“Our people, purpose, and products
will help fuel our growth and extend
our reach across the globe.
Looking ahead, we believe we have the right people in place to introduce the right
products, at the right time and we have strategies in place to make all that happen.”
Garry Ridge, President and Chief Executive Officer
OUR (secret) Formula:
PEOPLE
“What makes this company great is the people. We have tribe members
who have long tenure who tend to stay in this Company; and we have
new blood, which brings different skill sets.”
Steve Brass Division President, Americas, page 5
“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 understand that timing is everything.”
Bill Noble Managing Director, EMEA, page 7
PURPOSE
PRODUCTS
“We’re creating awareness of our products in emerging markets and
deepening brand awareness in developed markets. The long-term
growth opportunity for Asia-Pacific continues to be significant and
that’s what is most exciting for our tribe members here.”
Geoff Holdsworth Managing Director, Asia-Pacific, page 9
2017 WD-40 Company Annual Report 1
“Opportunity is abundant;
focus is a gift.”Garry Ridge, President and Chief Executive Officer
We had many things to celebrate in fiscal year 2017. We expanded
our flexible straw product into our Australian market. Global sales
of WD-40 Specialist® achieved a 20 percent increase for fiscal year
2017 compared to the prior fiscal year. And our flagship product,
WD-40 Multi-Use Product, continued to gain traction in new and
existing markets worldwide. These accomplishments demonstrate
our secret formula is working.
As we embark into fiscal year 2018, we believe the most significant
foreign currency exchange headwinds are now behind us and
therefore, it is an appropriate time to review our long-term revenue
targets. Our long-term objectives are aspirational but they are
built on a solid foundation. Our revised revenue target is to drive
consolidated net sales to approximately $700 million by the end of
fiscal year 2025. Our updated strategic initiatives reflect our deep
focus and abundant opportunities as we expand the global reach
of the WD-40 Company tribe.
STRATEGIC INITIATIVE #1 - GROW WD-40 MULTI-USE PRODUCT
Our most important strategic initiative continues to be to introduce the
blue and yellow can with the little red top to more places and people,
who will find more uses, more frequently. We are optimistic about the
long-term prospects for our flagship product and believe there are
many opportunities that will enable us to achieve our revised long-
term revenue target, which is to grow WD-40 Multi-Use Product to
approximately $530 million in revenue by the end of fiscal year 2025.
In our developed markets, we will continue to drive revenue growth
through innovation, with products like WD-40 EZ-REACH™ Flexible
Straw, and through the continued conversion of end users to our more
innovative WD-40 Smart Straw™ delivery system. In our developing
and emerging markets, we will continue to build brand awareness
among end-users and make our products easy to buy through new
distribution channels. It’s a winning formula that we’ve followed for
64 years and we know it works.
This was indeed a year of challenge and learning for WD-40 Company.
Although we may not have grown as fast in revenues as we would
have liked to, we certainly became stronger as a global organization.
I am now more certain than ever that the Company’s most valuable
secret ingredient is not the famous formula for WD-40® Multi-Use
Product, which we keep locked in a safe deposit box. The formula that
makes our story a successful one is the combination of our people,
our purpose and our products.
While we have no control over global markets, foreign currency
volatility or the next natural disaster, we have built an enduring
Company which utilizes a robust business model and global
diversification strategy that has proven it can deliver record earnings –
even in times of currency exchange headwinds and other challenges.
One of the key strengths of our Company is that we’re not dependent
on any one customer, trade channel or country, and this gives us a
special resilience in uncertain times.
Our net sales were flat in fiscal year 2017 compared to the prior fiscal
year due to the impact of foreign currency exchange rates coupled
with the phasing of promotional activities at some of our larger
customers in the United States. Despite our flat top-line results, our
net income increased 1 percent over last fiscal year to $52.9 million.
Diluted earnings per share for the full fiscal year set a new Company
record at $3.72, compared to $3.64 in the prior fiscal year.
2
2017 WD-40 Company Annual Report
STRATEGIC INITIATIVE #2 - GROW THE WD-40 SPECIALIST
PRODUCT LINE
Our goal under this initiative is to leverage the WD-40 Specialist line
to create growth through continued geographic expansion as well as
by developing new products and product categories within identified
platforms. WD-40 Specialist sales for fiscal year 2017 were $25.8
million, a 20 percent increase compared to last year. We are optimistic
about the long-term opportunities for WD-40 Specialist and believe
we can grow the product line to approximately $100 million in revenue
by the end of fiscal year 2025. To accomplish this, we will continue
our global expansion while developing new products and product
categories within identified platforms.
STRATEGIC INITIATIVE #3 - BROADEN PRODUCT AND
REVENUE BASE
We will continue to leverage the recognized strengths of WD-40
Company to derive revenue from existing brands as well as from new
sources and products. This initiative, which includes maintenance
brands like 3-IN-ONE®, WD-40 BIKE®, and GT85®, has been
expanded to include brands such as Spot Shot® and Lava® in the
Americas; 1001® in EMEA; and No Vac® and Solvol® in Asia-Pacific.
We’ve spent the last several years getting a better understanding
how each of these brands perform in their own unique channel
and geography. Many of them generate sizable revenue, as well as
meaningful profitable contributions and cash flows. Ultimately, we
believe we can continue to nurture the products included under this
initiative and expect their combined revenue to reach approximately
$70 million by the end of fiscal year 2025.
STRATEGIC INITIATIVE #4 - ATTRACT, DEVELOP AND
RETAIN OUTSTANDING TRIBE MEMBERS
Our long-term target under this initiative is to grow employee
engagement to greater than 95 percent. One of the most exciting
things that happened for our tribe this year was that, after over 45
years in the same space, we successfully relocated our San Diego-
based tribe members into an inviting, up-to-date building. Our new
offices were specifically designed to increase employee engagement,
collaboration, and innovation, and I am happy to report that after only
two months in our new space, I’ve witnessed the tribe collaborating
in new ways.
STRATEGIC INITIATIVE #5 – OPERATIONAL EXCELLENCE
Our goal under this initiative is best summarized by one of our core
values at WD-40 Company: “make it better than it is today.” We
are continuously focused on optimizing resources, systems and
processes, as well as applying rigorous commitment to quality
assurance, regulatory compliance, and intellectual property protection.
We measure ourselves against this operational excellence initiative by
executing our 55/30/25 business model and by making improvements
to processes and systems while still safeguarding the blue and yellow
can with the little red top.
IN CLOSING
All of the growth that will be required to meet our revised long-term
revenue objectives will be driven by the WD-40 Company tribe
members, the people who are behind the blue and yellow can with the
little red top. Our job is to make sure we create an environment where
our tribe members wake up each day inspired to go to work, feel safe
while they are there, and return home at the end of the day fulfilled by
the work they do – feeling that they have learned something new and
contributed to something bigger than themselves. This is the world we
envision. If we can create this world for our people, they will take care
of our customers, and that will, in turn, take care of our stockholders.
Over the last 20 years as WD-40 Company’s CEO, I have seen this
Company grow and evolve tremendously. Our growth comes from
continued education for our end users, and by equipping our tribe
members with the knowledge and support they need to continue
to introduce the blue and yellow can with the little red top to the
world. I’d like to thank the tribe for another year of hard work and
dedication. They really are the secret behind our can as well as to
our continued success.
I look forward to updating you on our progress in the coming year
and as we progress towards our aspirational objectives for 2025
and beyond.
Garry Ridge
President and Chief Executive Officer
2017 WD-40 Company Annual Report 3
THE AMERICAS
F Y 2 017 H I G H L I G H T S
$184.9 million in net sales
down 3% from fiscal year 2016,
representing 49% of global sales
Strong sales
growth of WD-40 Specialist,
3-IN-ONE and WD-40 BIKE
Launched new
innovations including WD-40
Specialist Degreasers, WD-40 Specialist
Greases and WD-40 Specialist Motorcycle
4
2017 WD-40 Company Annual Report
“It is exciting to see the development
of our talent and to witness our tribe
members moving up and extending
themselves into areas that will allow
for more knowledge sharing and
more growth.”
Steve Brass
Division President, Americas
will make us stronger and better able to serve
our end users, customers, and stockholders,
and that they will bring the Americas back to
top-line growth in fiscal year 2018.
FISCAL YEAR 2018 PRIORITIES
• Develop opportunities for continued growth
in Latin America
• Execute against innovation pipeline that has
been developed
• Expand WD-40 EZ-REACH Flexible Straw
into new geographies and trade channels
• Grow e-commerce channel
WD-40 Specialist grease bundle
WD-40 Specialist grease bundle
includes solutions formulated to give
hard-working machinery a formidable
defense against searing temperatures,
crushing pressures, and damp and
corrosive environments.
THE RIGHT PEOPLE
At WD-40 Company, we believe the right
people are one of the key ingredients to our
success – they not only give us a competitive
advantage in the global marketplace, but they
also allow us to keep our Company moving
forward. Our tribe members are accountable,
passionate, and engaged. Developing our tribe
and building our Company’s bench strength for
future success remains a top priority for our
organization.
A YEAR OF LEARNING
Fiscal year 2017 was a year of continued
learning for the Americas. Following four
consecutive years of growth, sales within the
segment declined in fiscal year 2017. This
required us to examine how we strike the right
balance between growing our core product,
WD-40 Multi-Use Product, and developing our
innovation pipeline.
Our learnings also prompted us to more closely
align our sales, marketing and innovation teams
which we believe is a very powerful formula for
success. We are confident that these changes
2017 WD-40 Company Annual Report 5
EMEA*
F Y 2 017 H I G H L I G H T S
$136.8 million in net sales
up 1% from fiscal year 2016, representing
36% of global sales
Strong currency
headwinds continued to
negatively impact reported sales results
Strong sales growth of
WD-40 Specialist
and WD-40 BIKE
*Europe, The Middle East, Africa and India
6
2017 WD-40 Company Annual Report
“For us, it’s all about timing – since
each of our markets vary, we will
continue to see different levels
of growth and maturity. We are
realistic about the growth we are
seeing in each market, but are
also enthusiastic about future
opportunities.”
Bill Noble
Managing Director, EMEA
WD-40 Smart Straw
With a permanently attached straw,
this WD-40 Multi-Use Product Sprays
2 Ways™ – flip it up for stream,
or down for spray. The fixed straw
delivery system means you never
lose the straw again.
2017 WD-40 Company Annual Report 7
Time is on our side. The blue and yellow can
with the little red top is not bound by the
constraints of the typical product lifecycle.
In many markets around the world, we are
pioneering the market – introducing end users
to our products for the very first time. We have
time to build brand awareness, distribution and
penetrate the map with our product portfolio
over time.
FISCAL YEAR 2018 PRIORITIES
• Continue to navigate uncertain market
conditions with plans for steady growth
in 2018
• Further market penetration with WD-40
Specialist platform
• Expand WD-40 Smart Straw into new
geographies and trade channels
• Drive growth of core product, WD-40
Multi-Use Product, in emerging markets
• Penetrate developing European markets
with our WD-40 BIKE and WD-40
Specialist Motorbike
THE RIGHT TIMING
Timing is everything, especially in an uncertain
or developing market. That’s why we have
strategies in place to introduce the right
products at the right time in the right markets.
We view international markets as an area of
considerable opportunities that need to be
clearly identified and explored. As we continue
to expand our brands into both developed
and emerging markets, we are confident that
market penetration and growth will follow.
UNCERTAIN MARKET CONDITIONS
In 2017, we had increased uncertainty in the
European market, mainly from significant
currency fluctuations due to the referendum
associated with the United Kingdom exiting the
European Union. However, we remain focused
on our strategies to grow the EMEA market.
It takes considerable time to build brand
awareness however, we wake up every day to
do just that. Once we have invested the time it
takes to build brand awareness in a particular
market we increase the value of our brand
through innovation and by taking to market
products like WD-40 Specialist, WD-40 BIKE
and WD-40 Specialist Motorbike, as well as
WD-40 Smart Straw. We have been steadily
improving our sales for each of those products
in the last few years.
ASIA-PACIFIC
F Y 2 017 H I G H L I G H T S
$58.8 million in net sales
up 9% from fiscal year 2016,
representing 15% of global sales
Strong sales growth of WD-40
Multi-Use Product
and WD-40 Specialist
Launched new innovations including WD-40
Specialist Automotive
and WD-40 EZ-REACH
Flexible Straw
8
2017 WD-40 Company Annual Report
THE RIGHT PRODUCTS
You will find WD-40 Company products from
Auckland to Shanghai and from Sydney to
Kuala Lumpur, but you’re not going to find
the same portfolio of products on every store
shelf. The marketplace is comprised of both
developed and emerging markets which
must be navigated in vastly different ways.
Strategically introducing different products
in different regions is a key driver to our
profitable growth.
UNIQUELY DIFFERENT MARKET NEEDS
In fiscal year 2017, we experienced solid
growth throughout the Asia-Pacific segment.
We experienced double-digit growth of
WD-40 Multi-Use Product in China in 2017.
We continue to drive brand awareness of the
blue and yellow can with the little red top in
emerging markets like China and Malaysia,
while growing products like WD-40 Specialist
in more developed regions.
Throughout the region we’ve continued to
advance our strategic priorities. We have
restructured our tribe, streamlined operations,
and are planning to move manufacturing for our
Asia marketing distributor customers from the
U.S. to Shanghai in fiscal year 2018, which will
further fuel our penetration in the Asia market.
Beyond products, innovation is embedded
into WD-40 Company’s culture to encourage
new ideas and go-to-market strategies. As we
continue to deliver the right products to the
right markets we will see a bright future ahead.
FISCAL YEAR 2018 PRIORITIES
• Grow WD-40 brand awareness of the
blue and yellow can with the little red top
throughout Asia-Pacific
• Expand WD-40 EZ-REACH Flexible Straw
and WD-40 Specialist Automotive into new
geographies and trade channels
• Drive growth of WD-40 BIKE
• Continue to innovate and bring our products
to a new generation
“Innovation doesn’t happen overnight,
but now we have more momentum;
we think there are much bigger
things to come in the future.”
Geoff Holdsworth
Managing Director, Asia-Pacific
WD-40 Specialist Automotive
WD-40 Specialist Automotive is part
of our specialist range designed to
improve and keep vehicles running
efficiently all year round.
2017 WD-40 Company Annual Report 9
“Although stronger revenue growth in fiscal year 2017 would have been a preferred result,
our fiscal year 2017 financial results demonstrate that our robust business model and global
diversification can deliver record earnings, even when our top-line results are challenged.”
Jay W. Rembolt, Vice President, Finance, Treasurer and Chief Financial Officer
Our cost of doing business was 35 percent of net sales, down from
36 percent last year. This decrease was driven by lower employee
costs, which decreased primarily due to lower employee earned
incentive compensation accruals. Partially offsetting these costs was
our increased 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 the long term, we believe that 30 percent is an
appropriate long-term target.
Finally, our last measure, EBITDA, was 22 percent of net sales,
compared to 21 percent last year.
DEAR STOCKHOLDERS,
We generated net sales of $380.5 million for the fiscal year, flat
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
$6 million in fiscal year 2017. This means that if we removed all
currency-related impacts, net sales would have increased of nearly
2 percent over the previous fiscal year.
Our net income for fiscal 2017 was $52.9 million, an increase of
1 percent from the prior fiscal year. This allowed us to deliver diluted
earnings per share (“EPS”) of $3.72, compared to $3.64 in the prior
fiscal year, a record for the company.
PLAYBOOK FOR CREATING VALUE
We continue to maintain a strong balance sheet while generating
significant cash and solid stockholder returns. Our capital allocation
strategy both supports our long-term growth objectives and allows
us to perform at the high end of our peer group in returning capital
to stockholders.
At the end of fiscal year 2017, our balance sheet was strong, with
$117.2 million in cash and short-term investments, and $21 million
available on our $175 million line of credit. We utilized our revolving
credit facility this year to fund the purchase, build out and equipping of
our new San Diego office at a total cost of about $18 million which is
an investment that we are truly making in the future of our tribe.
It’s interesting to note that included in fiscal year 2016 bottom-line
results was a non-operating item related to foreign currency exchange
gains that increased EPS by approximately $0.12. If we were to
remove this non-operating item from last year’s results, year-over-year
EPS growth would have been much stronger than our results reflect.
During the fiscal year we repurchased approximately 290 thousand
shares of our stock at a total cost of approximately $31 million. In the
second quarter of fiscal year 2017, our Board of Directors declared a
17 percent increase in our regular quarterly dividend which marked
the seventh consecutive year that we have increased our dividend.
OUR 55/30/25 BUSINESS MODEL
We continue to make progress on our 55/30/25 business model.
The model targets a gross margin of 55 percent of net sales, a cost
of doing business of 30 percent of net sales, and an EBITDA of 25
percent of net sales. In fiscal 2017, we maintained gross margin at 56
percent. Although our gross margin remained constant year-over-year,
it was negatively impacted by net changes in the costs of petroleum-
based specialty chemicals. These unfavorable impacts were almost
completely offset by favorable changes in foreign currency exchange
rates which impacted our EMEA segment. We cannot control global
market dynamics, but we will continue to be deliberate in managing
the rest of our business so that we can maintain gross margin at a
level close to our 55 percent target over the long-term.
10
2017 WD-40 Company Annual Report
In total, we delivered a return on invested capital to stockholders of
32 percent in fiscal year 2017.
We look forward to continuing to increase the value of the Company
for all of our stakeholders in the year ahead.
Jay W. Rembolt
Vice President, Finance, Treasurer and Chief Financial Officer
FY 2017 RESULTS
14%
Return
on Sales1
1 Calculated as net income for
fiscal year 2017 divided by
net sales for 2017.
2017 WD-40 Company Annual Report 11
2017 562016 562015 532014 522013 51Gross Margin (percent)Return on ASSETS2Return ON INVESTED CAPITAL314%32%2 Calculated as net income for fiscal year 2017 divided by total assets at August 31, 2017.3 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.Sales Per Employee (in millions)2017 0.852016 0.862015 0.872014 0.972013 1.00Weighted Average Shares Outstanding (in millions)2017 14.12016 14.42015 14.62014 15.12013 15.6Net Sales (in millions)2017 380.52016 380.72015 378.22014 383.02013 368.5Earnings Per Share (in dollars)2017 3.722016 3.642015 3.042014 2.872013 2.54Net Income (in millions)2017 52.92016 52.62015 44.82014 43.72013 39.8 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, 2017.
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. During fiscal year 2017, two companies included in the peer
group used by the Compensation Committee for fiscal year 2017 compensation decisions, Nutraceutical International Corporation and Synutra
International Inc., were acquired or merged with another public company. As a result, these two companies were included in the peer group used
by the Compensation Committee for fiscal year 2017 compensation benchmarking, but they are not included in the graph below.
The below comparison assumes $100 was invested on August 31, 2012 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
$300
$250
$200
$150
$100
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
WD-40 Company
S&P 500
Russell 2000
Peer Group
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
WD-40 Company
S&P 500
Russell 2000
Peer Group(1)
100.00
100.00
100.00
100.00
122.01
118.70
126.27
134.47
146.74
148.67
148.60
150.37
182.18
149.38
148.64
169.18
261.61
168.13
161.41
178.47
245.20
195.43
185.48
182.38
*$100 invested on 8/31/12 in stock or index, including reinvestment of dividends. Fiscal year ending August 31.
Copyright © 2017 S&P, a division of McGraw Hill Financial. All rights reserved. Copyright © 2017 Russell Investment Group. All rights reserved.
(1) WD-40 Company’s peer group Index is comprised of the following 17 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.
• Oil-Dri Corporation of America
• Park Electrochemical Corp.
• Prestige Brands Holdings, Inc.
• Quaker Chemical Corporation
• USANA Health Sciences, Inc.
12
2017 WD-40 Company Annual Report
TABLE OF CONTENTS
WD-40 Company Proxy Statement
WD-40 Company Annual Report on Form 10-K
WD-40 Company Corporate Information
WD-40 COMPANY
9715 Businesspark Avenue
San Diego, California 92131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The 2017 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 12, 2017, at 2:00 p.m.
