted © 2016 WD-40 Company.
All rights reserved. WD-40®, 3-IN-ONE®, GT85®,
WD-40 EZ-REACH Flexible Straw, Solvol®, Lava®,
X-14®, 2000 Flushes®, Carpet Fresh®, Spot Shot®,
1001® and no vac® are registered trademarks of
WD-40 Company.
Corporate information as of October 15, 2016
CORPORATE INFORMATION
BOARD OF DIRECTORS
Neal E. Schmale
Chairman of the Board
Former President and COO
Sempra Energy
Giles H. Bateman
Former CFO and Director
Price Club
Peter D. Bewley
Governance Committee Chair
Former Senior Vice President,
General Counsel and Corporate Secretary
The Clorox Company
Daniel T. Carter
Audit Committee Chair
Former Executive Vice President and CFO
BevMo! Inc.
Melissa Claassen
Vice President, Business Unit Finance
Adidas Group
Richard A. Collato
Former President and CEO
YMCA of San Diego County
Mario L. Crivello
Investor
Linda A. Lang
Finance Committee Chair
Former Chairman and CEO
Jack in the Box, Inc.
Daniel E. Pittard
Former President and CEO
Rubio’s Restaurants Inc.
Garry O. Ridge
President and Chief Executive Officer
WD-40 Company
Gregory A. Sandfort
Compensation Committee Chair
Chief Executive Officer
Tractor Supply Company
EXECUTIVE OFFICERS
Garry O. Ridge
President and Chief Executive Officer
Richard T. Clampitt
Vice President, General Counsel and
Corporate Secretary
Michael L. Freeman
Division President, Americas
Geoffrey J. Holdsworth
Managing Director, Asia-Pacific
William B. Noble
Managing Director, EMEA
Jay W. Rembolt
Vice President, Finance, Treasurer and
Chief Financial Officer
Stanley A. Sewitch
Vice President, Global Organization Development
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“ People don’t buy what you do, they buy why you do it.
And what you do simply proves what you believe.”
Simon Sinek, Optimist and Bestselling Author of “Start With Why” and “Leaders Eat Last”
165496 WD-40 Annual Report Cvr.indd 2
WD-40_2016AR_Cover.indd 2
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#positivelastingmemories
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#RecuerdosPositivosyDuraderos
#positivebleibendeErinnerungen
#memoriaspositivaseduradouras
#积极持久印象
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NOTE TO PRINTER: We don’t have an accurate
measurement for the spine thickness, so for
What is
our Why
perfect binding, please use the provided spine type
treatment on this page — center type horizontally
and vertically on the real spine once you have the
actual spine measurement calibrated. The yellow
background (0C 15M 100Y 0K) on the spine should
wrap around to the front and back outside covers
and butt to the score on both sides (.25 inches).
Spine type prints 100% PMS Reflex Blue C.
and how do we do it?
Page 1 of file: Front Outside Cover
Page 2 of file: Inside Front Cover
Page 3 of file: Inside Back Cover
2016 annual report
Page 4 of file: Outside Back Cover
Page 5 of file: Spine Treatment
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www.wd40company.com
WD-40 Company
1061 Cudahy Place
San Diego, CA 92110
619-275-1400
165496 WD-40 Annual Report Cvr.indd 1
WD-40_2016AR_Cover.indd 4
WD-40_2016AR_Cover.indd 5
10/25/16 5:11 PM
WD-40_2016AR_Cover.indd 1
10/25/16 5:11 PM
10/26/16 9:17 AM
10/25/16 5:11 PM