WD 40 COWDFC
WD 40 CO Income Taxes Disclosure
Income Taxes
Income before income taxes consisted of the following (in thousands):
| Fiscal Year Ended August 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 54,936 | $ | 47,345 | $ | 49,871 | |||||||||||
Foreign (1) | 46,690 | 44,163 | 35,292 | ||||||||||||||
| Income before income taxes | $ | 101,626 | $ | 91,508 | $ | 85,163 | |||||||||||
(1)Included in these amounts are income before income taxes for the EIMEA segment of $34.7 million, $31.4 million and $25.6 million for the fiscal years ended August 31, 2025, 2024 and 2023, respectively.
The provision for income taxes consisted of the following (in thousands):
| Fiscal Year Ended August 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (4,726) | $ | 9,559 | $ | 9,973 | |||||||||||
| State | 1,543 | 820 | 1,039 | ||||||||||||||
| Foreign | 12,945 | 12,596 | 9,023 | ||||||||||||||
| Total current | 9,762 | 22,975 | 20,035 | ||||||||||||||
| Deferred: | |||||||||||||||||
| United States | 657 | (1,413) | (806) | ||||||||||||||
| Foreign | 213 | 302 | (59) | ||||||||||||||
| Total deferred | 870 | (1,111) | (865) | ||||||||||||||
| Provision for income taxes | $ | 10,632 | $ | 21,864 | $ | 19,170 | |||||||||||
Deferred tax assets and deferred tax liabilities consisted of the following (in thousands):
| August 31, 2025 | August 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued payroll and related expenses | $ | 1,451 | $ | 1,321 | |||||||
| Reserves and accruals | 1,758 | 2,166 | |||||||||
| Research and development expenses | 2,078 | 1,520 | |||||||||
| Stock-based compensation expense | 2,547 | 2,622 | |||||||||
| Uncertain tax positions and related interest | 234 | 1,266 | |||||||||
| Uniform capitalization | 2,020 | 1,774 | |||||||||
| Tax credit carryforwards | 4,399 | 4,197 | |||||||||
| Other | 2,571 | 2,673 | |||||||||
| Total gross deferred tax assets | 17,058 | 17,539 | |||||||||
| Valuation allowance | (4,552) | (4,305) | |||||||||
| Total net deferred tax assets | 12,506 | 13,234 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment, net | (3,449) | (3,940) | |||||||||
| Amortization of tax goodwill and intangible assets | (15,793) | (15,458) | |||||||||
| Other | (1,612) | (1,909) | |||||||||
| Total deferred tax liabilities | (20,854) | (21,307) | |||||||||
| Net deferred tax liabilities | $ | (8,348) | $ | (8,073) | |||||||
The Company had state net operating loss (“NOL”) carryforwards of $7.8 million as of August 31, 2025, which generated a net deferred tax asset of $0.5 million. The state NOL carryforwards, if unused, will expire between fiscal years 2026 and 2045. The Company also had tax credit carryforwards of $4.4 million as of August 31, 2025, of which $4.3 million is attributable to U.K. tax credit carryforwards, which do not expire.
Future utilization of the U.K. tax credit carryforwards and certain state carryforwards 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 does not conclude that it is “more likely than not” that all of the related deferred tax assets will be realized. Accordingly, the Company recorded an insignificant change in its valuation allowance during the fiscal year ended August 31, 2025 and the cumulative valuation allowance recorded against the related deferred tax asset associated with the
U.K. tax credit carryforwards was $4.1 million as of August 31, 2025, and state carryforwards were insignificant as of August 31, 2025.