WD-40 Company
9715 Businesspark Avenue
San Diego, California 92131
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 hold an advisory vote on the frequency of future advisory votes on executive
compensation;
4. To approve the WD-40 Company 2017 Performance Incentive Compensation Plan;
5. To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for fiscal year 2018; and
6. 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 16, 2017 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 2, 2017
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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 2017
Equity Holding Requirement for Directors
Stockholder Communications with Board of Directors
Committees
ITEM NO. 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
ITEM NO. 3: ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON 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 2017
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 2017
Outstanding Equity Awards at 2017 Fiscal Year End
Option Exercises and Stock Vested - Fiscal Year 2017
Nonqualified Deferred Compensation – Fiscal Year 2017
Supplemental Death Benefit Plans and Supplemental Insurance Benefits
Change of Control Severance Agreements
ITEM NO. 4: APPROVAL OF THE WD-40 COMPANY 2017
PERFORMANCE INCENTIVE COMPENSATION PLAN
AUDIT COMMITTEE REPORT
ITEM NO.5: 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 2017 PERFORMANCE INCENTIVE COMPENSATION PLAN
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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 2017 Annual Report before you vote.
2017 ANNUAL MEETING OF STOCKHOLDERS
Date and Time:
December 12, 2017, at 2:00 p.m.
Record Date:
October 16, 2017
Place:
WD-40 Company
9715 Businesspark Avenue
San Diego, California 92131
Meeting Webcast:
Available on the Company’s investor relations website at
http:/investor.wd40company.com/investors/default.aspx
beginning at 2:00 p.m. Pacific Time on December 12, 2017
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)
Advisory Vote on the Frequency of Future Advisory Votes on
1 YEAR
Executive Compensation (Item No. 3)
Approval of the WD-40 Company 2017 Performance
Incentive Compensation Plan (Item No. 4)
FOR
Ratification of Appointment of PricewaterhouseCoopers LLP
FOR
as the Company’s Independent Registered Public
Accounting Firm for Fiscal Year 2018 (Item No. 5)
Page
3
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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 2016 have been approved in each year by more than 95% of the votes cast.
At the 2017 Annual Meeting of Stockholders, the Company’s stockholders are being asked again to express their
preference as to the frequency of future advisory Say-on-Pay votes. The Company’s Board of Directors recommends
that Say-on-Pay votes be continued every year.
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 12, 2017, and at any
postponements or adjournments thereof. This Proxy Statement and enclosed form of proxy are first sent to stockholders on
or about November 2, 2017.
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) an advisory vote on the frequency of
future advisory votes on executive compensation; (iv) the approval of the WD-40 Company 2017 Performance Incentive
Compensation Plan; and (v) the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for fiscal year 2018. 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 16, 2017 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 16, 2017, WD-40 Company had outstanding 13,965,243 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, in the advisory vote to approve executive compensation, in the advisory
vote on the frequency of future advisory votes on executive compensation, for approval of the WD-40 Company 2017
Performance Incentive Compensation Plan, and for ratification of the appointment of PricewaterhouseCoopers LLP as the
Company’s independent registered public accounting firm for fiscal year 2018. Your broker will only be permitted to
exercise its discretionary authority
the appointment of
PricewaterhouseCoopers LLP as the Company’ independent registered public accounting firm for fiscal year 2018. 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 12, 2017” 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.
to vote on your behalf as to
the ratification of
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
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
Parnassus Investments
1 Market Street, Suite 1600
San Francisco, CA 94105
Vanguard Group, Inc.
P.O. Box 2600
Valley Forge, PA 19482
Amount and
Nature of
Beneficial Ownership
October 16, 2017
Percent of Class
1,682,586 1
12.05%
1,310,233 2
1,238,670 3
9.38%
8.87%
1 As of June 30, 2017, BlackRock, Inc. (“BlackRock”) filed a report on Form 13F with the Securities and Exchange Commission to report
beneficial ownership of a total of 1,682,586 shares managed by eleven BlackRock investment management subsidiaries. BlackRock
disclaims investment discretion with respect to all shares reported as beneficially owned by its investment management subsidiaries.
BlackRock Fund Advisors holds sole investment discretion and sole voting authority with respect to 1,180,752 shares. BlackRock
Institutional Trust Company, N.A. reported sole investment discretion and sole voting authority with respect to 366,745 shares and sole
investment discretion and no voting authority with respect to 27,641 shares. Sole investment discretion and sole voting authority with
respect to shares is reported for the following BlackRock subsidiaries: BlackRock Investment Management, LLC as to 65,112 shares;
BlackRock Asset Management Ireland Limited as to 20,339 shares; BlackRock Advisors, LLC as to 9,855 shares; and four other
BlackRock subsidiaries as to a total of 4,026 shares. Two other BlackRock subsidiaries reported sole investment discretion and sole voting
authority with respect to 6,723 shares and sole investment discretion and no voting authority with respect to 1,393 shares. Beneficial
ownership information for BlackRock, Inc. and its investment management subsidiaries as of October 16, 2017 is unavailable.
2 As of June 30, 2017, Parnassus Investments (“Parnassus”) filed a report on Form 13F with the Securities and Exchange Commission to
report beneficial ownership of 1,310,233 shares. Parnassus reported sole investment discretion with respect to all shares, sole voting
authority with respect to 1,266,806 shares and no voting authority with respect to 43,427 shares. Beneficial ownership information as of
October 16, 2017 is unavailable.
3 As of June 30, 2017, The Vanguard Group, Inc. (“Vanguard”) filed a report on Form 13F with the Securities and Exchange Commission
to report beneficial ownership of 1,238,670 shares, including 26,059 shares held by Vanguard Fiduciary Trust Company and 3,500 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 1,208,111 shares and sole investment
discretion and sole voting authority with respect to 1,000 shares. Beneficial ownership information as of October 16, 2017 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 11, 2017, 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.
By resolution of the Board of Directors adopted on October 10, 2016, the number of directors was fixed at ten, effective as of
December 13, 2016, the date of the 2016 Annual Meeting of Stockholders. Mario L. Crivello is retiring from the Board of
Directors as of the date of the 2017 Annual Meeting of Stockholders. On June 19, 2017, David B. Pendarvis was nominated by
the Board of Directors for election as a director at the 2017 Annual Meeting of Stockholders.
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, director nominees, and executive officers as a group:
Director/Nominee
Peter D. Bewley
Age
71 Investor, Retired General Counsel,
Principal Occupation
The Clorox Company
Amount and Nature of
Beneficial Ownership
October 16, 2017 1
Director
Since
2005
Number
24,762 2
Percent of
Class
*
Daniel T. Carter
61 Investor, Retired Executive Vice President & CFO,
2016
1,678 3
*
Melissa Claassen
Mario L. Crivello
(retiring director)
Eric P. Etchart
BevMo! Inc.
45 Vice President Business Unit Finance, adidas
77 Investor
61 Investor, Retired Senior Vice President,
The Manitowoc Company
2015
1994
2016
2,541 4
231,383 5
*
1.66%
1,832 6
Linda A. Lang
59 Board Chair, WD-40 Company; Investor, Retired
2004
18,340 7
David B. Pendarvis
(nominee director)
Daniel E. Pittard
Chairman & CEO, Jack in the Box, Inc.
58 Chief Administrative Officer, Global General Counsel,
Chief Compliance Officer and Secretary, ResMed Inc.
N/A
67 Investor, Retired President and CEO,
Rubio's Restaurants, Inc.
Garry O. Ridge
Gregory A. Sandfort
Neal E. Schmale
61 President and CEO, WD-40 Company
62 CEO, Tractor Supply Company
71 Investor, Retired President and COO, Sempra Energy
2016
1997
2011
2001
1,876 8
83,958 9
14,536 10
26,248 11
*
*
*
*
*
*
Less than one (1) percent.
*
1 All shares owned directly unless otherwise indicated.
2 Mr. Bewley has the right to receive 15,481 shares upon settlement of vested restricted stock units upon termination of his service as a
director of the Company.
3 Mr. Carter has the right to receive 1,678 shares upon settlement of vested restricted stock units upon termination of his service as a director
of the Company.
4 Ms. Claassen has the right to receive 2,541 shares upon settlement of vested restricted stock units upon termination of her service as a
director of the Company.
5 Mr. Crivello has sole voting and investment power over 3 shares held in trust for the benefit of others. He also has sole voting and
investment power over 222,879 shares held directly. Mr. Crivello has the right to receive 8,501 shares upon settlement of vested restricted
stock units upon termination of his service as a director of the Company.
6 Mr. Etchart has the right to receive 832 shares upon settlement of vested restricted stock units upon termination of his service as a director
of the Company.
7 Ms. Lang has the right to receive 14,698 shares upon settlement of vested restricted stock units upon termination of her service as a director
of the Company.
8 Mr. Pittard has the right to receive 981 shares upon settlement of vested restricted stock units upon termination of his service as a director
of the Company.
9 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 4,475
shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 9,530 shares within 60 days upon
settlement of vested market share units. Mr. Ridge also has voting and investment power over 1,251 shares held under the Company’s
401(k) plan.
10 Mr. Sandfort has the right to receive 9,268 shares upon settlement of vested restricted stock units upon termination of his service as a
director of the Company.
11 Mr. Schmale has the right to receive 15,481 shares upon settlement of vested restricted stock units upon termination of his service as a
director of the Company.
4
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS (cont’d)
Amount and Nature of
Beneficial Ownership
October 16, 2017 1
Executive Officer
Jay W. Rembolt
Age
Principal Occupation
66 Vice President, Finance, Treasurer and Chief Financial Officer,
Number
37,330 2
WD-40 Company
Michael L. Freeman
William B. Noble
Stanley A. Sewitch
64 Chief Strategy Officer, WD-40 Company
59 Managing Director, EMEA, WD-40 Company Limited
64 Vice President, Global Organization Development
All Directors, Director Nominees and Executive Officers as a Group
27,733 3
11,540 4
6,717 5
510,521 6
Percent of
Class
*
*
*
*
3.62%
Less than one (1) percent.
*
1 All shares owned directly unless otherwise indicated.
2 Mr. Rembolt has the right to receive 310 shares upon settlement of vested deferred performance units upon termination of employment,
the right to receive 927 shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 2,198 shares
within 60 days upon settlement of vested market share units. Mr. Rembolt also has voting and investment power over 6,284 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 927
shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 2,198 shares within 60 days upon
settlement of vested market share units. Mr. Freeman also has voting and investment power over 2,381 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 621
shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 1,612 shares within 60 days upon
settlement of vested market share units.
5 Mr. Sewitch has the right to receive 190 shares upon settlement of vested deferred performance units upon termination of employment,
the right to receive 751 shares upon settlement of restricted stock units upon vesting within 60 days, and the right to receive 1,612 shares
within 60 days upon settlement of vested market share units. Mr. Sewitch also has voting and investment power over 1,008 shares held
under the Company’s 401(k) plan.
6
Total includes the rights of executive officers and directors to receive a total of 87,258 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 2,616 shares
upon settlement of vested deferred performance units upon termination of employment, the rights of executive officers to receive a total
of 9,455 shares upon settlement of restricted stock units upon vesting within 60 days, the rights of executive officers to receive a total of
20,429 shares within 60 days upon settlement of vested market share units, and a total of 10,924 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 in 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.
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 (Chair)
(cid:120)
(cid:120) Compensation
6
ERIC P. ETCHART – Director
Eric P. Etchart was elected to the Board of Directors in 2016. 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 provides 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) Audit
(cid:120)
Finance
LINDA A. LANG – Chair
Linda A. Lang was elected to the Board of Directors in 2004. Ms. Lang was named Board Chair in 2016. 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 is an independent trustee for Goldman Sachs Investment Funds. 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:
(cid:120) Compensation
(cid:120)
Finance
DAVID B. PENDARVIS – Director Nominee
David B. Pendarvis is a nominee for election to the Board of Directors at the Annual Meeting. Mr. Pendarvis has served as chief
administrative officer of ResMed Inc. since 2011. From March through July 2017, he served as interim president, EMEA and
Japan of ResMed Inc. He joined ResMed Inc. in 2002 as global general counsel and he has served as secretary since 2003 and
he also served as vice president of organizational development from 2005 to 2011. From 2000 until 2002 Mr. Pendarvis was a
partner at Gray Cary Ware & Friedenrich (presently, DLA Piper). From 1986 until 2000 he was an associate (1986-1992) and a
partner (1993-2000) at Gibson, Dunn & Crutcher, and from 1984 until 1986 he served as a law clerk to United States District
Court Judge, J. Lawrence Irving in the United States District Court, San Diego. Mr. Pendarvis served as a director of Sequenom,
Inc. from 2009 until its acquisition by Laboratory Corporation of America Holdings in 2016. His legal expertise and experience
as general counsel with global responsibilities will provide the Board of Directors with valuable perspective for risk oversight.
Skills and Expertise:
(cid:120)
(cid:120)
(cid:120)
In depth experience in corporate compliance, intellectual property and world-wide legal affairs
Strong focus on investor relations and corporate communications
International executive management experience
Committees:
(cid:120) To be determined
7
DANIEL E. PITTARD – Director
Daniel E. Pittard was elected to the Board of Directors in 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 is a National Association of Corporate Directors (NACD) Board Leadership
Fellow. His expertise in the areas of strategy development and international business and his extensive public and private
company board experience provide the Board with valuable perspective.
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
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 presently serves as a director of Tractor Supply Company and Kirkland’s, Inc. 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
8
NEAL E. SCHMALE – Director
Neal E. Schmale was elected to the Board of Directors in 2001. He served as Board Chair from 2004 through 2016. 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
(cid:120) Compensation
Finance
(cid:120)
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.
9
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 under “Corporate Governance” within the “Investors”
section at http://investor.wd40company.com/investors/corporate-governance/overview/default.aspx. There were five 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 2017, 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, 2017 through the date of the Company’s 2017 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 2017.
At the Company’s 2016 Annual Meeting of Stockholders, the Company’s stockholders approved the WD-40 Company 2016
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 2016 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 13, 2016, each non-employee director received an RSU award
covering 497 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 elective portion of his or her base annual fee 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 $6,000 in charitable contributions to be made by the Company to properly qualified
(under Internal Revenue Code Section 501(c)(3)) charitable organizations.
10
DIRECTOR COMPENSATION TABLE - FISCAL YEAR 2017
The following Director Compensation table provides information concerning director compensation earned by each non-
employee director for services rendered in fiscal year 2017. Since the annual base fee and fees for service on Committees are
payable for services provided to the Company from January 1st of the fiscal year until the next annual meeting of stockholders,
such compensation is reported for purposes of the Director Compensation table on a weighted basis. For fiscal year 2017, one
third of the reported compensation earned or paid in cash is based on the Director Compensation Policy in effect for calendar
year 2016 and two thirds of the reported compensation earned or paid in cash is based on the Director Compensation Policy in
effect for calendar year 2017. Amounts earned and reported in the Director Compensation table for Fees Earned or Paid in Cash
for the fiscal year for each director are dependent upon the various committees on which each director served as a member or as
chair during the fiscal year.
Name
Peter D. Bewley
Daniel T. Carter
Melissa Claassen
Mario L. Crivello
Eric P. Etchart
Linda A. Lang
Daniel E. Pittard
Gregory A. Sandfort
Neal E. Schmale
Fees Earned or Paid in
Cash
($)1
$ 57,500
$ 57,500
$ 48,167
$ 46,833
$ 33,000
$ 58,833
$ 49,500
$ 51,500
$ 59,500
Stock Awards
($)2
$ 55,490
$ 55,490
$ 55,490
$ 55,490
$ 55,490
$ 55,490
$ 55,490
$ 55,490
$ 55,490
All Other
Compensation
($)3
$ 6,000
$ 6,000
$ 6,000
$ 6,000
$ 6,000
$ 6,000
$ 6,000
$ 6,000
$ 6,000
Total
($)
$ 118,990
$ 118,990
$ 109,657
$ 108,323
$ 94,490
$ 120,323
$ 110,990
$ 112,990
$ 120,990
1
For services rendered during fiscal year 2017, directors received RSU awards pursuant to elections made in 2015 (not applicable to Messrs.
Carter, Etchart or Pittard) and 2016 under the Director Compensation Policy with respect to their services as directors in calendar years
2016 (not applicable to Mr. Etchart) and 2017, 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). The value of such elective RSU awards received by the
directors for services rendered during fiscal year 2017 were as follows: Peter D. Bewley, Melissa Claassen, Linda A. Lang, Gregory A.
Sandfort and Neal E. Schmale received RSU awards valued at $37,422, Mr. Carter received RSU awards valued at $37,420, and Mr.
Etchart received an RSU award valued at $24,935. Messrs. Crivello and Pittard elected to receive their 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 13, 2016, each director received a non-elective RSU award covering
497 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 $111.65 per share multiplied by the number of shares underlying the RSU award. 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 16, 2017 are reported above in footnotes to the table under the heading, Security Ownership of Directors and Executive Officers.
The RSUs vest immediately upon grant, but are settled in stock only upon termination of service as a director. 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 Amounts represent charitable contributions made by the Company in fiscal year 2017 as designated by non-employee directors pursuant
to the Company’s Director Contribution Fund.
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, 9715 Businesspark Avenue, San Diego, CA 92131.
11
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
Director
Peter D. Bewley
Daniel T. Carter
Melissa Claassen
Mario L. Crivello
Eric P. Etchart
Linda A. Lang
Daniel E. Pittard
Gregory A. Sandfort
Neal E. Schmale
Number of Meetings Held in Fiscal Year 2017
Audit
(cid:51)(cid:3)(cid:3)
Chair
(cid:51)(cid:3)(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:51)(cid:3)(cid:3)
5
Compensation
(cid:51)(cid:3)(cid:3)
(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:3)
Chair
(cid:51)(cid:3)(cid:3)
3
Governance
Chair
(cid:51)(cid:3)(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:3)
4
Finance
Chair
(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:51)(cid:3)(cid:3)
(cid:3)
(cid:51)(cid:3)(cid:3)
4
CORPORATE GOVERNANCE COMMITTEE
NOMINATION POLICIES AND PROCEDURES
The Corporate Governance Committee is comprised of Peter D. Bewley (Chair), Daniel T. Carter, Mario L. Crivello (retiring
director) and Gregory A. Sandfort. 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
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.
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, 9715 Businesspark Avenue, San Diego, California 92131. 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.
12
AUDIT COMMITTEE
RELATED PARTY TRANSACTIONS REVIEW AND OVERSIGHT
The Audit Committee is comprised of Daniel T. Carter (Chair), Peter D. Bewley, Eric P. Etchart, 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.
During the fiscal year ended August 31, 2017, 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, compensation and oversight of the independent
registered public accounting firm for the Company. With respect to the mandatory rotation of the lead engagement partner, the
Audit Committee is directly involved in the selection of the lead engagement partner for the Company’s account.
FINANCE COMMITTEE
The Finance Committee is comprised of Melissa Claassen (Chair), Eric P. Etchart, Linda A. Lang, 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.
13
COMPENSATION COMMITTEE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Gregory A. Sandfort (Chair), Peter D. Bewley, Melissa Claassen, Mario L.
Crivello (retiring director), Linda A. Lang, and Neal E. Schmale, 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,
2017, 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.
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 2017 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 2017 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.
14
ITEM NO. 3
ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
In addition to providing stockholders with the opportunity to cast an advisory vote on executive compensation, the Dodd-Frank
Wall Street Reform and Consumer Protection Act also requires, at least once every six years, that the Company conduct an
advisory vote to solicit input from stockholders on whether future advisory votes on executive compensation should be held
every one, two or three years.
For the past six years, the Company’s stockholders have provided advisory votes on executive compensation every year. After
careful consideration of the various arguments supporting each frequency level, the Board of Directors believes that submitting
the advisory vote on executive compensation to stockholders on an annual basis continues to be the most appropriate option.
Although the Board of Directors recommends that stockholders vote in favor of holding advisory votes on executive
compensation every year, stockholders are not voting to approve or disapprove the Board’s recommendation. The form of proxy
for the Company’s Annual Meeting of Stockholders provides stockholders with four choices: (a) to recommend that an advisory
vote on executive compensation be held every year, (b) every two years, (c) every three years; or (d) to abstain from making any
recommendation with respect to the frequency of future advisory votes on executive compensation.
Because the vote on this proposal is advisory in nature, it will not be binding on the Board of Directors. However, the Board of
Directors will consider the outcome of the advisory vote along with other factors when making its decision about the frequency
of future stockholder advisory votes on executive compensation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE “1
YEAR” RECOMMENDATION FOR FUTURE STOCKHOLDER ADVISORY VOTES ON EXECUTIVE
COMPENSATION
15
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 2017, 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 Chief Strategy Officer;
(cid:120) William B. Noble, our Managing Director, EMEA; and
(cid:120)
Stanley A. Sewitch, our Vice President, Global Organization Development.
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 (in
operating departments) 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, subject to earlier vesting upon the effective date of retirement under certain conditions. 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, subject to pro-rata vesting at the end of the applicable measurement period
in the event of earlier retirement under certain conditions.
Performance-related compensation includes (i) an annual cash payment opportunity that is tied to current fiscal year financial
results (“Incentive Compensation”); (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.
For purposes of measuring performance based on the Company’s EBITDA, the Company uses EBITDA before deduction of the
stock-based compensation expense for vested DPU awards, if any, and excluding other non-operating income and expense
amounts (“Adjusted EBITDA”).
The foregoing compensation structure elements are fully described 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 Adjusted 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 2017, the Company’s overall financial performance was strong, but mixed, resulting in partial achievement of
performance measure goals for regional and global Adjusted EBITDA under the Company’s Incentive Compensation program
(the “Performance Incentive Program”) as described below. The maximum first level performance measure goals for the EMEA
and Asia-Pacific regions were achieved, but the first level performance goal for the Americas region was not achieved. Due to
the strong performance of the EMEA and Asia-Pacific segments, the maximum first level goal for global Adjusted EBITDA was
achieved and approximately 47% of the second level goal for global Adjusted EBITDA was achieved. As a result, each of the
NEOs earned 74% of their Incentive Compensation opportunity for fiscal year 2017. For fiscal year 2016, the Company’s
financial performance was strong. For fiscal year 2016, the maximum performance measure goals for regional and global
16
Adjusted EBITDA were achieved. As a result, each of the NEOs earned the maximum possible 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 Adjusted 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 Adjusted 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 those
NEOs other than Mr. Noble and no Incentive Compensation was earned by Mr. Noble.
For the three fiscal years ended August 31, 2017, the TSR for the Company’s shares exceeded, by an absolute percentage point
difference, the return for the Russell 2000 Index (the “Index”) by 33.32%. As a result, MSUs awarded to the NEOs in October
2014 provided vested shares of the Company’s common stock to the NEOs at 200% of the target number of award shares. 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 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 those 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 also provided vested shares of the
Company’s common stock to those NEOs at the maximum amount of 200% of the target number of award shares.
FISCAL YEAR 2017 COMPENSATION
Compensation decisions for fiscal year 2017 were made in October 2016 based on individual and Company performance during
fiscal year 2016 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 2017 is based on peer group data which 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 2017:
(cid:120)
For fiscal year 2017, base salaries for the NEOs other than Mr. Sewitch were not increased. Base salaries for the NEOs were
assessed in relation to labor market information. For fiscal year 2017, 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 Adjusted EBITDA were established at the beginning of the fiscal year. The Company’s
performance as measured against these goals is described in detail below.
(cid:120)
(cid:120)
(cid:120)
In October 2016, the NEOs received annual RSU awards providing for the issuance of a total of 6,977 shares of the
Company’s common stock to be earned by continued employment by the Company over a vesting period of three years,
subject to earlier vesting upon the effective date of retirement under certain conditions. These awards serve a retention
purpose together with an incentive to maximize long term stockholder value through share price appreciation.
In October 2016, the NEOs received MSU awards subject to performance vesting covering a target number of shares of the
Company’s common stock equal to 6,977 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 to the NEOs 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 2016, the NEOs received DPU awards that provided an opportunity to receive up to an aggregate maximum of
9,184 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 2017 if the Company were to achieve a level of global Adjusted EBITDA for the fiscal
year in excess of the maximum goal for global Adjusted EBITDA established for the Performance Incentive Program2. Since
the Company’s global Adjusted EBITDA for fiscal year 2017 did not exceed the maximum goal for global EBITDA
established for the Performance Incentive Program, the DPU awards for fiscal year 2017 did not vest and they have lapsed
without value to the NEOs.
(cid:120) RSU, MSU and DPU award amounts for fiscal year 2017 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 2016 in areas over which each NEO had direct
influence.
1 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.
2 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.
17
(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 2014, 2015
and 2016. 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 2017 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 on WD-40 Company’s website at https://www.wd40company.com/, under “Corporate
Governance” within the “Investors” section.
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. Mr. Sewitch, 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 2017, 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 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 are 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.
18
The mix of pay for executive officers is intended to provide significant incentives to drive overall company performance and
increased stockholder value. The following charts show the relative portions of the maximum total compensation that the CEO
and the other NEOs, respectively, are eligible to earn for fiscal year 2017 (“Total Compensation Opportunity”). For purposes of
these charts, Salary and All Other Compensation amounts are as reported in the Summary Compensation Table below; maximum
possible Stock Award (RSUs, MSUs and DPUs) amounts are as reported in the table in footnote 1 to the Summary Compensation
Table; and maximum Non-Equity Incentive Plan Compensation (Incentive Compensation) amounts are as reported as the
maximum amounts for such compensation in the Grants of Plan-Based Awards table below. The Total Compensation
Opportunity for the CEO and for all other NEOs in the aggregate is divided among elements of compensation that are considered
at risk (MSUs, tied to longer term relative stockholder return, and Incentive Compensation and DPUs, tied to current fiscal year
financial performance), and those elements that are not performance-based (Salary, All Other Compensation and RSUs).
Approximately 66% of the CEO’s Total Compensation Opportunity for fiscal year 2017 was at risk while approximately 55%,
in the aggregate, of the Total Compensation Opportunity for fiscal year 2017 for all of the other NEOs was at risk. As reported
in more detail below, for fiscal year 2017, each of the NEOs earned 74% of their maximum Incentive Compensation amounts,
maximum MSU award values (for the MSU award granted in 2014), and no portion of their DPU awards.
19
COMPENSATION BENCHMARKING
For purposes of its fiscal year 2017 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
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 2017 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 2017
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; leadership and strategic planning for Mr. Freeman;
business unit performance, teamwork, execution and growth for Mr. Noble; and organizational development, talent, leadership
development and compensation systems for Mr. Sewitch.
BASE SALARY: FISCAL YEAR 2017
In October 2016, 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 for fiscal year 2017 were approved by the Committee for any of the NEOs, other than Mr. Sewitch.
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
Company’s stockholders are being asked to approve the WD-40 Company 2017 Performance Incentive Compensation Plan at
this year’s 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 2017 were based on pre-established goals for the
following corporate performance measures: (i) the Company’s Adjusted EBITDA computed for each of the Company’s relevant
20
financial reporting segments (“Regional EBITDA”); and (ii) Adjusted EBITDA computed on a consolidated basis (“Global
EBITDA”). The calculations of attainment of these performance measures for the NEOs are substantially 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. Noble will earn some Incentive
Compensation because the performance measure for a portion of the Incentive Compensation opportunity payable to him is based
on Regional EBITDA.
Depending upon actual performance results, the Incentive Compensation opportunities for fiscal year 2017 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, and from 0% up to
80% of base salary for Messrs. Noble and Sewitch.
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 2017 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 payout for Mr. Noble required achievement of a specified
segment goal 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, Rembolt, Freeman and Sewitch (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 2017 Performance Incentive Program are disclosed
below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2017.
The table below sets forth the fiscal year 2017 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
Performance Measure
A
A
C
Regional EBITDA (EMEA)1
Global EBITDA
Global EBITDA
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
Stanley A. Sewitch
N/A
50%
50%
William B.
Noble
Minimum Goal
FY 2017
($ thousands)
Maximum Goal
FY 2017
($ thousands)
50%
N/A
50%
$ 33,597 $ 36,322
$ 77,100 $ 89,100
$ 80,922 $ 87,404
1
EMEA figures have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal
year 2017 of $1.2678 per GBP.
21
The table below sets forth the actual fiscal year 2017 performance results and percentage achievement for each of the performance
measures under the Performance Incentive Program formulas applicable to the NEOs. The actual Regional and Global EBITDA
Level A results were based on earnings before deduction of any Incentive Compensation amounts. The actual Global EBITDA
Level C results were based on earnings after deduction of the actual Incentive Compensation amounts for Level A and B, but
before deduction of the actual Incentive Compensation amounts for Level C.
Level
Performance Measure
A
A
C
Regional EBITDA (EMEA)1
Global EBITDA
Global EBITDA
Actual
FY 2017
($ thousands)
$ 40,565
$ 89,464
$ 83,993
% Achievement
100.0%
100.0%
47.4%
1
EMEA figures have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal
year 2017 of $1.2678 per GBP.
Achievement of the maximum goals for Regional EBITDA and Global EBITDA is intended to be attainable through the
concerted efforts of all management teams working in their own regions and areas of responsibility and for the Company as a
whole.
Based on the Company’s fiscal year 2017 performance and the Committee’s certification of the relative attainment of each of the
performance measures under the Performance Incentive Program, the payouts for our executive officers, including the NEOs,
were calculated. On October 9, 2017, the Committee approved payment of the following Incentive Compensation amounts to the
NEOs for fiscal year 2017 performance:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble1
Stanley A. Sewitch
Title
President and Chief Executive Officer
Vice President, Finance, Treasurer
and Chief Financial Officer
Chief Strategy Officer
Managing Director, EMEA
Vice President, Global Organization
Development
FY 2017
Annual
Opportunity
(As % of
Base Salary)
150%
100%
FY 2017
Incentive
Compensation
Paid ($)
$ 710,091
$ 227,454
100%
80%
80%
$ 245,081
$ 166,574
$ 143,769
FY 2017
Actual Incentive
Compensation
(As % of
Opportunity)
74%
74%
74%
74%
74%
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 2017 of $1.2678 per GBP.
As an example of the operation of the Performance Incentive Program, Mr. Noble’s Incentive Compensation payout for fiscal year
2017 was computed as follows:
Incentive Compensation Annual Opportunity = 80% X Eligible Earnings ($282,560) = $226,048.
(cid:120)
(cid:120) Level A (Regional EBITDA (EMEA)) = 50% of Annual Opportunity = $113,024.
— Level A Incentive Compensation = Level A Achievement (100%) X Level A Annual Opportunity = $113,024.
(cid:120) Level C (Global EBITDA) = 50% of Annual Opportunity = $113,024.
— Level C Incentive Compensation = Level C Achievement (47.379%) X Level C Annual Opportunity = $53,550.
Mr. Noble’s aggregate Incentive Compensation payout was the sum of the payouts under Levels A and C of the Performance
Incentive Program, or $166,574.
22
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 for fiscal year 2017 were granted to the NEOs 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 2016, the Committee granted primary
equity allocations of RSU and MSU awards for fiscal year 2017. 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 2016. 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, subject to earlier
vesting upon the effective date of retirement under certain conditions.
(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 except as noted below with respect to vesting
upon retirement. 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.
23
RSU Award Agreements provide that, for RSU award recipients who retire from the Company after reaching age 65, or for RSU
award recipients who retire from the Company after reaching age 55 and have been employed by the Company for at least 10
years, all RSUs will be vested upon the effective date of retirement and shares will be issued within 30 days after the effective
date of retirement.
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. 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”). Except as noted below with respect to
vesting upon retirement, 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.
MSU Award Agreements provide for monthly pro-rata vesting of MSUs as of the end of the Measurement Period in the event of
the earlier termination of the award recipient’s employment due to death, disability, or retirement after reaching age 65, or
retirement after reaching age 55 with at least 10 years of employment with the Company. For purposes of calculating the number
of MSUs vested and the corresponding number of shares to be issued as of the Settlement Date, the Target Number of shares
covered by the MSU awards will be adjusted according to the pro-rata portion of the Measurement Period that has elapsed as of
the effective date of termination of employment. The Committee may also exercise its discretion to provide for monthly pro-rata
vesting of MSUs awarded to a recipient who resigns or is terminated by the Company for reasons other than good cause.
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.
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 for each of the NEOs based on the
absolute percentage point difference between the TSR for the Company as compared to the Return for the Index (the “Relative
TSR”) 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
24
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”). Except as noted below with respect to vesting upon retirement, the recipient must remain employed with the Company
for vesting purposes until August 31 of the Measurement Year. Except as noted below as to non-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.
DPU Award Agreements provide for monthly pro-rata vesting of DPUs as of the end of the Measurement Year in the event of
the earlier termination of the award recipient’s employment due to death, disability, or retirement after reaching age 65, or
retirement after reaching age 55 with at least 10 years of employment with the Company. For purposes of calculating the number
of Vested DPUs earned, the Maximum Number of shares covered by the DPU awards will be adjusted according to the pro-rata
portion of the Measurement Year that has elapsed as of the effective date of termination of employment.
Vested DPUs not otherwise settled in cash will be settled by issuance of the DPU Shares as of 6 months following termination
of employment (the “Settlement Date”). Payment of required withholding taxes due with respect to the settlement of a Vested
DPU 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 DPU award after withholding shares having a value as of the Settlement Date equal to the
required tax withholding obligation.
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 and excluding
other non-operating income and expense amounts (“Adjusted Global EBITDA”) for the Measurement Year.
25
For fiscal year 2017, the performance vesting provisions for the DPUs were established as set forth in the table below:
Adjusted Global EBITDA1
> $87,645,000
$87,645,000
$83,455,000
< $83,455,000
$83,234,000*
* Implied zero percentage achievement level.
Applicable Percentage
100%
100%
5%
0%
0%
1
The calculation of Adjusted Global EBITDA for purposes of the performance vesting provisions of the DPUs 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 21 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 21 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 2017
For fiscal year 2017, 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 2016. All of the equity awards are set forth
below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2017. In establishing award levels for the NEOs
for fiscal year 2017, 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 2016 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 2016 base salary amounts and fiscal year 2017 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 9, 2017, the Committee certified achievement of the performance measure applicable to MSU awards granted to the
NEOs in October 2014. The Committee certified the Company’s relative TSR as compared to the Return for the Index for the
performance Measurement Period ended August 31, 2017 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, 2017 was 33.32%. 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 2014 was 200% for each of the NEOs.
The following table sets forth the Target Number and vested number of shares underlying the MSU awards granted to each NEO
in October 2014:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Stanley A. Sewitch
Target Number
Vested Shares
4,765
1,099
1,099
806
806
9,530
2,198
2,198
1,612
1,612
26
Deferred Performance Unit Award Vesting for Fiscal Year 2017 Performance Achievement
DPU awards granted to the NEOs for fiscal year 2017 lapsed without value to the NEOs. Vesting of the DPUs would have
required a level of Adjusted Global EBITDA equal to or greater than $83,455,000 (the minimum Adjusted Global EBITDA goal
for DPU vesting as set forth in the table on the preceding page). Since the actual Adjusted Global EBITDA for fiscal year 2017
was less than $83,455,000, the DPUs did not vest and they have lapsed.
BENEFITS AND PERQUISITES
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, 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
shares of the Company’s common stock as an alternative to other investment choices available under the Plan. For Mr. Noble,
the Company provides contributions to a local retirement program.
The Company maintains individual Supplemental Death Benefit Plan agreements with each of the NEOs other than
Messrs. Noble and Sewitch. 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.
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. In establishing the terms and conditions
for the change of control severance 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 financial 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 financial performance goals 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.
27
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, plus the value of equity awards (other than the DPUs) at their date of grant per share values)
for fiscal year 2017, together with the relative market percentile for each NEO:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble2
Stanley A. Sewitch
Base Salary
$ 642,416
$ 308,664
$ 332,585
$ 282,560
$ 244,094
Annual
Earned Incentive
Compensation
$ 710,091
$ 227,454
$ 245,081
$ 166,574
$ 143,769
Value of
Stock Awards1
$ 956,335
$ 175,966
$ 175,966
$ 110,710
$ 150,988
Total
Compensation
$ 2,308,842
$ 712,084
$ 753,632
$ 559,844
$ 538,851
Present Value of Total
Compensation
Received as a
Percentage of Market
Median
114%
110%
133%
114%
102%
1
For purposes of comparing total compensation for fiscal year 2017 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 for those awards. The grant date closing price was $112.51. 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 DPUs) for fiscal year 2017 is set forth below in the table under the heading, Grants of Plan-Based
Awards - Fiscal Year 2017.
2 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 2017 of $1.2678 per GBP.
For fiscal year 2017, 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 102% to 133% 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 EMEA region and
global 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.
28
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, 2017 by the NEOs are set forth, together with outstanding stock options granted for fiscal
years prior to 2009, in the table below under the heading, Outstanding Equity Awards at 2017 Fiscal Year End. All of the NEOs
hold Vested DPUs and each of the NEOs, other than Messrs. Rembolt and Sewitch, 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.
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 2017 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 2017, 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.
29
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, 2017, 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
Melissa Claassen
Mario L. Crivello
Linda A. Lang
Neal E. Schmale
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 2017, our executive officers received a base salary amount. Base salary amounts for the NEOs were 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 2017 is provided below in the table under the
heading, Grants of Plan-Based Awards - Fiscal Year 2017. The actual payouts under the Performance Incentive Program for
fiscal year 2017 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 2017 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 2017, annual salary and earned Incentive Compensation was 58% of total compensation for
our CEO and from 64% to 70% of total compensation for the other NEOs.
30
SUMMARY COMPENSATION TABLE
The following table shows information for the three fiscal years ended August 31, 2017, August 31, 2016 and August 31, 2015,
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 2017 (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
Chief Strategy Officer
William B. Noble4
Managing Director, EMEA
Stanley A. Sewitch
Vice President, Global Organization
Development
Year
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
Salary
Stock Awards1
Non-Equity
Incentive Plan
Compensation2
$ 642,416 $ 894,031 $ 710,091 $ 105,791 $ 2,352,329
2,704,631
1,689,844
All Other
Compensation3
963,624
261,407
998,645
686,446
642,416
642,416
99,946
99,575
Total
$ 308,664 $ 164,502 $ 227,454 $ 88,153 $ 788,773
904,399
627,319
308,664
75,360
205,470
158,322
308,664
308,664
81,601
84,973
$ 332,585 $ 164,502 $ 245,081 $ 99,578 $ 841,746
956,762
677,905
332,585
99,729
205,470
158,322
332,585
332,585
86,122
87,269
$ 282,560 $ 103,497 $ 166,574 $ 97,096 $ 649,727
792,522
586,950
81,792
121,861
258,516
-
129,069
116,113
323,145
348,976
$ 244,094 $ 141,152 $ 143,769 $ 72,894 $ 601,909
672,930
472,693
189,587
48,158
176,085
116,113
236,984
236,984
70,274
71,438
1
Stock Awards other than DPUs for fiscal years 2017, 2016 and 2015 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 23, 2017. Stock Awards consisting of MSUs awarded in fiscal years
2017, 2016 and 2015 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 2017, 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 2017 and as described above in the Compensation Discussion and Analysis section under the heading, Equity
Compensation.
31
SUMMARY COMPENSATION TABLE (continued)
The following table sets forth the amounts that would have been included for the Stock Awards for fiscal years 2017, 2016 and 2015 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
Stanley A. Sewitch
Year
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
RSUs
MSUs
(Maximum)
DPUs
(Maximum)
$ 460,913
$ 866,235
$ 476,883
409,637
309,963
1,178,016
752,965
473,551
316,339
$ 84,808
$ 159,387
$ 152,766
84,282
71,490
242,376
173,664
151,642
91,145
$ 84,808
$ 159,387
$ 164,603
84,282
71,490
242,376
173,664
163,460
98,283
$ 53,357
$ 100,279
$ 127,877
52,943
52,431
152,251
127,364
137,178
108,577
$ 72,770
$ 136,763
$ 93,806
72,229
52,431
207,713
127,364
93,122
58,309
Total Stock
Awards
$ 1,804,031
2,061,204
1,379,267
$ 396,961
478,300
336,299
$ 408,798
490,118
343,437
$ 281,513
342,372
288,372
$ 303,339
373,064
238,104
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
2017 are set forth below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2017.
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 Mr. Noble, a U.K.
employer retirement benefit contribution for Mr. Noble; (iii) dividend equivalent amounts paid to each NEO other than Messrs. Rembolt
and Sewitch with respect to RSUs held by those NEOs that are vested and that will not be settled in shares until termination of employment
and dividend equivalent amounts payable to each of the NEOs with respect to Vested DPUs; (iv) the value of supplemental life insurance
benefits received by the NEOs other than Messrs. Noble and Sewitch described below under the heading, Supplemental Death Benefit
Plans and Supplemental Insurance Benefits; and (v) a taxable payment in the amount of $29,228 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 2017,
the total employer 401(k) profit sharing and matching contributions for each NEO other than Messrs. Noble and Sewitch were $44,167.