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows (in thousands):
| Fiscal Year Ended August 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Amount computed at U.S. statutory federal tax rate | $ | 21,341 | $ | 19,217 | $ | 17,884 | ||||||||||||||
| Effect of foreign operations | 3,323 | 3,339 | 1,583 | |||||||||||||||||
| Net (benefit) from GILTI/FDII | (3,339) | (2,696) | (2,071) | |||||||||||||||||
| Uncertain tax positions | (8,049) | 947 | 1,377 | |||||||||||||||||
| Interest and other true-ups related to uncertain tax positions | (3,416) | — | — | |||||||||||||||||
| Other | 772 | 1,057 | 397 | |||||||||||||||||
| Provision for income taxes | $ | 10,632 | $ | 21,864 | $ | 19,170 | ||||||||||||||
On July 4, 2025, the One Big Beautiful Bill Act ("OBBB Act”) was enacted into law. The OBBB Act includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The significant provisions of the OBBB Act will be effective between fiscal years ended August 31, 2025 through fiscal year ended August 31, 2027, and the Company does not expect these provisions to have a material impact on our effective tax rate.
The provision for income taxes was 10.5% and 23.9% of income before income taxes for the fiscal years ended August 31, 2025 and 2024, respectively. The decrease in the effective income tax rate from period to period was primarily due to the expiration of the statute of limitations on the uncertain tax position associated with the Tax Cuts and Jobs Act’s mandatory one-time “toll tax” on unremitted foreign earnings. The release of the uncertain tax position generated a favorable income tax adjustment of $11.9 million, net of the tax effect of the related interest during twelve months ended August 31, 2025.
Reconciliations of the beginning and ending amounts of the Company’s gross unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands):
| Fiscal Year Ended August 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Unrecognized tax benefits – beginning of fiscal year | $ | 9,147 | $ | 9,275 | |||||||
| Increases for prior period tax positions | 181 | — | |||||||||
| Increases for current period tax positions | 218 | 184 | |||||||||
| Expirations of statute of limitations for assessment | (8,558) | (312) | |||||||||
| Settlements with taxing authorities | (87) | — | |||||||||
| Unrecognized tax benefits – end of fiscal year | $ | 901 | $ | 9,147 | |||||||
Gross unrecognized tax benefits totaled $0.9 million and $9.1 million for the fiscal years ended August 31, 2025 and 2024, respectively, of which $0.7 million and $9.0 million, respectively, would affect the Company’s effective income tax rate if recognized. Interest and penalties related to uncertain tax positions included in tax expense was a benefit of $4.4 million for the fiscal year ended August 31, 2025 and an expense of $1.2 million for the fiscal year ended August 31, 2024. The total balance of accrued interest and penalties related to uncertain tax positions was insignificant and $4.6 million for the fiscal years ended August 31, 2025 and 2024, respectively. Total unrecognized tax benefits including interest and penalties were $1.1 million and $13.7 million as of August 31, 2025 and 2024, respectively, and are recorded in other long-term liabilities in the Company’s consolidated balance sheets.
The Company is subject to taxation in the U.S. and in various state and foreign jurisdictions. Due to expired statutes and closed audits, the Company’s federal income tax returns for years prior to fiscal year 2022 are not subject to examination by the U.S. Internal Revenue Service. The Company is currently under audit in various state jurisdictions for fiscal years 2022 through 2024. Generally, for the majority of state and foreign jurisdictions where the Company does business, periods prior to fiscal year 2021 are no longer subject to examination. The Company has estimated an amount of unrecognized tax
benefits, including interest and penalties, related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitation within the next twelve months to be insignificant. Audit outcomes and the timing of settlements are subject to significant uncertainty.
Income taxes receivable of $4.9 million and $0.5 million are recorded in the Company’s consolidated balance sheets as of August 31, 2025 and 2024, respectively. Income taxes receivable are included in other current assets, which also consists of miscellaneous prepaid expenses and deposits.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Oct 27, 2025 | Showing above |
| 2024 | Oct 21, 2024 | |
| 2023 | Oct 23, 2023 | |
| 2022 | Oct 24, 2022 | |
| 2021 | Oct 22, 2021 | |
| 2020 | Oct 21, 2020 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.