For Mr. Sewitch, the employer 401(k) profit sharing and matching contributions were $39,750. Mr. Noble’s employer retirement benefit
contribution was $36,024. Dividend equivalent payments received by and/or payable to the NEOs for fiscal year 2017 were as follows:
Mr. Ridge - $12,948; Mr. Rembolt - $586; Mr. Freeman - $8,136; Mr. Noble - $8,034; and Mr. Sewitch - $359. For fiscal year 2017, the
value of supplemental life insurance benefits received by Messrs. Ridge, Rembolt and Freeman were as follows: Mr. Ridge - $4,182; Mr.
Rembolt - $4,170; and Mr. Freeman - $3,462. For fiscal year 2017, the welfare benefit costs for each NEO were as follows: Mr. Ridge -
$28,546; Mr. Rembolt - $27,178; Mr. Freeman - $27,077; Mr. Noble - $9,306; and Mr. Sewitch - $21,876. For fiscal year 2017, the vehicle
allowance costs for each NEO were as follows: Mr. Ridge - $15,948; Mr. Rembolt - $12,052; Mr. Freeman - $16,736; Mr. Noble - $14,504;
and Mr. Sewitch - $10,909.
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 2017 at $1.2678 per GBP
for fiscal year 2016 at $1.4499 per GBP, and for fiscal year 2015 at $1.5658 per GBP.
32
GRANTS OF PLAN-BASED AWARDS - FISCAL YEAR 2017
In December 2007, the Company’s stockholders approved the WD-40 Company 2007 Stock Incentive Plan to authorize the
issuance of stock-based compensation awards to employees, directors and consultants. In addition to base salary and the
Performance Incentive Compensation, for fiscal year 2017 the executive officers were granted RSU, MSU and DPU awards
under the Company’ 2007 Stock Incentive Plan. Descriptions of the RSU, MSU and DPU awards are provided above in the
Compensation Discussion and Analysis section under the heading, Equity Compensation.
Information concerning the grant of RSU, MSU and DPU awards to the NEOs is provided in the following Grants of Plan-Based
Awards table. The table also contains information with respect to Performance Incentive Program opportunity awards for fiscal
year 2017 as described above in the Compensation Discussion and Analysis section under the heading, Performance Incentive
Program. The table provides threshold, target and maximum payout information relating to the Company’s fiscal year 2017
Performance Incentive Program.
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards1
Estimated Future Payouts Under
Equity Incentive Plan Awards2
Name
Garry O. Ridge
Threshold
($)
Target
($)
$ 1 $ 481,812 $ 963,624
Maximum
($)
Grant Date
10/11/2016
10/11/2016 (MSU)
10/11/2016 (RSU)
10/11/2016 (DPU)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units3
(#)
Grant Date
Fair Value of
Stock and
Options
Awards4
($)
Threshold
(#)
Target
(#)
Maximum
(#)
2,125
4,250
8,500
$ 433,118
215
4,311
$ -
4,250
$ 460,913
Jay W. Rembolt
10/11/2016
$ 1 $ 154,332 $ 308,664
10/11/2016 (MSU)
10/11/2016 (RSU)
10/11/2016 (DPU)
391
782
1,564
$ 79,694
69
1,381
$ -
782
$ 84,808
Michael L. Freeman
10/11/2016
$ 1 $ 166,293 $ 332,585
10/11/2016 (MSU)
10/11/2016 (RSU)
10/11/2016 (DPU)
391
782
1,564
$ 79,694
74
1,488
$ -
782
$ 84,808
William B. Noble5
10/11/2016
$ 1 $ 113,024 $ 226,048
10/11/2016 (MSU)
10/11/2016 (RSU)
10/11/2016 (DPU)
246
492
984
$ 50,140
57
1,156
$ -
492
$ 53,357
Stanley A. Sewitch
10/11/2016
$ 1 $ 97,638 $ 195,275
10/11/2016 (MSU)
10/11/2016 (RSU)
10/11/2016 (DPU)
335
671
1,342
$ 68,382
42
848
$ -
671
$ 72,770
1
The Estimated Future Payouts Under Non-Equity Incentive Plan Awards represent Threshold, Target and Maximum payouts under the
WD-40 Company Performance Incentive Compensation Plan for Incentive Compensation payable for fiscal year 2017 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.
33
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
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 2017 of $1.2678 per GBP.
OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR END
The following table provides detailed information concerning the unexercised stock options and RSU and MSU awards that were
not vested as of the end of the last fiscal year for each of the NEOs:
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise
Price
($)
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
-
-
3,160
3,160
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,736 $ 951,787
26,866 $ 2,927,051
8,736 $ 951,787
26,866 $ 2,927,051
1,742 $ 189,791
5,580 $ 607,941
1,742 $ 189,791
5,580 $ 607,941
1,742 $ 189,791
5,580 $ 607,941
1,742 $ 189,791
5,580 $ 607,941
1,133 $ 123,440
3,738 $ 407,255
1,133 $ 123,440
3,738 $ 407,255
1,450 $ 157,978
4,512 $ 491,582
1,450 $ 157,978
4,512 $ 491,582
Name
Garry O. Ridge
Total
Jay W. Rembolt
Total
Michael L. Freeman
Total
William B. Noble
Total
Stanley A. Sewitch
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 $108.95 per unit, determined by reference to the
closing price for the Company’s common stock as of August 31, 2017.
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 $108.95
per share, determined by reference to the closing price for the Company’s common stock as of August 31, 2017.
34
OPTION EXERCISES AND STOCK VESTED - FISCAL YEAR 2017
The following table sets forth the number of shares of the Company’s common stock acquired on exercise of stock options in the
Company’s last fiscal year and the aggregate dollar value realized on exercise of such stock options for the NEOs. The table also
sets forth the number of shares of the Company’s common stock acquired upon the vesting of RSU and MSU awards in the
Company’s last fiscal year and the aggregate dollar value realized with respect to such vested RSU and MSU awards.
Option Awards
Stock Awards
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Stanley A. Sewitch
Number of Shares
Acquired on Exercise
(#)
Value Realized
on Exercise1
($)
Number of Shares
Acquired on Vesting2
(#)
- $
3,000 $
- $
- $
- $
-
221,910
-
-
-
13,726 $
3,333 $
3,333 $
2,412 $
1,851 $
Value Realized
on Vesting3
($)
1,469,780
356,898
356,898
258,277
198,205
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 24, 2016.
The Value Realized on Vesting for shares of the Company’s common stock issued on October 24, 2016 is calculated based on the number
of vested RSU and MSU awards multiplied by the closing price of $107.08 for the Company’s common stock as of that date.
NONQUALIFIED DEFERRED COMPENSATION – FISCAL YEAR 2017
The following table provides information concerning compensation received by the NEOs that is subject to deferral under
applicable RSU and DPU award agreements:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Stanley A. Sewitch
Aggregate
Earnings
in Last FY1
($)
$ (64,399)
$ (2,914)
$ (40,467)
$ (39,959)
$ (1,786)
Aggregate
Balance
at Last FYE2
($)
$ 746,416
$ 33,775
$ 469,030
$ 463,146
$ 20,701
1
2
The Aggregate Earnings in Last FY represents the decrease in value from August 31, 2016 to August 31, 2017 of the shares underlying
deferred settlement RSUs and Vested DPUs 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 and Vested DPUs for each NEO was multiplied by the difference in the closing
price of the Company’s common stock on August 31, 2017 of $108.95 and August 31, 2016 of $118.35, a decline in value of $9.40 per
share. Amounts included as the Aggregate Earnings in Last FY are not otherwise included as compensation in the Summary Compensation
Table for fiscal year 2017.
The Aggregate Balance at Last FYE represents the value as of August 31, 2017 of the deferred settlement RSUs and Vested DPUs as
noted in the footnote above. The value for each deferred settlement RSU and each Vested DPU is based on the closing price of the
Company’s common stock as of August 31, 2017 in the amount of $108.95 per share. The underlying deferred settlement RSUs and
Vested DPUs were included in prior disclosures for the NEOs to the extent that the NEOs were included in Summary Compensation Table
disclosures for the years in which such awards were first granted to the NEOs.
35
SUPPLEMENTAL DEATH BENEFIT PLANS AND SUPPLEMENTAL INSURANCE BENEFITS
The Company maintains Supplemental Death Benefit Plans for the NEOs other than Messrs. Noble and Sewitch. 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 Mr. Noble, to all employees of the
Company’s U.K. subsidiary.
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. Non-employee directors do not have death benefit
plan agreements.
Based upon their fiscal year 2017 base salaries, the supplemental death benefit to be provided to the NEOs other than Messrs.
Noble and Mr. Sewitch as of the end of fiscal year 2017 would have been as set forth in the following table:
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Stanley A. Sewitch
$
$
$
$
$
Death Benefit
642,416
308,664
332,585
-
-
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 Messrs. Rembolt and Sewitch. On October 16, 2008, the Company entered
into a Severance Agreement with Mr. Rembolt and on October 15, 2014, the Company entered into a Severance Agreement with
Mr. Sewitch. 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.”
36
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 2017 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 2017.
Executive Officer
Garry O. Ridge
Jay W. Rembolt
Michael L. Freeman
William B. Noble
Stanley A. Sewitch
Severance Pay1
Welfare Benefits2
Accelerated Vesting of
RSUs and MSUs3
Total Change of
Control Severance
Benefits
$ 3,212,080 $ 51,186 $ 2,415,313 $ 5,678,579
$ 1,234,656 $ 51,186 $ 493,762 $ 1,779,604
$ 1,330,340 $ 50,786 $ 493,762 $ 1,874,888
$ 1,082,152 $ 10,276 $ 327,068 $ 1,419,496
$ 867,362 $ 41,112 $ 403,769 $ 1,312,243
1
2
For each NEO, Severance Pay includes two times the reported Salary for fiscal year 2017 plus two times the reported Non-Equity Incentive
Plan Compensation for fiscal year 2016.
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.
3 Acceleration of vesting of RSU and MSU awards is governed by applicable provisions of the Severance Agreements and the MSU Award
Agreements. 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 $108.95 for each RSU and MSU based on the closing price for the Company’s common stock as of August 31, 2017. 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.
37
ITEM NO. 4
APPROVAL OF THE WD-40 COMPANY
2017 PERFORMANCE INCENTIVE COMPENSATION PLAN
On June 24, 2008, the Board of Directors first adopted the WD-40 Performance Incentive Compensation Plan. The plan, as amended
and restated in 2012, was most recently approved by the stockholders at the Company’s 2012 Annual Meeting of Stockholders. The
Board of Directors is seeking stockholder approval of the WD-40 Company 2017 Performance Incentive Compensation Plan (the
“Incentive Plan”) to allow Incentive Compensation paid under the Incentive Plan to qualify as deductible “performance-based
compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Incentive
Plan will be effective as of September 1, 2018 and will continue in effect until August 31, 2023 or until such time as it is extended by
re-approval by the stockholders or otherwise terminated by the Compensation Committee (the “Committee”) of the Board of Directors.
INCENTIVE PLAN SUMMARY
The following paragraphs provide a summary of the principal features of the Incentive Plan. This summary does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions of the Incentive Plan, which is attached to this Proxy Statement
as Appendix A. Capitalized terms used herein and not defined shall have the same meanings as set forth in the Incentive Plan.
Purpose. The purpose of the Incentive Plan is to enhance the Company’s ability to attract and retain highly qualified executives and
provide such executives with additional financial incentives (referred to herein as “Awards”) to promote the success of the Company
and its Subsidiaries. Awards granted under the Incentive Plan are intended to qualify as performance-based compensation within the
meaning of Section 162(m) of the Code.
Eligibility. Participation in the Incentive Plan is limited to corporate officers of the Company selected by the Committee to participate
in the Incentive Plan (collectively “Participants”). The Participants are intended to include any officer determined to be a “covered
employee” of the Company within the meaning of Section 162(m) of the Code. Although the Incentive Plan is intended to cover such
corporate officers, the Company maintains a Performance Incentive Program for the payment of Incentive Compensation to all
Company employees on substantially the same terms are provided for in the Incentive Plan. The Incentive Plan is formalized to cover
the corporate officer Participants and is being submitted to the stockholders for approval in order to qualify the Incentive Plan
compensation paid to such Participants as deductible “performance-based compensation” within the meaning of Section 162(m) of the
Code.
Administration. The Incentive Plan will be administered by the Compensation Committee of the Board of Directors. Except as
otherwise provided by the Board of Directors and subject to applicable laws, the Committee has the full and final authority in its
discretion to establish rules and take all actions determined by the Committee to be necessary in the administration of the Incentive
Plan, including, without limitation, interpreting the terms of the Incentive Plan and any related documents, rules, or regulations and
deciding all questions of fact arising in their application. All decisions, determinations and interpretations of the Committee are final,
binding and conclusive on all persons, including the Company, its Subsidiaries, its stockholders, the Participants and their estates and
beneficiaries.
Awards. Within 90 days after the commencement of each fiscal year, the Committee shall select the Participants to whom Incentive
Compensation (an “Award”) may be paid under the Incentive Plan and establish in writing (i) an objective Performance Goal or Goals
for each Participant for the fiscal year based on one or more Performance Measures; (ii) the Award amounts to be paid to each Participant
to the extent the specified Performance Goal or Goals are achieved (the “Target Award”); and (iii) establish the method by which the
Target Award will be calculated.
Performance Measures. The Performance Goals established by the Committee for Participants are based on the relative achievement
of one or more Performance Measures. The following measures may be selected as 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.
Performance Period. The period for measurement of relative achievement of the Performance Goals under the Incentive Plan is the
Company’s fiscal year and in order to receive the Target Award, a Participant must be employed by the Company or a Subsidiary on
August 31 of the applicable fiscal year.
38
Maximum Award. The maximum Award that may be paid to any Participant under the Incentive Plan for any fiscal year is $2 million.
Committee Certification. As soon as practicable after the end of each fiscal year, the Committee will determine the amount of the
Awards to be paid to each Participant for the fiscal year based on the relative achievement of the Performance Goals established for
each Participant. The Committee must certify such determination in writing.
Payment of Awards. All Awards will be paid in cash. Awards shall be paid to Participants following the Committee’s certification no
later than ninety (90) days after the close of the fiscal year.
Non-Transferability of Awards. Unless otherwise determined by the Committee, an Award granted under the Incentive Plan may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner by any Participant. During the lifetime of the
Participant, payment of an Award shall only be made to such Participant. The Committee may, however, establish procedures necessary
for a Participant to designate a beneficiary to whom any amounts would be payable in the event of the Participant’s death.
Amendment and Termination. The Committee may at any time suspend, revise, amend or terminate the Incentive Plan, in whole or in
part, provided, however, that no amendment that requires stockholder approval in order to maintain qualification of the Awards as
performance-based compensation under Section 162(m) of the Code shall be made without such approval. If changes are made to
Section 162(m) of the Code or the related regulations that permit greater flexibility with respect to any Award, the Committee may
make adjustments to the Incentive Plan and/or Awards as it deems appropriate.
Benefits to Be Received Upon Stockholder Approval. If the Incentive Plan is approved by the Company’s stockholders, it will
be effective as of September 1, 2018 and Awards will be considered by the Committee for fiscal year 2019. Therefore, future
Awards under the Incentive Plan, if approved, cannot now be determined. The Company’s current Performance Incentive
Program applicable to all Company employees, including the NEOs, is implemented pursuant to the amended and restated
Performance Incentive Compensation Plan approved by the stockholders at the Company’s 2012 Annual Meeting of
Stockholders. The Company’s Performance Incentive Program is described in further detail above in the Compensation
Discussion and Analysis section under the heading, Performance Incentive Program. Information concerning Performance
Incentive Compensation awards granted to the NEOs for fiscal year 2017 is set forth in the table above under the heading, Grants
of Plan-Based Awards – Fiscal Year 2017.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the material U.S. federal income tax consequences associated with Awards granted under the
Incentive 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.
Participants will recognize ordinary income equal to the amount of the Award received in the year of receipt. That income will be
subject to applicable income and employment tax withholding by the Company. If and to the extent that the Incentive Plan payments
satisfy the requirements of Section 162(m) of the Code and otherwise satisfy the requirements of deductibility under federal income tax
law, the Company will receive a deduction for the amount constituting ordinary income to the Participant.
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 Incentive Plan. The persons designated in the form of proxy accompanying this Proxy Statement will vote your shares
FOR approval unless you include instructions to the contrary.
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE ”FOR” APPROVAL OF THE WD-40 COMPANY
2017 PERFORMANCE INCENTIVE COMPENSATION PLAN.
39
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, appointment and compensation 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,
2017. 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, 2017, 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, 2018.
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, 2017:
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, 2017, 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, 2017, 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, 2017, and the related consolidated statements of operations, of
shareholders’ equity, of comprehensive income and of cash flows for the fiscal year ended August 31, 2017; 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, 2017.
40
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, 2017.
PricewaterhouseCoopers LLP has been selected to serve as the Company’s independent registered public accounting firm for the
fiscal year ending August 31, 2018.
Audit Committee
Daniel T. Carter, Chair
Peter D. Bewley
Eric P. Etchart
Daniel E. Pittard
Neal E. Schmale
41
ITEM NO. 5
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 2018. 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
$935,112 for the year ended August 31, 2017 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.” Audit-related services billed
to the Company by PricewaterhouseCoopers LLP were $5,820 for the year ended August 31, 2017 and the fees were associated
with discussions, review and testing of certain information related to the adoption of Accounting Standard Update No. 2014-09,
“Revenue from Contracts with Customers”, which will be adopted by the Company in fiscal year 2019. Such fees billed to the
Company by PricewaterhouseCoopers LLP were $10,047 for the year ended August 31, 2016 and the services provided were
related to technical assistance in connection with the transition of the Company’s U.K. subsidiary to new U.K. generally accepted
accounting principles (“GAAP”).
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 $56,480 for the year ended
August 31, 2016, primarily in connection with international tax planning consulting services. No such fees were billed to the
Company by PricewaterhouseCoopers LLP for the year-ended August 31, 2017.
42
ALL OTHER FEES
Other fees for services provided by PricewaterhouseCoopers LLP for fiscal years 2017 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,
2017 and the year ended August 31, 2016.
STOCKHOLDER PROPOSALS
Stockholder proposals must be received by the Company no sooner than June 5, 2018 and not later than July 5, 2018 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 2018 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 2, 2017
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.
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APPENDIX A
WD-40 COMPANY
2017 PERFORMANCE INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of The WD-40 Company 2017 Performance Incentive Compensation Plan (the “Plan”) is to provide
an incentive for corporate officers and to recognize and reward those officers. The Company’s executive officers are eligible to
earn short-term incentive awards under this Plan.
2. Definitions. The following terms will have the following meaning for purposes of the Plan:
(a) “Award” means a bonus paid in Cash as provided for under Section 4(a) of the Plan.
(b) “Board” means the Board of Directors of the Company.
(c) “Code” means the Internal Revenue Code of 1986, as amended.
(d) “Committee” means the Compensation Committee of the Board, or such other Committee designated by the Board
to administer the Plan provided that the Committee shall consist of two or more persons, each of whom is an “outside director”
within the meaning of Section 162(m) of the Code.
(e) “Company” means WD-40 Company, a Delaware corporation.
(f) “Participant” means a corporate officer of the Company or a Subsidiary selected by the Committee to participate in
the Plan.
(g) “Performance Measure” means the following measures of performance: 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.
A Performance Measure may be applied by the Committee as a measure of the performance of any, all, or any
combination of the following: the Company, a Subsidiary, an operating segment, a division or other reporting unit of the
Company or a Subsidiary, or of one or more brands or product lines of the Company or a Subsidiary.
(h) “Performance Goal(s)” means the goal or goals established for a Participant by the Committee in accordance with
Section 4(a).
(i) “Stock” means the Company’s $.001 par value common stock.
(j) “Subsidiary” means any corporation in which the Company, directly or indirectly, controls 50 percent or more of
the total combined voting power of all classes of stock.
(k) “Target Award” means the maximum amount of the Award established for each Participant by the Committee in
accordance with Section 4(a).
(l) “Year” means a fiscal year of the Company commencing on September 1.
3. Term. The Plan shall be effective for as of September 1, 2018 and shall continue until August 31, 2023 unless re-approved
by the Company’s stockholders or unless amended or terminated pursuant to Section 9 hereof.
i
4. Awards.
(a) Within 90 days after the beginning of each Year, the Committee will select Participants for the Year and establish
in writing (i) an objective Performance Goal or Goals for each Participant for that Year based on one or more of the Performance
Measures, (ii) the specific Award amounts that will be paid to each Participant to the extent his or her Performance Goal or Goals
are achieved (the “Target Award”) and (iii) the method by which such amounts will be calculated. The Target Award may
provide for payment of all or part of the Target Award in the case of retirement, death, disability or change of ownership of
control of the Company or a Subsidiary during the Year, but only to the extent that the Target Award would otherwise be payable
to the Participant based on the achievement of the Performance Goal(s) for the Participant for such Year.
(b) The maximum Award that may be paid to any Participant under the Plan for any Year will be $2 million.
(c) The Committee may reduce or eliminate, but may not increase, any Award calculated under the methodology
established in accordance with subsection (a) in order to reflect additional considerations relating to performance.
(d) As soon as practicable following each Year while the Plan is in effect, the Committee shall determine and certify,
for each Participant, the extent to which the Performance Goal or Goals have been met and the amount of the Award, if any, to
be made. Awards will be paid to the Participants following such certification by the Committee and no later than ninety (90) days
following the close of the Year with respect to which the Awards are made.
(e) The Company shall withhold from the payment of any Award hereunder any amount required to be withheld for
taxes.
5. Termination of Employment. Except as may be specifically provided in an Award pursuant to Section 4(a), a Participant shall
have no right to an Award under the Plan for any Year in which the Participant is not actively employed by the Company or its
Subsidiaries on August 31 of such Year. In establishing Target Awards, the Committee may also provide that in the event a
Participant is not employed by the Company or its Subsidiaries on the date on which the Committee certifies the amount of the
Award, the Participant may forfeit his or her right to the Award to be paid under the Plan.
6. Administration. The Plan will be administered by the Committee. The Committee will have the authority to interpret the Plan,
to prescribe rules relating to the Plan and to make all determinations necessary or advisable in administering the Plan. Decisions
of the Committee with respect to the Plan will be final and conclusive.
7. Unfunded Plan. Awards under the Plan will be paid from the general assets of the Company, and the rights of Participants
under the Plan will be only those of general unsecured creditors of the Company.
8. Code Section 162(m). It is the intent of the Company that all Awards under the Plan qualify as performance-based
compensation for purposes of Code Section 162(m)(4)(C) so that the Company’s tax deduction for such Awards is not disallowed
in whole or in part under Code Section 162(m). The Plan is to be applied and interpreted accordingly.
9. Amendment or Termination of the Plan. The Committee may from time to time suspend, revise, amend or terminate the Plan;
provided that any such amendment or revision which requires approval of the Company’s stockholders in order to maintain the
qualification of Awards as performance-based compensation pursuant to Code Section 162(m)(4)(C) shall not be made without
such approval.
10. Applicable Law. The Plan will be governed by the laws of California.
11. No Rights to Employment. Nothing contained in the Plan shall give any person the right to be retained in the employment
of the Company or any of its Subsidiaries. Subject to any employment agreement or other contract between the Company and a
Participant, the Company reserves the right to terminate the employment of any Participant at any time for any reason
notwithstanding the existence of the Plan.
12. No Assignment. Except as otherwise required by applicable law, any interest, benefit, payment, claim or right of any
Participant under the Plan shall not be sold, transferred, assigned, pledged, encumbered or hypothecated by any Participant and
shall not be subject in any manner to any claims of any creditor of any Participant or beneficiary, and any attempt to take any
such action shall be null and void. During the lifetime of any Participant, payment of an Award shall only be made to such
Participant. Notwithstanding the foregoing, the Committee may establish such procedures as it deems necessary for a Participant
to designate a beneficiary to whom any amounts would be payable in the event of any Participant’s death.
13. Stockholder Approval. This Plan shall be approved by a vote of the stockholders of the Company at the 2017 Annual
Meeting.
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ANNUAL REPORT ON FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended August 31, 2017
or
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)
9715 Businesspark Avenue, San Diego, California
(Address of principal executive offices)
95-1797918
(I.R.S. Employer
Identification No.)
92131
(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 No
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 No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes No
Indicate by check mark 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.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated
filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
The aggregate market value (closing price) of the voting stock held by non-affiliates of the registrant as of February 28, 2017
was approximately $1,490,334,448.
As of October 18, 2017, there were 13,964,343 shares of the registrant’s common stock outstanding.
The Proxy Statement for the annual meeting of stockholders on December 12, 2017 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, 2017
TABLE OF CONTENTS
PART I
Page
Business
Item 1.
Item 1A. Risk Factors
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
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART IV
1
5
14
14
14
14
16
17
17
39
40
40
40
41
41
41
42
42
42
43
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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 that 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 its 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 principal driver of the Company’s growth continues to be taking the Company’s flagship product, WD-40 Multi-Use Product,
to new users in global markets. 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 EZ Reach
Flexible Straw, WD-40 Smart Straw®, WD-40 Trigger Pro®, WD-40 Specialist®, WD-40 Bike™, and 3-IN-ONE Professional
Garage Door Lube™.
1
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:
Americas segment consists of the United States (“U.S.”), Canada and Latin America;
Europe, Middle East and Africa (“EMEA”) segment consists of countries in Europe, the Middle East, Africa and India;
and
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 operating segment 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 product is the WD-40 Multi-Use Product in the blue and yellow can with the red top, which 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 in many countries among multi-purpose
maintenance products and is sold as an aerosol spray with various unique delivery systems, a non-aerosol trigger spray and in
liquid-bulk 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 Specialist product line – WD-40 Specialist consists of a line of professional-grade specialty maintenance products that
include penetrants, degreasers, corrosion inhibitors, greases, lubricants and rust removers that are aimed at professionals as well
as 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 the United States and Europe, WD-40 Specialist Lawn and Garden in Australia, and WD-40 Specialist
Automotive in Asia.
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 drip lubricants, chain cleaners and 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 select distributors and retailers in countries where the Company sells this product.
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 professional-grade maintenance products, as
well as 3-IN-ONE RVcare products and 3-IN-ONE Garage Door Lubricant. The high quality of the 3-IN-ONE brand and its
2
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. 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:
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.
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.
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, mass, and value 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.
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.
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.
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.
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
3
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.
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.
Sources and Availability of Components and Raw Materials
The Company and its third-party contract manufacturers rely 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 primary components and raw
materials for the Company’s products 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 $8.4 million, $7.7 million, and $9.0
million in fiscal years 2017, 2016 and 2015, respectively. None of this research and development activity was customer-
sponsored.
Order Backlog
Order backlog is not a significant factor in the Company’s business.
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.
4
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, 2017, the Company employed 448 people worldwide: 172 by the U.S. parent corporation; 7 by the Malaysia
subsidiary; 12 by the Canada subsidiary; 183 by the U.K. subsidiary; 20 by the Australia subsidiary; 52 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 people. The Company’s future performance depends in
significant part on maintaining high levels of employee engagement and nurturing the Company’s values and culture. In addition,
it depends on the continued service of its executive officers, key employees and other talented people, as well as effective
succession planning. The loss of the services of key employees could have a material adverse effect on the Company’s business
and prospects. Competition for such talent is intense, and there can be no assurance that the Company can retain its key employees
or attract, assimilate and retain employees who are fully engaged 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.
5
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 61% of consolidated net sales in fiscal year 2017 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:
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 and compliance with 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 39% of the Company’s revenues in fiscal year 2017 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 net assets 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.
As a result of the June 2016 referendum by British voters to exit the European Union (“Brexit”), global markets and foreign
currencies were adversely impacted in the months following the vote. In particular, the value of the Pound Sterling sharply
declined as compared to the U.S. Dollar and other currencies in late fiscal year 2016 and early fiscal year 2017. Subsequently,
on March 29, 2017, the U.K. invoked Article 50 of the Lisbon Treaty, which provides a two-year time period through March
2019 for the U.K. and the remaining EU countries to negotiate a withdrawal agreement. The volatility in foreign currencies may
continue as the U.K. negotiates and executes its impending exit from the European Union, but it is uncertain over what time
period the volatility in foreign currencies as a result of this event 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. In
addition, the legal and regulatory framework that will apply to the U.K. and its future relationship with the European Union after
the exit is completed may change the manner in which businesses operate in Europe, including how products and services are
imported and exported between countries in Europe, and this could adversely impact the Company’s financial condition and
results of operations. The outcomes of the negotiations between the U.K. and the European Union are currently unknown and
due to the lack of comparable precedent, the extent of any adverse consequences to the Company’s business is uncertain.
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.
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 prevalent. 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.
6
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, including the release of new products or innovative packaging, 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 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 in new markets by making targeted end users aware of the Company’s products and making them easier to buy, (iii) drive
growth within its existing markets through innovation, renovation and enhanced merchandising and marketing of its established
brands, and (iv) capture market share from its competitors. It is more difficult for the Company to achieve sales volume growth
in developed 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, the continued prominence and growth of the online retail sales channel has presented both the Company and its
customers that sell the Company’s products online with the challenge of balancing online and physical store retailing methods.
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 emerging and developing markets and sales channels globally, the Company may not achieve its sales volume growth
objectives.
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.
7
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, trade channels, and industrial segments 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.
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
8
upon the Company’s operations. These laws and regulations also impose strict, retroactive and joint and several liability for the
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 the Company’s suppliers. Various regulations affect the packaging, labelling
and shipment of the Company’s 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. Failure by the Company to comply with any of these regulations or its inability to adequately predict the
manner in which these regulations are interpreted and applied to the Company’s business by the applicable enforcement agencies
could have a materially adverse effect on the Company’s business, 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. This system supports two other regional offices outside the U.S. as well. 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.
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, trade supply 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 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 consolidations
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 2017. However,
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,
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
10
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 end user needs and 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.
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 are implemented. There is a risk that changes in such marketing distributor relationships, including
11
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
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.
12
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, which is 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, 2017,
the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on $137.5 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. such as the fiscal year 2016 repatriation of $8.2 million
discussed in Note 12 – Income Taxes, or if the U.S. international tax rules change as part of comprehensive tax reform or other
tax legislations.
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 fiscal year 2017 to fund the
purchase of and improvements to its new San Diego office building, which houses 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 2016, the Board of Directors declared a 17% increase in the regular quarterly cash dividend, increasing it from
$0.42 per share to $0.49 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.
The Company’s business development activities may not be successful.
The Company may 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.
13
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Americas
The Company owns and occupies an office located at 9715 Businesspark Avenue, San Diego, California 92131, which was
purchased in September 2016. The buildout of this new office building and facilities was completed in late fiscal year 2017.
Corporate employees and employees in the Company’s Americas segment transitioned to this location during August 2017 from
the previous location at 1061 Cudahy Place, San Diego, California 92110, which the Company still owns and utilizes as a plant
facility. 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, 2017:
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
Steven A. Brass
61 1997
66 2008
64 2012
62 2014
64 2016
55 1997
59 1996
51 2016
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
Chief Strategy Officer
Managing Director, Asia-Pacific
Managing Director, EMEA
Division President, The Americas
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. He then served as Division President, The Americas, from 2002 until 2016 when he was appointed to his current position
as Chief Strategy Officer.
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.
Mr. Brass joined the Company in 1991 as International Area Manager at the Company’s U.K. subsidiary and has since held
several management positions including Country Manager in Germany, Director of Continental Europe, European Sales Director,
and most recently European Commercial Director prior to his promotion to Division President, The Americas, in 2016.
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
121.10
119.90
113.25
114.10
$
$
$
$
Fiscal Year 2017
Low
101.35
100.65
100.60
103.80
$
$
$
$
Dividend
$
$
$
$
0.42
0.49
0.49
0.49
High
101.00
109.37
111.99
125.00
$
$
$
$
Fiscal Year 2016
Low
81.68
94.00
99.32
109.58
$
$
$
$
Dividend
$
$
$
$
0.38
0.42
0.42
0.42
On October 18, 2017, the last reported sales price of the Company’s common stock on the NASDAQ Global Select Market was
$114.70 per share, and there were 13,964,343 shares of common stock outstanding held by approximately 680 holders of record.
Dividends
The Company has historically paid regular quarterly cash dividends on its common stock. In December 2016, the Board of
Directors declared a 17% increase in the regular quarterly cash dividend, increasing it from $0.42 per share to $0.49 per share.
On October 10, 2017, the Company’s Board of Directors declared a cash dividend of $0.49 per share payable on October 31,
2017 to shareholders of record on October 20, 2017.
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 June 21, 2016, the Company’s Board of Directors approved a share buy-back plan. Under the plan, which became effective
on September 1, 2016, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31,
2018. The timing and amount of repurchases are 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 September 1, 2016 through August 31, 2017, the Company repurchased 290,573 shares at a total cost of $31.1
million under this $75.0 million plan.
The following table provides information with respect to all purchases made by the Company during the three months ended
August 31, 2017. All purchases listed below were made in the open market at prevailing market prices. Purchase transactions
between June 1, 2017 and July 13, 2017 were executed pursuant to trading plans adopted by the Company pursuant to Rule 10b5-
1 under the Securities Exchange Act of 1934, as amended.
Period
June 1 - June 30
July 1 - July 31
August 1 - August 31
Total
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
12,200
9,500
23,900
45,600
$
$
$
47,430,543
46,408,333
43,890,766
Average
Price Paid
Per Share
109.96
107.58
105.32
107.03
Total
Number of
Shares
Purchased
12,200
9,500
23,900
45,600
$
$
$
$
16
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 (expense) income, 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
As of and for the Fiscal Year Ended August 31,
2017
$ 380,506
166,621
213,885
137,976
75,909
(1,287)
74,622
21,692
52,930
$
2016
$ 380,670
166,301
214,369
143,021
71,348
1,441
72,789
20,161
52,628
$
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
$
$
$
$
3.73
3.72
1.89
$
$
$
3.65
3.64
1.64
$
$
$
3.05
3.04
1.48
$
$
$
2.89
2.87
1.33
$
$
$
2.55
2.54
1.22
14,123
$ 369,717
14,379
$ 339,668
14,649
$ 339,257
15,148
$ 347,680
15,619
$ 323,064
Long-term obligations (1)
$ 154,907
$ 140,579
$ 133,427
$
26,354
$
25,912
(1) Long-term obligations include long-term debt, deferred tax liabilities, net and other long-term liabilities.
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.
17
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 that 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, 2017:
Consolidated net sales decreased $0.2 million for fiscal year 2017 compared to the prior fiscal year. Changes in foreign
currency exchange rates had an unfavorable impact of $19.1 million on consolidated net sales for fiscal year 2017.
Thus, on a constant currency basis, net sales would have increased by $18.9 million, or 5%, for fiscal year 2017
compared to the prior fiscal year. This unfavorable impact from changes in foreign currency exchange rates mainly
came from our EMEA segment, which accounted for 36% of our consolidated sales for the fiscal year ended August 31,
2017.
Consolidated net sales for the WD-40 Specialist product line were $25.8 million which is a 20% increase for fiscal year
2017 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.
Gross profit as a percentage of net sales decreased to 56.2% for fiscal year 2017 compared to 56.3% for the prior fiscal
year.
Consolidated net income increased $0.3 million, or 1%, for fiscal year 2017 compared to the prior fiscal year. Changes
in foreign currency exchange rates had an unfavorable impact of $3.5 million on consolidated net income for fiscal
year 2017. Thus, on a constant currency basis, net income would have increased by $3.8 million, or 7%, for fiscal year
2017 compared to the prior fiscal year.
Diluted earnings per common share for fiscal year 2017 were $3.72 versus $3.64 in the prior fiscal year.
Share repurchases were executed under our current $75.0 million share buy-back plan, which was approved by the
Company’s Board of Directors in June 2016 and became effective on September 1, 2016. During the period from
September 1, 2016 through August 31, 2017, the Company repurchased 290,573 shares at an average price of $107.04
per share, for a total cost of $31.1 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.
18
Results of Operations
Fiscal Year Ended August 31, 2017 Compared to Fiscal Year Ended August 31, 2016
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
2017
2016
Dollars
Percent
$
$
$
$
342,295
38,211
380,506
166,621
213,885
137,976
75,909
52,930
3.72
$
$
$
$
339,974
40,696
380,670
166,301
214,369
143,021
71,348
52,628
3.64
$
$
$
$
2,321
(2,485)
(164)
320
(484)
(5,045)
4,561
302
0.08
1%
(6)%
-
-
-
(4)%
6%
1%
2%
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):
Americas
EMEA
Asia-Pacific
Total
Fiscal Year Ended August 31,
Change from
Prior Year
2017
2016
Dollars
Percent
$
184,929
$
191,397
$
(6,468)
136,771
58,806
380,506
135,235
54,038
380,670
$
$
$
1,536
4,768
(164)
(3)%
1%
9%
-
19
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
$
$
2017
159,167
25,762
184,929
49%
$
$
2016
163,655
27,742
191,397
50%
Change from
Prior Year
Dollars
Percent
$
$
(4,488)
(1,980)
(6,468)
(3)%
(7)%
(3)%
Sales in the Americas segment, which includes the U.S., Canada and Latin America, decreased to $184.9 million, down $6.5
million, or 3%, for the fiscal year ended August 31, 2017 compared to the prior fiscal year. Changes in foreign currency exchange
rates did not have a material impact on sales for the Americas segment from period to period.
Sales of maintenance products in the Americas segment decreased $4.5 million, or 3%, for the fiscal year ended August 31, 2017
compared to the prior fiscal year. This sales decrease was mainly driven by lower sales of maintenance products in the U.S.,
which declined 5% from period to period. This decline in sales from period to period was primarily due to decreased sales
associated with a lower level of promotional activities and the timing of customer orders for the WD-40 Multi-Use Product. This
lower level of sales in the U.S. was also attributable to efforts of certain of our customers in late fiscal year 2017 to more closely
manage their inventory levels. The sales decrease of maintenance products in the U.S. was partially offset by increased sales of
such products in Canada and Latin America, which increased 10% and 4%, respectively, from period to period. The sales increase
in Canada was primarily due to added distribution of the WD-40 Bike product as well as higher sales due to successful
promotional programs, which was partially driven by improving market and economic conditions, including those within the
industrial channel in Western Canada as a result of increased activity levels in the oil industry. The sales increase in Latin America
was primarily due to improved economic conditions in Puerto Rico in fiscal year 2017 compared to the prior fiscal year, as well
as new distribution and successful promotional programs in several countries in South America. Although sales in Puerto Rico
may decline in future periods during hurricane-related recovery efforts in response to Hurricane Maria, which made landfall in
Puerto Rico in September 2017, sales in Puerto Rico are not material to the overall sales of the Company. The overall decrease
in sales of WD-40 Multi-Use Product in the Americas segment was partially offset by higher sales of the WD-40 Specialist
product line, which were up $1.5 million, or 13%, from period to period due to new distribution, particularly of certain new
products within this product line during fiscal year 2017.
Sales of homecare and cleaning products in the Americas segment decreased $2.0 million, or 7%, for the fiscal year ended August
31, 2017 compared to the prior fiscal year. This sales decrease was driven primarily by a decrease in sales of the X-14, Spot Shot
and Lava brand products in the U.S., which were down 13%, 9% and 9%, respectively, 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 promotional programs with certain of our customers, particularly those in the warehouse club and mass
retail channels.
For the Americas segment, 81% of sales came from the U.S., and 19% of sales came from Canada and Latin America combined
for the fiscal year ended August 31, 2017 compared to the prior fiscal year when 83% of sales came from the U.S., and 17%
of sales came from Canada and Latin America combined.
20
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
$
$
2017
131,562
5,209
136,771
36%
$
$
2016
129,217
6,018
135,235
36%
Change from
Prior Year
Dollars
Percent
$
$
2,345
(809)
1,536
2%
(13)%
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, increased to $136.8 million, up $1.5
million, or 1%, for the fiscal year ended August 31, 2017 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, 2017 translated at the exchange rates in effect for the prior fiscal year would have been $155.9 million in the EMEA segment.
Thus, on a constant currency basis, sales would have increased by $20.6 million, or 15%, for the fiscal year ended August 31,
2017 compared to the prior fiscal year.
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 the direct markets increased $1.3 million, or 1%, for the fiscal year ended August 31, 2017
compared to fiscal year 2016. 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 15%
from fiscal year 2017 compared to the prior fiscal year.
We experienced sales increases throughout most of the EMEA direct markets for the fiscal year ended August 31, 2017 compared
to the prior fiscal year primarily due to a sales increase of $3.5 million, or 6%, in the Euro-based direct markets as a result of
continued growth of the base business and higher sales of WD-40 Specialist. Sales of WD-40 Specialist in the Euro-based direct
markets increased $1.6 million, or 36%, from period to period as a result of expanded distribution in most markets, but
particularly in France. Although sales in the Euro-based direct markets also benefited from the strengthening of the Euro against
the Pound Sterling, the functional currency of our U.K. subsidiary, they were impacted in the opposite direction by approximately
the same amount due the weakening of the Pound Sterling against the U.S. Dollar from period to period. The sales increase in
the Euro-based direct markets was partially offset by a sales decrease in the U.K. of $2.2 million, or 8%, as a result of the
unfavorable impacts of changes in foreign currency exchange rates, specifically the Pound Sterling against the U.S. Dollar. In
functional currency, sales in the U.K. increased by 4% primarily due to a favorable shift in product mix within the WD-40 Multi-
Use Product from period to period. Sales from direct markets accounted for 65% of the EMEA segment’s sales for the fiscal year
ended August 31, 2017 compared to 66% 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 increased $0.2 million, or 1%, for the fiscal year ended August 31, 2017
compared to the prior fiscal year primarily due increased sales of WD-40 Multi-Use Product in the Eastern Europe and India.
Overall, sales in the distributor markets were increased from period to period primarily due to the continued growth of the base
business in key markets. The distributor markets accounted for 35% of the EMEA segment’s total sales for the fiscal year ended
August 31, 2017, compared to 34% for the prior fiscal year.
21
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
2017
2016
Dollars
Percent
$
$
51,567
7,239
58,806
15%
$
$
47,102
6,936
54,038
14%
$
$
4,465
303
4,768
9%
4%
9%
Sales in the Asia-Pacific segment, which includes Australia, China and other countries in the Asia region, increased to $58.8
million, up $4.8 million, or 9%, for the fiscal year ended August 31, 2017 compared to the prior fiscal year. Although changes
in foreign currency exchange rates did not have a material impact on sales in the Asia-Pacific segment from period to period,
fluctuations in foreign currency exchange rates impacted sales in both China and Australia.
Sales in Asia, which represented 70% of the total sales in the Asia-Pacific segment, increased $3.7 million, or 10%, for the fiscal
year ended August 31, 2017 compared to the prior fiscal year. Sales in the Asia distributor markets increased $2.2 million, or
9%, primarily attributable to successful promotional programs and expanded distribution in the Asian distributor markets,
particularly those in the Philippines, Bangladesh and Malaysia, from period to period. Sales in China increased $1.5 million, or
11%, for the fiscal year ended August 31, 2017 compared to the prior fiscal year. Changes in foreign currency exchange rates
had an unfavorable impact on sales in China. On a constant currency basis, sales would have increased by 16% from period to
period primarily due to new distribution and continued growth in sales to our largest customers throughout China.
Sales in Australia increased by $1.1 million, or 6%, for the fiscal year ended August 31, 2017 compared to the prior fiscal year.
Changes in foreign currency exchange rates had a favorable impact on Australia sales. On a constant currency basis, sales would
have increased by 2% for the fiscal year ended August 31, 2017 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 decreased to $213.9 million for the fiscal year ended August 31, 2017 compared to $214.4 million for the prior fiscal
year. As a percentage of net sales, gross profit decreased to 56.2% for the fiscal year ended August 31, 2017 compared to 56.3%
for the prior fiscal year.
Gross margin was negatively impacted by 1.0 percentage points from period to period due to unfavorable net changes in the costs
of petroleum-based specialty chemicals and aerosol cans, primarily in our EMEA segment. The unfavorable impacts in our
EMEA segment were primarily due to increased costs of petroleum-based specialty chemicals from period to period. While the
costs of petroleum-based specialty chemicals for our EMEA segment are sourced in Pound Sterling, the underlying inputs
are denominated in U.S. Dollars. As a result, the overall strengthening of the U.S. Dollar against the Pound Sterling from period
to period resulted in a significant increase in cost of goods in Pound Sterling. 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. Due to the volatility of
the price of crude oil, it is uncertain the level to which gross margin will be impacted by such costs in future periods. In addition,
the combined effects of unfavorable sales mix changes and other miscellaneous costs negatively impacted gross margin by 0.4
percentage points primarily due to an unfavorable shift in product mix as a result of a higher portion of sales in the Americas
segment being made to lower margin maintenance products from period to period. Gross margin was also negatively impacted
by 0.1 percentage points from period to period primarily due to higher warehousing and in-bound freight costs in the Americas
segment.
These unfavorable impacts to gross margin were almost completely offset by changes in foreign currency exchange rates,
which positively impacted gross margin by 1.3 percentage points due to the fluctuations in the exchange rates for both 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. In addition, sales price increases
22
in the EMEA segment over the last twelve months also positively impacted gross margin by 0.1 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 $16.4 million and
$16.1 million for the fiscal years ended August 31, 2017 and 2016, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the fiscal year ended August 31, 2017 decreased $3.2 million to
$114.6 million from $117.8 million for the prior fiscal year. As a percentage of net sales, SG&A expenses decreased to 30.1%
for the fiscal year ended August 31, 2017 from 30.9% for the prior fiscal year. The decrease in SG&A expenses was primarily
attributable to favorable impacts due to changes in foreign currency exchange rates and lower employee-related costs from period
to period. Changes in foreign currency exchange rates had a favorable impact of $5.4 million on SG&A expenses for the fiscal
year ended August 31, 2017 compared to the prior fiscal year. Employee-related costs, which include salaries, incentive
compensation, profit sharing, stock-based compensation and other fringe benefits, decreased by $2.7 million primarily due to
lower earned incentive compensation, which was partially offset by increased headcount and higher stock-based compensation
expense from period to period. The increase in stock-based compensation expense was due to the acceleration of expense of $0.8
million for certain equity awards granted during the first quarter of fiscal year 2017 under updated equity award agreements that
include expanded accelerated vesting provisions in the event of retirement of the award recipients. These decreases were partially
offset by increased costs associated with freight, professional services, travel and meetings, general office overhead and
depreciation, and other miscellaneous expenses from period to period. Freight costs associated with shipping products to our
customers increased $1.3 million primarily due to higher sales volumes in the EMEA segment from period to period as well as
the unfavorable impact from changes in foreign currency exchange rates in our Euro-based direct markets from period to
period. Professional services costs increased $1.1 million due to increased use of such services from period to period, primarily
in the Americas and EMEA segments. Travel and meeting expenses increased $0.9 million due to a higher level of travel expenses
associated with various sales meetings and activities in support of our strategic initiatives. In addition, general office overhead
and depreciation expense increased $0.7 million primarily due to higher rent expense for certain offices that the Company leases
as well as higher depreciation expense, primarily in the EMEA segment. Other miscellaneous expenses, the largest of which
were related to sales commissions and research and development costs, increased by $0.9 million for the fiscal year ended August
31, 2017 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, 2017 and 2016 were $8.4 million and $7.7 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 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, 2017 decreased $1.8 million to $20.5 million from
$22.3 million for the prior fiscal year. As a percentage of net sales, these expenses decreased to 5.4% for the fiscal year ended
August 31, 2017 from 5.9% for the prior fiscal year. Changes in foreign currency exchange rates had a favorable impact on such
expenses of $1.1 million from period to period. Thus, on a constant currency basis, advertising and sales promotion expenses for
fiscal year 2017 would have decreased by $0.7 million, primarily due to a lower level of promotional programs and marketing
support in the Americas segment from period to period. Investment in global advertising and sales promotion expenses for fiscal
year 2018 is expected to be near 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 $17.5 million and $16.1 million for the fiscal years ended August 31, 2017 and 2016, respectively. Therefore, our
total investment in advertising and sales promotion activities totaled $38.0 million and $38.4 million for the fiscal years ended
August 31, 2017 and 2016, respectively.
23
Amortization of Definite-lived Intangible Assets Expense
Amortization of our definite-lived intangible assets remained relatively constant at $2.9 million and $3.0 million for the fiscal
years ended August 31, 2017 and 2016, respectively.
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
2017
2016
Dollars
Percent
$
48,303
$
48,404
$
35,389
16,765
(24,548)
75,909
31,702
15,162
(23,920)
71,348
$
$
$
(101)
3,687
1,603
(628)
4,561
-
12%
11%
3%
6%
(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 decreased to $48.3 million, down $0.1 million, for the fiscal year ended August
31, 2017 compared to the prior fiscal year, primarily due to a $6.5 million decrease in sales and a lower gross margin, which
were almost completely offset by lower operating expenses. As a percentage of net sales, gross profit for the Americas segment
decreased from 55.1% to 54.4% period over period. This decrease in the gross margin was primarily due to the negative impacts
of unfavorable sales mix changes as well as higher warehousing and in-bound freight costs from period to period. These
unfavorable impacts were partially offset by the combined positive impacts of decreased costs of petroleum-based specialty
chemicals and aerosol cans as well as a lower level of advertising, promotional and other discounts that we gave to our customers
from period to period. Operating expenses decreased $4.8 million period over period due to lower employee-related expenses,
primarily those associated with earned incentive compensation, and decreased advertising and sales promotion expenses from
period to period. Operating income as a percentage of net sales increased from 25.3% to 26.1% period over period.
EMEA
Income from operations for the EMEA segment increased to $35.4 million, up $3.7 million, or 12%, for the fiscal year ended
August 31, 2017 compared to the prior fiscal year, primarily due to a higher gross margin, lower operating expenses and a $1.5
million increase in sales. As a percentage of net sales, gross profit for the EMEA segment increased from 58.7% to 59.6% period
over period primarily due to the combined positive impacts of favorable fluctuations in foreign currency exchange rates and sales
mix changes, which were partially offset by the negative impacts of increased costs of petroleum-based specialty chemicals and
aerosol cans from period to period. Operating expenses decreased $1.6 million primarily due to the favorable impacts of
fluctuations in foreign currency exchange rates and lower earned incentive compensation expense, which were partially offset
by increased headcount and other employee-related expenses from period to period. Operating income as a percentage of net
sales increased from 23.4% to 25.9% period over period.
Asia-Pacific
Income from operations for the Asia-Pacific segment increased to $16.8 million, up $1.6 million, or 11%, for the fiscal year
ended August 31, 2017 compared to the prior fiscal year, primarily due to a $4.8 million increase in sales, which was partially
offset by a lower gross margin and an increase in operating expenses. As a percentage of net sales, gross profit for the Asia-
Pacific segment decreased from 54.8% to 54.2% period over period due to the combined negative impacts of increased costs of
petroleum-based specialty chemicals and aerosol cans as well a higher level of advertising, promotional and other discounts that
we gave to our customers from period to period. Operating expenses increased $0.7 million period over period primarily due
to higher employee-related expenses and information systems support costs. Operating income as a percentage of net sales
increased from 28.1% to 28.5% period over period.
24
Non-Operating Items
The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):
Interest income
Interest expense
Other income
Provision for income taxes
Interest Income
Fiscal Year Ended August 31,
2017
2016
Change
$
$
$
$
508
2,582
787
21,692
$
$
$
$
683
1,703
2,461
20,161
$
$
$
$
(175)
879
(1,674)
1,531
Interest income remained relatively constant for the fiscal year ended August 31, 2017 compared to the prior fiscal year.
Interest Expense
Interest expense increased $0.9 million for the fiscal year ended August 31, 2017 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
Other income decreased by $1.7 million for the fiscal year ended August 31, 2017 compared to the prior fiscal year primarily
due to lower net foreign currency exchange gains from period to period. This significant decrease in foreign currency exchange
gains was primarily due to the relative movement in foreign currency exchange rates and the fluctuation of non-functional
currency balance sheet accounts, particularly those associated with our UK subsidiary, during the fiscal year ended August 31,
2017 compared to the prior fiscal year.
Provision for Income Taxes
The provision for income taxes was 29.1% of income before income taxes for the fiscal year ended August 31, 2017 compared
to 27.7% for the prior fiscal year. The increase in the effective income tax rate from period to period was primarily driven by an
immaterial out-of-period correction that we recorded in the second quarter of fiscal year 2017 associated with the tax impacts
from certain unrealized foreign currency exchange losses.
Net Income
Net income was $52.9 million, or $3.72 per common share on a fully diluted basis, for fiscal year 2017 compared to $52.6
million, or $3.64 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 $3.5 million on net income for fiscal year 2017. Thus, on a constant currency basis,
net income for fiscal year 2017 would have been $56.4 million.
25
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):
Americas
EMEA
Asia-Pacific
Total
Fiscal Year Ended August 31,
Change from
Prior Year
2016
2015
Dollars
Percent
$
191,397
$
187,344
$
135,235
54,038
380,670
136,847
53,959
378,150
$
$
$
4,053
(1,612)
79
2,520
2%
(1)%
-
1%
26
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 fiscal year 2015. 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
August 31, 2016 translated at the exchange rates in effect for fiscal year 2015 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%, for the fiscal year ended August
31, 2016 compared to fiscal year 2015.
Sales of maintenance products in the Americas segment increased $6.7 million, or 4%, for the fiscal year ended August 31, 2016
compared to fiscal year 2015. 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 WD-40 EZ
Reach Flexible Straw product, which was launched in late fiscal year 2015. 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 fiscal year 2015. 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.
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 fiscal year 2015 when 82% of sales came from the U.S., and 18% of sales
came from Canada and Latin America combined.
27
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 fiscal year 2015. 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 fiscal year 2015 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 fiscal year 2015.
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 fiscal year 2015. 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 fiscal year 2015.
We experienced sales increases throughout most of the EMEA direct markets for the fiscal year ended August 31, 2016 compared
to fiscal year 2015, 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%, from period to period. 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 fiscal year 2015.
28
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 fiscal year 2015 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 began to
stabilize in fiscal year 2016, our sales did not return in fiscal year 2016 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 fiscal year 2015.
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 fiscal year 2015 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 fiscal year 2015.
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 fiscal year 2015. 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, 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 fiscal year 2015.
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 fiscal year 2015 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 fiscal year
2015. 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 fiscal year 2015.
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 fiscal year
2015, thus resulting in positive impacts to our gross margin from period to period. 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
29
primarily due to sales price increases implemented in the EMEA and Asia-Pacific segments in fiscal year 2016. 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 fiscal year 2015. 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 fiscal year 2015. 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
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 fiscal year 2015.
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 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 fiscal year 2015. As a percentage of net sales, these expenses decreased to 5.9% for the fiscal year ended August
31, 2016 from 6.0% for fiscal year 2015. 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.
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.
30
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
$
46,674
$
31,702
15,162
(23,920)
71,348
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 fiscal year 2015, 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 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 fiscal year 2015, 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 23.4% 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 fiscal year 2015, 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.
31
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 fiscal year 2015.
Interest Expense
Interest expense increased $0.5 million for the fiscal year ended August 31, 2016 compared to fiscal year 2015 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 fiscal year 2015
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 fiscal year 2015 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.
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 fiscal year 2015. 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 fiscal year 2015. 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.
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. We target our gross margin to be above 55% of net sales, our cost of doing business to be at or
below 30% of net sales, and our EBITDA to be above 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,
2017
2016
2015
56%
35%
22%
56%
36%
21%
53%
34%
19%
(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):
2017
137,976
(2,879)
(2,789)
132,308
380,506
35%
$
Fiscal Year Ended August 31,
2016
143,021
(2,976)
(2,744)
137,301
380,670
36%
$
$
$
$
$
2015
134,788
(3,039)
(2,664)
129,085
378,150
34%
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
$
$
$
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
2017
Fiscal Year Ended August 31,
2016
2015
$
$
$
52,930
21,692
(508)
2,582
2,879
3,890
83,465
380,506
22%
$
$
$
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%
The Company’s financial condition and liquidity remain strong. Net cash provided by operations was $52.3 million for fiscal
year 2017 compared to $60.6 million for fiscal year 2016. 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 to fund the purchase and
buildout of its new headquarters office, which was purchased in September 2016 and completed in August 2017. The new office
building houses both corporate employees and employees in the Company’s Americas segment.
During the fiscal year ended August 31, 2017, we had net new borrowings of $32.0 million U.S. dollars under the revolving
credit facility. We regularly convert the vast majority of our draws on our line of credit to new draws with new maturity dates
and interest rates. As of August 31, 2017, we had a $154.0 million outstanding balance on the revolving credit facility, of which
$134.0 million was classified as long-term and $20.0 million was classified as short-term. 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, 2017, 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, 2017, we had a total of $117.2 million in cash and cash equivalents and short-term investments. Of this balance,
$114.0 million was held in Europe, Australia and China in foreign currencies. It is our intention to indefinitely reinvest the
cumulative unremitted earnings at these locations in order to ensure sufficient working capital, expand operations and fund
foreign acquisitions in these locations. 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. 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.
34
We believe that our existing consolidated cash and cash equivalents at August 31, 2017, 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 in cash and cash equivalents
Operating Activities
Fiscal Year Ended August 31,
2017
52,337
(42,291)
(23,603)
(252)
(13,809)
$
$
2016
60,604
(20,920)
(38,536)
(4,153)
(3,005)
$
$
2015
55,064
(16,951)
(38,663)
(3,357)
(3,907)
$
$
Net cash provided by operating activities decreased $8.3 million to $52.3 million for fiscal year 2017 from $60.6 million for
fiscal year 2016. 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, 2017 was net income of $52.9 million,
which increased $0.3 million from period to period. The changes in our working capital from period to period were primarily
attributable to an overall decrease in accrued payroll and related expenses due to higher earned incentive payouts in the first
quarter of fiscal year 2017 compared to the same period of the prior fiscal year as well as lower earned incentive accruals during
the fiscal year ended August 31, 2017 as compared to the prior fiscal year. These earned incentive payouts and accruals are based
on the Company achieving targets for EBITDA which are set each fiscal year. As a result, these amounts have varied year over
year due to the Company’s actual or expected achievement of these targets. Higher income taxes receivable balances also
contributed to the overall decrease in cash provided by operating activities from period to period. These impacts to working
capital were partially offset by changes in trade accounts receivable balances year over year. Such balances a decreased slightly
from fiscal year 2016 to fiscal year 2017 whereas they increased significantly from fiscal year 2015 to fiscal year 2016. The
significant increase in the trade accounts receivable balance at the end of fiscal year 2016 was primarily due to increased sales
volumes in the fourth quarter of fiscal year 2016 as compared to the same quarter in fiscal year 2015 and the timing of payments
received from our customers from period to period.
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 fiscal year 2015 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 fiscal year 2015 as well as significantly
higher accruals for earned incentive compensation in fiscal year 2016 as compared fiscal year 2015.
Investing Activities
Net cash used in investing activities increased $21.4 million to $42.3 million for fiscal year 2017 from $20.9 million for fiscal
year 2016 primarily due to an increase of $16.4 million in cash outflow during the fiscal year 2017 related to the purchase and
buildout of the Company’s new office building, which was completed in August 2017. Also contributing to the total cash outflows
was a $5.7 million net increase from period to period in purchases of short-term investments that were made primarily by our
U.K. and Australia subsidiaries.
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.
Financing Activities
Net cash used in financing activities decreased $14.9 million to $23.6 million for fiscal year 2017 from $38.5 million for fiscal
year 2016 primarily due to an $18.0 million increase in cash inflows from our revolving credit facility and
a $1.0 million decrease in cash outflows for treasury stock purchases from period to period. This decrease was partially offset by
an increase of $3.1 million in dividends paid. Also offsetting cash inflows from financing activities was a $0.5 million decrease
in excess tax benefits from settlements of stock-based equity awards and a $0.5 million decrease in proceeds from the issuance
of common stock upon the exercise of stock options from period to period.
Net cash used in financing activities decreased $0.2 million to $38.5 million for fiscal year 2016 from $38.7 million for 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.
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 $0.3 million, $4.2 million and $3.4
million for fiscal years 2017, 2016 and 2015, respectively. 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 June 21, 2016, the Company’s Board of Directors approved a share buy-back plan. Under the plan, which became effective
on September 1, 2016, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31,
2018. The timing and amount of repurchases are 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 September 1, 2016 through August 31, 2017, the Company repurchased 290,573 shares at a total cost of $31.1
million under this $75.0 million plan.
Dividends
The Company has historically paid regular quarterly cash dividends on its common stock. In December 2016, the Board of
Directors declared a 17% increase in the regular quarterly cash dividend, increasing it from $0.42 per share to $0.49 per share.
On October 10, 2017, the Company’s Board of Directors declared a cash dividend of $0.49 per share payable on October 31,
2017 to shareholders of record on October 20, 2017. 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.
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, 2017 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
$
5,660
$
1,856
$
2,116
$
1,218
Thereafter
470
$
36
The following summarizes other commitments which are excluded from the contractual obligations table above as of August
31, 2017:
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.
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, 2017, we had $154.0 million outstanding on this credit facility. Based on our most recent cash
projections and anticipated business activities, we expect to borrow additional amounts ranging from $15.0 million to
$20.0 million in fiscal year 2018. We estimate that the interest associated with these incremental borrowings will be
approximately $0.4 million for fiscal year 2018 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.
At August 31, 2017, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was
approximately $1.0 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
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.
37
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, 2017 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 2017, 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 employees; 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
concluded that no impairment of our goodwill existed as of February 28, 2017. We also did not identify or record any impairment
losses related to our goodwill during our annual impairment tests performed in fiscal years 2016 and 2015.
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 28, 2017.
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
38
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, 2017, 2016 and 2015.
Recently Issued Accounting Standards
Information on Recently Issued Accounting Standards that could potentially impact the Company’s consolidated financial
statements and related disclosures is incorporated by reference to Part IV—Item 15, “Notes to Condensed Consolidated Financial
Statements” Note 2 — Basis of Presentation and Summary of Significant Accounting Policies, included in this report.
Related Parties
The information required by this item is incorporated by reference to Part IV—Item 15, “Notes to Condensed Consolidated
Financial Statements” Note 10 — Related Parties, included in this report.
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 to net asset balances held in non-functional currencies, specifically 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, 2017, the Company had a $154.0 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.
39
Item 8. Financial Statements and Supplementary Data
The Company’s consolidated financial statements at August 31, 2017 and 2016 and for each of the three fiscal years in the period
ended August 31, 2017, 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
89,248
51,040
11,758
0.82
1st
92,522
51,408
12,062
0.83
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Fiscal Year Ended August 31, 2017
2nd
96,519
54,462
12,360
0.87
3rd
98,178
54,287
14,444
1.02
$
$
$
$
4th
96,561
54,096
14,368
1.01
$
$
$
$
Total
$ 380,506
$ 213,885
52,930
$
3.72
$
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
$
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, 2017, 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.
40
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, 2017.
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, 2017, 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, 2017, 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.
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 2017 Annual Meeting of Stockholders on December 12, 2017 (“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.”
41
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, 2017:
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)
198,525 (1) $
n/a
198,525 (1) $
36.03 (2)
n/a
36.03 (2)
979,546
n/a
979,546
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
(1) Includes 5,960 securities to be issued upon exercise of outstanding stock options; 116,770 securities to be issued pursuant to outstanding restricted stock
units; 44,919 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 30,876 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 5,960, which is included as a component of the number of securities to be issued
upon exercise of outstanding options, warrants and rights.
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.”
42
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
Articles of Incorporation and Bylaws.
3(a)
Certificate of Incorporation, incorporated by reference from the Registrant’s Form 10-K filed October 22, 2012, Exhibit 3(a)
thereto.
3(b)
Amended and Restated Bylaws of WD-40 Company, incorporated by reference from the Registrant’s Form 8-K filed July 14,
2017, Exhibit 3.1 thereto.
Material Contracts.
Executive Compensation Plans and Arrangements (Exhibits 10(a) through 10(t) are management contracts and compensatory
plans or arrangements required to be filed as exhibits pursuant to Item 15(b)).
10(a)
WD-40 Company 2016 Stock Incentive Plan, incorporated by reference from the Registrant’s Proxy Statement filed November
3, 2016, Appendix A thereto.
10(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.
10(c)
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.
10(d)
WD-40 Directors’ Compensation Policy and Election Plan dated October 9, 2017.
10(e)
10(f)
10(g)
10(h)
10(i)
10(j)
10(k)
10(l)
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 Award Agreement for grants of Restricted Stock Units to Executive Officers in fiscal years 2015
and 2016, incorporated by reference from the Registrant’s Form 10-K filed October 24, 2016, Exhibit 10(e) thereto.
Form of Restricted Stock Unit Agreement for grants of Restricted Stock Units to Executive Officers in fiscal year 2017.
Form of Market Share Unit Award Agreement for grants of Market Share Units to Executive Officers in fiscal years 2015 and
2016, incorporated by reference from the Registrant’s Form 8-K filed October 31, 2012, Exhibit 10(a) thereto.
Form of Market Share Unit Award Agreement for grants of Market Share Units to Executive Officers in fiscal year 2017.
Form of Deferred Performance Unit Award Agreement for grants of Deferred Performance Units to Executive Officers in fiscal
year 2017.
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,
incorporated by reference from the Registrant’s Form 10-K filed October 24, 2016, Exhibit 10(i) thereto.
43
10(m)
10(n)
10(o)
10(p)
10(q)
10(r)
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.
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.
Change of Control Severance Agreement between WD-40 Company and Michael L. Freeman dated February 14, 2006.
Change of Control Severance Agreement between WD-40 Company and Geoffrey J. Holdsworth dated February 14, 2006.
10(s)
Change of Control Severance Agreement between WD-40 Company and William B. Noble dated February 14, 2006.
10(t)
10(u)
10(v)
10(w)
10(x)
10(y)
10(z)
10(aa)
21
23
Change of Control Severance Agreement between WD-40 Company and Steven Brass dated June 22, 2016, incorporated by
reference from the Registrant’s Form 10-Q filed January 9, 2017, Exhibit 10(c) thereto
Credit Agreement dated June 17, 2011 among WD-40 Company and Bank of America, N.A..
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.
Standard Form of Agreement between Owner and Contractor dated February 23, 2017 and Change Order #1 dated March 9,
2017 between WD-40 Company and Back’s Construction, Inc., incorporated by reference from the Registrant’s Form 10-Q
filed April 6, 2017, Exhibit 10(d) thereto.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm dated October 23, 2017.
31(a)
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)
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
Item 16. Form 10-K Summary
Not applicable.
44
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 23, 2017
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 23, 2017
/s/ PETER D. BEWLEY
PETER D. BEWLEY, Director
Date: October 23, 2017
/s/ DANIEL T. CARTER
DANIEL T. CARTER, Director
Date: October 23, 2017
/s/ MELISSA CLAASSEN
MELISSA CLAASSEN, Director
Date: October 23, 2017
/s/ MARIO L. CRIVELLO
MARIO L. CRIVELLO, Director
Date: October 23, 2017
/s/ ERIC P. ETCHART
ERIC P. ETCHART, Director
Date: October 23, 2017
/s/ LINDA A. LANG
LINDA A. LANG, Director
Date: October 23, 2017
/s/ DANIEL E. PITTARD
DANIEL E. PITTARD, Director
Date: October 23, 2017
/s/ GREGORY A. SANDFORT
GREGORY A. SANDFORT, Director
Date: October 23, 2017
/s/ NEAL E. SCHMALE
NEAL E. SCHMALE, Director
Date: October 23, 2017
45
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 as of August 31, 2017 and 2016, and the results of their operations and their cash flows for
each of the three years in the period ended August 31, 2017 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, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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.
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, California
October 23, 2017
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 $240 and $394 at August 31, 2017
and 2016, respectively
Inventories
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
Revolving credit facility, current portion
Income taxes payable
Total current liabilities
Revolving credit facility
Deferred tax liabilities, net
Other long-term liabilities
Total liabilities
Commitments and Contingencies (Note 11)
August 31,
2017
August 31,
2016
$
37,082
80,166
$
50,891
57,633
$
$
64,259
35,340
8,007
224,854
29,439
95,597
16,244
495
3,088
369,717
20,898
18,997
14,222
20,000
1,306
75,423
134,000
18,949
1,958
230,330
$
$
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
Shareholders' equity:
Common stock ― authorized 36,000,000 shares, $0.001 par value;
19,688,238 and 19,621,820 shares issued at August 31, 2017 and 2016,
respectively; and 13,984,183 and 14,208,338 shares outstanding at
August 31, 2017 and 2016, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Common stock held in treasury, at cost ― 5,704,055 and 5,413,482
shares at August 31, 2017 and 2016, respectively
Total shareholders' equity
Total liabilities and shareholders' equity
20
150,692
315,764
(28,075)
20
145,936
289,642
(27,298)
(299,014)
139,387
369,717
$
(267,905)
140,395
339,668
$
See accompanying notes to consolidated financial statements.
F-2
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Fiscal Year Ended August 31,
2017
2016
2015
$
380,506
166,621
213,885
$
380,670
166,301
214,369
$
378,150
177,972
200,178
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
114,560
20,537
2,879
137,976
117,767
22,278
2,976
143,021
108,873
22,876
3,039
134,788
Income from operations
75,909
71,348
65,390
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
508
(2,582)
787
74,622
21,692
52,930
3.73
3.72
14,089
14,123
$
$
$
683
(1,703)
2,461
72,789
20,161
52,628
3.65
3.64
14,332
14,379
$
$
$
584
(1,205)
(1,659)
63,110
18,303
44,807
3.05
3.04
14,582
14,649
$
$
$
See accompanying notes to consolidated financial statements.
F-3
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Fiscal Year Ended August 31,
2017
2016
2015
Net income
Other comprehensive loss:
Foreign currency translation adjustment
Total comprehensive income
$
$
52,930
(777)
52,153
$
$
52,628
(18,576)
34,052
$
$
44,807
(9,825)
34,982
See accompanying notes to consolidated financial statements.
F-4
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share amounts)
Common Stock
Shares
19,464,310 $
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
19 $
136,212 $
237,596 $
1,103
Total
Treasury Stock
Shareholders'
Shares
4,709,948 $
Amount
Equity
(205,515) $
169,415
Balance at August 31, 2014
Issuance of common stock under share-based
compensation plan, net of shares withheld for taxes
82,578
1
Stock-based compensation
Tax benefits from settlements of
stock-based equity awards
Cash dividends ($1.48 per share)
Acquisition of treasury stock
Foreign currency translation adjustment
Net income
1,449
2,782
1,208
(21,720)
44,807
386,450
(30,259)
(9,825)
Balance at August 31, 2015
19,546,888 $
20 $
141,651 $
260,683 $
(8,722)
5,096,398 $
(235,774) $
Issuance of common stock under share-based
compensation plan, net of shares withheld for taxes
74,932
Stock-based compensation
Tax benefits from settlements of
stock-based equity awards
Cash dividends ($1.64 per share)
Acquisition of treasury stock
Foreign currency translation adjustment
Net income
(1,434)
3,655
2,064
(23,669)
52,628
317,084
(32,131)
(18,576)
Balance at August 31, 2016
19,621,820 $
20 $
145,936 $
289,642 $
(27,298)
5,413,482 $
(267,905) $
Issuance of common stock under share-based
compensation plan, net of shares withheld for taxes
66,418
Stock-based compensation
Tax benefits from settlements of
stock-based equity awards
Cash dividends ($1.89 per share)
Acquisition of treasury stock
Foreign currency translation adjustment
Net income
(921)
4,138
1,539
(26,808)
52,930
290,573
(31,109)
(777)
Balance at August 31, 2017
19,688,238 $
20 $
150,692 $
315,764 $
(28,075)
5,704,055 $
(299,014) $
See accompanying notes to consolidated financial statements.
1,450
2,782
1,208
(21,720)
(30,259)
(9,825)
44,807
157,858
(1,434)
3,655
2,064
(23,669)
(32,131)
(18,576)
52,628
140,395
(921)
4,138
1,539
(26,808)
(31,109)
(777)
52,930
139,387
F-5
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
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 losses (gains), 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
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 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
Fiscal Year Ended August 31,
2017
2016
2015
$
52,930
$
52,628
$
44,807
6,769
(115)
1,608
(1,539)
4,138
364
(138)
482
(3,487)
(3,514)
2,827
(8,328)
605
(265)
52,337
(20,150)
430
-
(27,136)
4,565
(42,291)
(31,109)
(26,808)
775
1,539
32,000
(23,603)
(252)
(13,809)
50,891
37,082
2,625
21,933
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
$
$
$
$
$
$
$
$
$
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 that solve problems in workshops, factories and homes around the
world. The Company markets its maintenance products and its homecare and cleaning products under the following well-known
brands: WD-40®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and
Solvol®. Currently included in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-
40 BIKE® product lines.
The Company’s brands are sold in various locations around the world. Maintenance products are sold worldwide in markets
throughout North, Central and South America, Asia, Australia, Europe, the Middle East and Africa. Homecare and cleaning
products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia. The Company’s products are sold
primarily through mass retail and home center stores, warehouse club stores, grocery stores, hardware stores, automotive parts
outlets, 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 $80.2 million and $57.6 million at August 31, 2017 and 2016, 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, 2017 and 2016.
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 $3.9 million, $3.5 million and $3.4 million for fiscal years 2017, 2016 and 2015, respectively. These amounts
include factory depreciation expense which is recognized as cost of products sold and totaled $1.1 million for fiscal year 2017
and $0.8 million for each of the fiscal years ended August 31, 2016 and 2015.
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 goodwill impairments were identified by the Company during
fiscal years 2017, 2016 and 2015.
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 2017, 2016 and 2015.
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, 2017, the Company had no assets or liabilities that are measured at fair value in
the financial statements on a recurring basis, with the exception of the foreign currency forward contracts, which are classified
as Level 2 within the fair value hierarchy. The carrying values of cash equivalents, short-term investments and short-term
borrowings are recorded at cost, which approximates their fair values primarily due to their short-term maturities and are
classified as Level 2 within the fair value hierarchy. In addition, the carrying value of long-term borrowings on the Company’s
consolidated balance sheets approximate fair value and is also classified as Level 2 within the fair value hierarchy. During the
fiscal years ended August 31, 2017, 2016 and 2015, 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, 2017 and 2016.
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.
F-9
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
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 $16.4 million, $16.1 million and $15.8 million for fiscal years 2017, 2016 and 2015,
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 $20.5
million, $22.3 million and $22.9 million for fiscal years 2017, 2016 and 2015, 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 $8.4 million, $7.7 million and $9.0 million in fiscal years 2017, 2016 and 2015, 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.
F-10
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
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
$0.4 million and $2.4 million of net gains in foreign currency transactions in fiscal years 2017 and 2016, respectively, and $1.7
million of net losses in fiscal year 2015.
In the normal course of business, the Company employs established policies and procedures to manage its exposure to
fluctuations in foreign currency exchange rates. The Company’s U.K. subsidiary, whose functional currency is Pound Sterling,
utilizes foreign currency forward contracts to limit its exposure to net asset balances held in non-functional currencies,
specifically 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, 2017, the Company had a notional amount of $23.4 million outstanding in foreign
currency forward contracts, which matured in September 2017. Unrealized net losses related to foreign currency forward
contracts were $0.6 million at August 31, 2017, while unrealized net gains and losses were not significant at August 31, 2016.
Realized net losses related to foreign currency forward contracts were $0.5 million for the fiscal year ended August 31, 2017,
while realized net gains and losses were not significant for the fiscal year ended August 31, 2016.
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 and current equity incentive plans.
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
F-11
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
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,
2017, 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 August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern”. This updated guidance requires management to evaluate whether there is substantial doubt about an entity's
ability to continue as a going concern within one year of the date that the financial statements are issued and provide related
disclosures if necessary. This guidance is effective for the first annual fiscal period ending after December 15, 2016, and for all
interim and annual periods thereafter. The Company adopted this guidance in the fourth quarter of fiscal year 2017 on a
prospective basis and there was no impact on its consolidated financial statements and related disclosures.
Recently Issued Accounting Standards
In May 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-09, “Scope of Modification
Accounting”, to reduce diversity in practice and provide clarity regarding existing guidance in ASC 718, “Stock Compensation”.
The amendments in this updated guidance clarify that an entity should apply modification accounting in response to a change in
the terms and conditions of an entity’s share-based payment awards unless three newly specified criteria are met. This guidance
is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period.
Early adoption is permitted. The Company has evaluated the potential impacts of this updated guidance, and it does not expect
the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment”. This updated guidance
eliminates Step 2 from the current two-step quantitative model for goodwill impairment tests. Step 2 required an entity to
calculate an implied fair value, which included a hypothetical purchase price allocation requirement, for reporting units that
failed Step 1. Per this updated guidance, a goodwill impairment will instead be measured as the amount by which a reporting
unit’s carrying value exceeds its fair value as identified in Step 1. This guidance is effective for fiscal years beginning after
December 15, 2019, including interim periods within that reporting period. Early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017. The Company has evaluated the potential impacts
of this updated guidance, and it does not expect the adoption of this guidance to have a material impact on its consolidated
financial statements and related disclosures.
In October 2016, the FASB issued ASU No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory”, which requires
an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer
occurs. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within that
reporting period. Early adoption is permitted in the first interim period of an entity's annual financial statements. The Company
has evaluated the potential impacts of this updated guidance, and it does not expect the adoption of this guidance to have a
material impact on its consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments”. The
amendments in this updated guidance 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
F-12
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 was permitted. The Company did not adopt this updated guidance early and therefore
this guidance will become effective for the Company during the first quarter of fiscal year 2018. The Company 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 2017, its income tax expense for the year would
have been reduced by approximately $1.5 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 addition, the Company’s presentation of
employee taxes paid on shares of certain equity awards withheld by the Company for tax-withholding purposes will be reported
as a financing activity instead of an operating activity in the Consolidated Statement of Cash Flows, while the excess tax benefits
from settlements of stock-based equity awards will be reported as an operating activity under this new guidance.
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
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. This new
guidance requires an entity to recognize revenue for product sales at the point in time in which control of goods transfers to the
Company’s customers which, as defined, could be different than the point in time in which revenue had been recognized by the
Company under existing U.S. GAAP, which was based on when title and the risks and rewards of ownership were transferred to
the customer. The new guidance 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. Although early adoption is permitted, the Company has concluded that it will
not adopt this guidance early and it will become effective for the Company on September 1, 2018. The Company will adopt this
new guidance following the modified retrospective approach and will recognize the cumulative effect of initially applying the
guidance as an adjustment to the opening balance of retained earnings on September 1, 2018. Management is in the process of a
detailed review of the Company’s customer contracts which is focused principally on, but not limited to, identifying the point in
time at which the control of goods transfers to customers. Management is nearing the completion of this review and is still in the
process of determining the impacts that this new guidance will have on the Company's consolidated financial statements and
related disclosures.
F-13
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
Note 5. Goodwill and Other Intangible Assets
Acquisitions
August 31,
2017
August 31,
2016
$
$
$
$
3,021
3,021
215
29,083
35,340
August 31,
2017
17,491
16,953
4,552
7,947
1,608
861
3,453
52,865
(23,426)
29,439
$
$
$
$
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
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.
F-14
Goodwill
The following table summarizes the changes in the carrying amounts of goodwill by segment (in thousands):
Balance as of August 31, 2015
Translation adjustments
Balance as of August 31, 2016
Translation adjustments
Balance as of August 31, 2017
Americas
EMEA
Asia-Pacific
Total
$
$
85,532
(80)
85,452
(4)
85,448
$
$
9,667
(680)
8,987
(48)
8,939
$
$
1,210
-
1,210
-
1,210
$
$
96,409
(760)
95,649
(52)
95,597
During the second quarter of fiscal year 2017, the Company performed its annual goodwill impairment test. The annual goodwill
impairment test was performed at the reporting unit level, which resides at a component level below the Company’s operating
segment level and for which discrete financial information is available, 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 employees; 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 28, 2017.
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 28, 2017, 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.
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,
2017
$
$
35,891
(19,647)
16,244
August 31,
2016
$
$
36,009
(16,818)
19,191
There has been no impairment charge for the period ended August 31, 2017 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, 2015
Amortization expense
Translation adjustments
Balance as of August 31, 2016
Amortization expense
Translation adjustments
Balance as of August 31, 2017
Americas
EMEA
Asia-Pacific
Total
$
$
5,840
(768)
(794)
4,278
(672)
(68)
3,538
$
$
-
-
-
-
-
-
-
$
$
22,961
(2,976)
(794)
19,191
(2,879)
(68)
16,244
$
$
17,121
(2,208)
-
14,913
(2,207)
-
12,706
F-15
The estimated amortization expense for the Company’s definite-lived intangible assets in future fiscal years is as follows (in
thousands):
Fiscal year 2018
Fiscal year 2019
Fiscal year 2020
Fiscal year 2021
Fiscal year 2022
Thereafter
Total
Trade Names
Customer-Based
Technology
$
$
2,419
2,414
2,019
1,230
1,229
5,700
15,011
$
$
446
259
165
165
165
-
1,200
$
$
33
-
-
-
-
-
33
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.
Note 6. Accrued and Other Liabilities
Accrued liabilities consisted of the following (in thousands):
August 31,
2017
August 31,
2016
Accrued advertising and sales promotion expenses
Accrued professional services fees
Accrued sales taxes and other taxes
Other
Total
$
$
10,889
1,456
1,701
4,951
18,997
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,
2017
6,554
3,338
2,257
1,503
570
14,222
$
$
$
$
$
$
9,763
1,262
954
3,778
15,757
August 31,
2016
12,203
3,559
2,716
1,744
644
20,866
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, this unsecured credit agreement has been amended four times, most recently on September 1, 2016, (the
“Fourth Amendment”). This Fourth Amendment amended the credit agreement in connection with the purchase of the
Company’s new office building and related land located at 9715 Businesspark Avenue, San Diego, California (the “Property”).
The Fourth Amendment permits the Company to spend $18.0 million in aggregate for the acquisition and improvement costs for
the Property, with any excess applied against the $7.5 million permitted annually by the amended agreement for other capital
expenditures. In addition, the Fourth Amendment also includes changes to the agreement that will allow, as a permitted lien, any
agreement with Bank of America for secured debt.
Per the terms of the amended agreement, the revolving commitment may not exceed $175.0 million and the aggregate amount
of the Company’s capital stock that it may repurchase may not exceed $150.0 million during the period from November 16, 2015
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
F-16
this type, as well as customary events of default and remedies. In addition, 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. In the
second quarter of fiscal year 2016, the Company entered into an autoborrow agreement with Bank of America and this agreement
has been in effect since that time
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:
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
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. The Company had no balance under the autoborrow agreement as of August 31, 2017. In addition, the Company assesses
its ability and intent to refinance the outstanding draws on the line of credit at the end of each reporting period in order to
determine the proper balance sheet classification for amounts outstanding on the line of credit. During the fiscal year ended
August 31, 2017, the Company borrowed $20.0 million on the line of credit which it intends to repay in less than twelve months.
As a result, the Company has classified $20.0 million borrowed under the revolving credit facility during the fiscal year ended
August 31, 2017 as short-term on its consolidated balance sheets.
In addition to the $20.0 million in borrowings classified as short-term, the Company borrowed an additional $12.0 million U.S.
Dollars under the revolving credit facility during the fiscal year ended August 31, 2017. Based on management’s ability and
intent to refinance these new draws and remainder of the Company’s short-term borrowings under the facility with successive
short-term borrowings for a period of at least twelve months, the Company has classified $134.0 million outstanding under the
revolving credit facility as a long-term liability at August 31, 2017. 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, 2017, the Company had a $154.0 million
outstanding balance on the revolving credit facility and was in compliance with all debt covenants under this credit facility.
Note 8. Share Repurchase Plans
On June 21, 2016, the Company’s Board of Directors approved a share buy-back plan. Under the plan, which became effective
on September 1, 2016, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31,
2018. The timing and amount of repurchases are 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 September 1, 2016 through August 31, 2017, the Company repurchased 290,573 shares at a total cost of $31.1
million under this $75.0 million plan.
F-17
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
2017
52,930
(323)
52,607
$
$
Fiscal Year Ended August 31,
2016
$
$
52,628
(334)
52,294
$
$
2015
44,807
(271)
44,536
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
2017
14,089
34
14,123
Fiscal Year Ended August 31,
2016
14,332
47
14,379
2015
14,582
67
14,649
There were no anti-dilutive stock-based equity awards outstanding for the fiscal year ended August 31, 2017. For the fiscal years
ended August 31, 2016 and 2015, weighted-average stock-based equity awards outstanding that are non-participating securities
in the amounts of 4,501 and 1,337, 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 for each of the fiscal years 2017 and 2016,
respectively, and $1.1 million for fiscal year 2015. Accounts receivable from Tractor Supply were not significant as of August
31, 2017 and 2016.
Note 11. Commitments and Contingencies
Leases
The Company was committed under certain non-cancelable operating leases at August 31, 2017 which provide for the following
future fiscal year minimum payments (in thousands):
Operating leases
$
1,856
$
1,223
$
893
$
739
$
479
2018
2019
2020
2021
2022
Thereafter
470
$
Rent expense was $2.1 million, $1.9 million, and $2.1 million for the fiscal years ended August 31, 2017, 2016 and 2015,
respectively.
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.
F-18
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, 2017, no such commitments were outstanding.
Litigation
From time to time, the Company is subject to various claims, lawsuits, investigations and proceedings arising in the ordinary
course of business, including but not limited to, product liability litigation and other claims and proceedings with respect to
intellectual property, breach of contract, labor and employment, tax and other matters.
On February 24, 2017, a legal action was filed against the Company in a United States District Court in Ohio (FirstPower Group,
LLC v. WD-40 Company, WD-40 Manufacturing Company, Wal-Mart Stores East, LP, Lowe’s Home Centers, LLC, and Home
Depot U.S.A., Inc.). The complaint alleged claims of trademark infringement, unfair competition, counterfeiting, and deceptive
trade practices arising out of the Company’s marketing and sale of the WD-40 EZ-REACH Flexible Straw product. FirstPower
Group, LLC (“FirstPower”) claimed exclusive ownership and the right to use the words “EZ REACH” for lubricating oil products
based on certain registered trademarks covering such words. On February 24, 2017, FirstPower also filed a motion for
preliminary injunction seeking an interim order prohibiting the alleged infringement of FirstPower’s asserted trademark rights.
On July 18, 2017 the District Court issued a Memorandum Opinion denying FirstPower’s motion for preliminary injunction. On
October 13, 2017 the case was dismissed as to all of the defendants pursuant to a confidential settlement agreement between the
Company and FirstPower, which did not have a material impact on the Company’s business, financial condition or results of
operations.
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, 2017.
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
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, 2017.
F-19
Note 12. Income Taxes
Income before income taxes consisted of the following (in thousands):
United States
Foreign (1)
Income before income taxes
2017
42,060
32,562
74,622
$
$
Fiscal Year Ended August 31,
2016
$
$
41,128
31,661
72,789
2015
38,044
25,066
63,110
$
$
(1)
Included in these amounts are income before income taxes for the EMEA segment of $28.1 million, $28.3 million and $21.9 million for the fiscal years
ended August 31, 2017, 2016 and 2015, respectively.
The provision for income taxes consisted of the following (in thousands):
2017
Fiscal Year Ended August 31,
2016
2015
Current:
Federal
State
Foreign
Total current
Deferred:
United States
Foreign
Total deferred
Provision for income taxes
$
$
10,813
744
7,465
19,022
2,627
43
2,670
21,692
$
$
13,269
894
7,593
21,756
(1,100)
(495)
(1,595)
20,161
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,
2017
1,252
644
2,393
25
3,213
1,598
2,309
1,264
12,698
(2,328)
10,370
(2,109)
(26,036)
(679)
(28,824)
(18,454)
$
$
F-20
$
$
$
$
12,302
966
5,886
19,154
(870)
19
(851)
18,303
August 31,
2016
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)
The Company had state net operating loss (“NOL”) carryforwards of $2.6 million and $2.4 million as of August 31, 2017 and
2016, respectively, which generated a net deferred tax asset of $0.2 million for each of the fiscal years 2017 and 2016. The state
NOL carryforwards, if unused, will expire between fiscal year 2018 and 2037. The Company also had cumulative tax credit
carryforwards of $2.3 million and $2.0 million as of August 31, 2017 and 2016, respectively, of which $2.1 million and $1.9
million, respectively, 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.
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
2017
Fiscal Year Ended August 31,
2016
2015
26,118
327
(4,277)
(1,295)
819
21,692
$
$
25,476
397
(4,382)
(1,190)
(140)
20,161
$
$
22,088
578
(3,221)
(1,131)
(11)
18,303
$
$
The provision for income taxes was 29.1% and 27.7% of income before income taxes for the fiscal years ended August 31, 2017
and 2016, respectively. The increase in the effective income tax rate from period to period was primarily driven by an immaterial
out-of-period correction that the Company recorded in the second quarter of fiscal year 2017 associated with the tax impacts
from certain unrealized foreign currency exchange losses in periods prior to fiscal year 2017.
As of August 31, 2017, the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on
$137.5 million of the 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 $12.9 million as of August 31,
2017. 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. In the fourth quarter of fiscal year 2016, the Company approved a one-time repatriation of $8.2
million of historical foreign earnings from its Australia and China subsidiaries due to favorable tax consequences stemming
principally from the strengthening of the U.S. dollar against various currencies in which the Company conducts business. This
action resulted in the recognition of an incremental immaterial tax benefit in fiscal year 2016. The Company continues to consider
the remaining amount of unremitted foreign earnings in Australia and China, in addition to the U.K, to be indefinitely reinvested
outside of the United States. 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
Net decreases - prior period tax positions
Net 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,
2017
2016
$
$
1,239
(68)
228
(382)
(36)
981
$
$
1,279
-
211
(251)
-
1,239
Gross unrecognized tax benefits totaled $1.0 million and $1.2 million as of August 31, 2017 and 2016, of which $0.6 million and
$0.9 million, respectively, would affect the Company’s effective income tax rate if recognized. There were no material interest
or penalties included in income tax expense for the fiscal years ended August 31, 2017 and 2016. The total balance of accrued
interest and penalties related to uncertain tax positions was also immaterial at August 31, 2017 and 2016.
F-21
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 2014 are not subject to examination by the U.S. Internal
Revenue Service. The Company was notified in September 2016 by the U.S. Internal Revenue Service of its plans to perform an
income tax audit for the tax period ended August 31, 2015. The income tax examination was concluded in the third quarter of
fiscal year 2017 with no changes to the original return as filed. The Company is also currently under audit in various state
and international jurisdictions for fiscal years 2013 through 2016. Generally, for the majority of state and foreign jurisdictions
where the Company does business, periods prior to fiscal year 2013 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, 2017, the Company had one stock incentive plan, the WD-40 Company 2016 Stock Incentive Plan (“2016
Plan”), which was approved by the Company’s shareholders effective as of December 13, 2016. The 2016 Plan 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, 2017, the Company had granted awards of restricted stock units (“RSUs”)
under the 2016 Plan. Additionally, as of August 31, 2017, there were still outstanding stock options, RSUs, market share units
(“MSUs”) and deferred performance units (“DPUs”) which had been granted under the Company’s prior equity incentive plans.
The 2016 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 2016 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 2016 Plan. The total number of shares of common stock authorized for
issuance pursuant to grants of awards under the 2016 Plan is 1,000,000. As of August 31, 2017, 979,546 shares of common stock
remained available for future issuance pursuant to grants of awards under the 2016 Plan. The shares of common stock to be
issued pursuant to awards under the 2016 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 its
equity incentive plans.
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, subject to potential earlier
vesting in the event of retirement of the holder of the award in accordance with the award agreement, 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, subject to potential pro-rata vesting in the event of earlier retirement of the holder of the award in accordance with
the award agreement.
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, subject to potential pro-rata vesting in the event of earlier retirement of the holder of the award in
accordance with the award agreement. 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
F-22
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 $4.1 million, $3.7 million and
$2.8 million for the fiscal years ended August 31, 2017, 2016 and 2015, respectively. The Company recognized income tax
benefits related to such stock-based compensation of $1.4 million, $1.2 million and $0.9 million for the fiscal years ended August
31, 2017, 2016 and 2015, respectively. As of August 31, 2017, the total unamortized compensation cost related to non-vested
stock-based equity awards was $0.8 million and $1.6 million for RSUs and MSUs, respectively, which the Company expects to
recognize over remaining weighted-average vesting periods of 1.5 and 1.7 years for RSUs and MSUs, respectively. No
unamortized compensation cost for DPUs remained as of August 31, 2017.
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.
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, 2016
Granted
Exercised
Forfeited or expired
Outstanding at August 31, 2017
Exercisable at August 31, 2017
Number of
Shares
Weighted-Average
Exercise Price
Per Share
27,820
-
(21,860)
-
5,960
5,960
$
$
$
$
$
$
35.59
-
35.47
-
36.03
36.03
Weighted-Average
Remaining
Contractual Term
Per Share
(in years)
Aggregate
Intrinsic Value
0.1
0.1
$
$
435
435
The total intrinsic value of stock options exercised was $1.6 million, $2.5 million and $3.3 million for the fiscal years ended
August 31, 2017, 2016 and 2015, respectively.
The income tax benefits from stock options exercised totaled $0.4 million, $0.7 million and $1.1 million for the fiscal years
ended August 31, 2017, 2016 and 2015, 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.
F-23
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, 2016
Granted
Converted to common shares
Forfeited
Outstanding at August 31, 2017
Vested at August 31, 2017
Number of
Shares
130,035
21,501
(34,479)
(287)
116,770
87,258
$
$
$
$
$
$
Weighted-Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic Value
54.80
109.23
58.71
81.44
63.61
52.78
$
$
12,722
9,507
The weighted-average grant date fair value of all RSUs granted during the fiscal years ended August 31, 2017, 2016 and 2015
was $109.23, $95.89 and $69.35, respectively. The total intrinsic value of all RSUs converted to common shares was $3.6 million,
$2.8 million and $1.8 million for the fiscal years ended August 31, 2017, 2016 and 2015, respectively.
The income tax benefits from RSUs converted to common shares totaled $1.3 million, $1.0 million and $0.6 million for the fiscal
years ended August 31, 2017, 2016 and 2015, 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.
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
2017
Fiscal Year Ended August 31,
2016
2015
21.1%
1.0%
0.0%
22.2%
0.9%
0.0%
22.0%
0.8%
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 periods for MSUs granted
during each of the fiscal years ended August 31, 2017 and 2016, and over the most recent 2.88-year period for MSUs granted
during the fiscal year ended August 31, 2015, 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.
F-24
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, 2016
Granted
Performance factor adjustments
Converted to common shares
Forfeited
Outstanding at August 31, 2017 (1)
Number of
Shares
45,700
14,683
10,974
(25,825)
(613)
44,919
$
$
$
$
$
$
Weighted-Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic Value
87.82
90.91
73.44
71.20
82.51
94.95
$
4,894
(1) This figure represents the total number of shares underlying MSU grants assuming achievement of the target number of shares at 100%. As the
ultimate number of shares that vest could be as high as 200% of the target, the Company may be required to issue additional shares to satisfy
outstanding MSU award grants.
The weighted-average grant date fair value of all MSUs granted during the fiscal years ended August 31, 2017, 2016 and 2015
was $90.91, $120.99 and $71.66 respectively. The total intrinsic value of all MSUs converted to common shares was $2.8 million
and $3.7 million for the fiscal years ended August 31, 2017 and 2016, respectively. No MSUs were converted to common shares
during the fiscal year ended August 31, 2015.
The income tax benefits from MSUs converted to common shares totaled $0.9 million and $1.2 million for the fiscal years ended
August 31, 2017 and 2016, respectively.
Deferred Performance Units
The DPU awards 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 in
operating departments, and amortization computed on a consolidated basis for the Measurement Year, before deduction of the
stock-based compensation expense for the Vested DPUs and excluding other non-operating income and expense amounts
(“Adjusted Global EBITDA”). 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.
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, 2016
Granted
Performance factor adjustments
Converted to common shares
Forfeited
Outstanding at August 31, 2017
Vested at August 31, 2017
Weighted-Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic Value
94.54
110.19
94.54
94.54
-
107.66
94.54
$
$
3,364
544
Number of
Shares
26,323
25,882
(21,240)
(89)
-
30,876
4,994
$
$
$
$
$
$
$
F-25
The weighted-average grant date fair value of all DPUs granted during the fiscal years ended August 31, 2017, 2016 and 2015
was $110.19, $94.54 and $75.14, respectively. The total intrinsic value of all DPUs converted to common shares was not
significant for the fiscal year ended August 31, 2017. No DPUs were converted to common shares during the fiscal years ended
August 31, 2016, or 2015.
The income tax benefits from DPUs converted to common shares were not significant for the fiscal year ended August 31, 2017.
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 $3.3 million, $3.2 million and $3.1 million for the fiscal
years ended August 31, 2017, 2016 and 2015, 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 $1.4 million, $1.5 million and
$1.4 million for the fiscal years ended August 31, 2017, 2016 and 2015, respectively.
F-26
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, 2017
Net sales
Income from operations
Depreciation and
amortization expense
Interest income
Interest expense
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
Americas
EMEA
Asia-Pacific
Corporate (1)
Total
Unallocated
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
184,929
48,303
4,270
8
2,570
191,397
48,404
4,071
5
1,689
187,344
46,674
4,078
9
1,197
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
136,771
35,389
2,090
389
-
135,235
31,702
2,084
485
-
136,847
30,173
2,102
417
-
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
58,806
16,765
254
111
12
54,038
15,162
280
193
14
53,959
12,602
253
158
8
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
-
(24,548)
155
-
-
-
(23,920)
30
-
-
-
(24,059)
31
-
-
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
380,506
75,909
6,769
508
2,582
380,670
71,348
6,465
683
1,703
378,150
65,390
6,464
584
1,205
(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):
Fiscal Year Ended August 31,
2016
339,974
40,696
380,670
$
$
2015
333,306
44,844
378,150
$
$
Maintenance products
Homecare and cleaning products
Total
2017
342,295
38,211
380,506
$
$
F-27
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
2017
Fiscal Year Ended August 31,
2016
2015
$
$
$
$
150,086
230,420
380,506
23,346
6,093
29,439
$
$
$
$
158,139
222,531
380,670
6,419
5,126
11,545
$
$
$
$
153,116
225,034
378,150
5,955
5,421
11,376
(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 10, 2017, the Company’s Board of Directors declared a cash dividend of $0.49 per share payable on October 31,
2017 to shareholders of record on October 20, 2017.
F-28
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
San Diego, California
TRANSFER AGENT
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
Phone: +1-781-575-2879
https://www-us.computershare.com/investor/
contact
ANNUAL MEETING
December 12, 2017, 2:00 PM
WD-40 Company
9715 Businesspark Avenue
San Diego, California 92131
INVESTOR RELATIONS
Wendy D. Kelley
Director, Investor Relations and
Corporate Communications
Phone: +1-619-275-9304
investorrelations@wd40.com
PHYSICAL ADDRESS
WD-40 Company
9715 Businesspark Avenue
San Diego, California 92131
Phone: +1-858-251-5600
OPERATING SUBSIDIARIES
WD-40 Company Limited
Milton Keynes, United Kingdom
WD-40 Company (Canada) Ltd.
Etobicoke, Canada
WD-40 Company (Australia) Pty. Limited
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, 2017
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.
© 2017 WD-40 Company. All rights reserved.
WD-40, Smart Straw, EZ-REACH, WD-40 BIKE,
WD-40 Specialist, Sprays 2 Ways, 3-IN-ONE,
Spot Shot, Lava, GT85, 1001, no vac and Solvol
are, where designated, registered trademarks of
WD-40 Company or one of its subsidiaries in the
primary markets in which they are used, or such
marks are unregistered trademarks of WD-40
Company or one of its subsidiaries.
Corporate information as of October 15, 2017
CORPORATE INFORMATION
BOARD OF DIRECTORS
Linda A. Lang
Chairman of the Board
Former Chairman and CEO
Jack in the Box, Inc.
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
Finance Committee Chair
Vice President, Business Unit Finance
adidas
Mario L. Crivello
Investor
Eric P. Etchart
Former Senior Vice President
Manitowoc Company
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
President and Chief Executive Officer
Tractor Supply Company
Neal E. Schmale
Former President and COO
Sempra Energy
EXECUTIVE OFFICERS
Garry O. Ridge
President and Chief Executive Officer
Steven A. Brass
Division President, Americas
Richard T. Clampitt
Vice President, General Counsel and
Corporate Secretary
Michael L. Freeman
Chief Strategy Officer
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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Our Global Reach
Our 448 tribe members
live and work in 14 countries, speak
more than 7 languages
Ciao Nihao
G u t e n t a g
Ola’
Hola
Bonjour
G ’ d a y
and are located in 6 different time zones.
WD-40 Company products can be found on all 7 continents. We have a fan club with over
100,000
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! YAY !!!!!!!!!!!!!!!!!!!!!!!!!!!!!
members located all around the world. The blue and yellow can
with the little red top has been creating positive
lasting memories for more than
64 years. The formula for WD-40 Multi-Use Product is a trade secret so protected we
don’t even have a patent for it. If you really need the secret formula, you
can find it…written on a single notepad… locked in a vault
somewhere in
California… if you can get in.
www.wd40company.com
WD-40 Company
9715 Businesspark Avenue
San Diego, CA 92131
+1-858-251-5600