UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 29, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-14669
HELEN OF TROY LIMITED
(Exact name of registrant as specified in its charter)
Bermuda
74-2692550
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
Clarendon House
2 Church Street
Hamilton, Bermuda
(Address of principal executive offices)
1 Helen of Troy Plaza
El Paso, Texas 79912
(Registrant's United States Mailing Address)
(915) 225-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, $0.10 par value per share
HELE
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: 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 every Interactive Data File required to be submitted 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
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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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 of the voting and non-voting common shares held by non-affiliates of the registrant as of August 31, 2023, based upon
the closing price of the common shares as reported by The NASDAQ Global Select Market on such date, was approximately $2,883.4 million.
As of April 18, 2024, there were 23,810,028 common shares, $0.10 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2024 Annual General Meeting of Shareholders to be filed within one hundred and twenty days of the fiscal
year ended February 29, 2024 (2024 Proxy Statement) are incorporated by reference into Part III of this report to the extent described herein.
Table of Contents
TABLE OF CONTENTS
PAGE
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
12
Item 1B.
Unresolved Staff Comments
29
Item 1C.
Cybersecurity
29
Item 2.
Properties
30
Item 3.
Legal Proceedings
31
Item 4.
Mine Safety Disclosures
32
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
33
Item 6.
[Reserved]
35
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
36
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
64
Item 8.
Financial Statements and Supplementary Data
66
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
114
Item 9A.
Controls and Procedures
114
Item 9B.
Other Information
114
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
114
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
115
Item 11.
Executive Compensation
115
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
115
Item 13.
Certain Relationships and Related Transactions, and Director Independence
115
Item 14.
Principal Accountant Fees and Services
115
PART IV
Item 15.
Exhibit and Financial Statement Schedules
116
Item 16.
Form 10-K Summary
117
Signatures
118
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1
EXPLANATORY NOTE
In this Annual Report on Form 10-K (the “Annual Report”), which includes the accompanying
consolidated financial statements and notes, unless otherwise indicated or the context suggests
otherwise, references to “the Company”, “our Company”, “Helen of Troy”, “we”, “us”, or “our”
refer to Helen of Troy Limited and its subsidiaries. We refer to our common shares, par value
$0.10 per share, as “common stock.” References to “EMEA” refer to the combined geographic
markets of Europe, the Middle East and Africa. We use product and service names in this Annual
Report for identification purposes only and they may be protected in the United States and other
jurisdictions by trademarks, trade names, service marks, and other intellectual property rights of
ours and other parties. The absence of a specific attribution in connection with any such mark
does not constitute a waiver of any such right. All trademarks, trade names, service marks, and
logos referenced herein belong to their respective owners. References to “fiscal” in connection
with a numeric year number denotes our fiscal year ending on the last day of February, during the
year number listed. References to “the FASB” refer to the Financial Accounting Standards Board.
References to “GAAP” refer to accounting principles generally accepted in the United States of
America (the “U.S.”). References to “ASU” refer to the codification of GAAP in the Accounting
Standards Updates issued by the FASB. References to “ASC” refer to the codification of GAAP in
the Accounting Standards Codification issued by the FASB.
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2
PART I
Item 1. Business
Our Company
We incorporated as Helen of Troy Corporation in Texas in 1968 and were reorganized as Helen of Troy
Limited in Bermuda in 1994. We are a leading global consumer products company offering creative
products and solutions for our customers through a diversified portfolio of brands. We have built leading
market positions through new product innovation, product quality and competitive pricing. We go to
market under a number of brands, some of which are licensed. Our Leadership Brands are brands which
have leading positions in their respective categories and include the OXO, Hydro Flask, Osprey, Vicks,
Braun, Honeywell, PUR, Hot Tools and Drybar brands.
Segment Information
We currently operate in two business segments:
•
Home & Outdoor: Offers a broad range of outstanding world-class brands that help consumers
enjoy everyday living inside their homes and outdoors. Our innovative products for home
activities include food preparation and storage, cooking, cleaning, organization, and beverage
service. Our outdoor performance range, on-the-go food storage, and beverageware includes
lifestyle hydration products, coolers and food storage solutions, backpacks, and travel gear.
Sales for this global segment are primarily to online and brick & mortar retailers and through our
direct-to-consumer channel.
•
Beauty & Wellness: Provides consumers with a broad range of outstanding world-class brands
for beauty and wellness. In Beauty, we deliver innovation through products such as hair styling
appliances, grooming tools, and liquid and aerosol personal care products that help consumers
look and feel more beautiful. In Wellness, we are there when you need us most with highly
regarded humidifiers, thermometers, water and air purifiers, heaters, and fans. Sales for this
global segment are primarily to online and brick & mortar retailers, distributors, and through our
direct-to-consumer channel.
For more segment and geographic information concerning our net sales revenue, long-lived assets and
operating income, refer to Note 17 to the accompanying consolidated financial statements.
Our Strategic Initiatives
Fiscal 2019 marked the completion of Phase I of our transformation strategy, which delivered improved
organic sales growth by focusing on our Leadership Brands, strategic acquisitions, becoming a more
efficient operating company with strong global shared services, upgrading our organization and culture,
improved inventory turns and return on invested capital, and returning capital to shareholders.
Fiscal 2020 began Phase II of our transformation, which was designed to drive the next five years of
progress. The long-term objectives of Phase II included improved organic sales growth, continued
margin expansion, and strategic and effective capital deployment. Phase II included plans to continue to
invest in our Leadership Brands, with a focus on growing them through consumer-centric innovation,
expanding them more aggressively outside the U.S., and adding new brands through acquisition. We
sought to build further shared service capability and operating efficiency, as well as focus on attracting,
retaining, unifying and training the best people. Additionally, we strove to enhance and consolidate our
Environmental, Social and Governance (“ESG”) efforts and accelerate programs related to Diversity,
Equity, Inclusion, and Belonging (“DEI&B”) to support our Phase II transformation.
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3
Fiscal 2024 concluded Phase II of our transformation strategy, which produced net sales and organic net
sales growth and gross profit margin expansion. We expanded our Leadership Brands and international
footprint with the acquisitions of Drybar, Osprey and Curlsmith. We completed the divestiture of our
Personal Care business (as defined below) and extended our Revlon trademark license for a period of up
to 100 years. We strategically and effectively deployed capital to construct our new distribution facility in
Gallaway, Tennessee, repurchased shares of our common stock, and repaid amounts outstanding under
our long-term debt agreement. We began publishing an annual ESG Report, which summarizes our ESG
strategy and performance, providing further transparency into our ESG efforts. During Phase II, we also
initiated a global restructuring plan referred to as “Project Pegasus” intended to expand operating
margins through initiatives designed to improve efficiency and effectiveness and reduce costs.
Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the
organization, accelerate cost of goods savings projects, enhance the efficiency of our supply chain
network, optimize our indirect spending and improve our cash flow and working capital, as well as other
activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to
fund future growth investments. During the fourth quarter of fiscal 2023, we made changes to the
structure of our organization, which resulted in our previous Health & Wellness and Beauty operating
segments being combined into a single reportable segment, the creation of a North America RMO
responsible for sales and go-to-market strategies, and further centralization of operations and finance
functions under shared services to better support our business segments and RMOs. This new structure
reduced the size of our global workforce by approximately 10%. We believe that these changes better
focus business segment resources on brand development, consumer-centric innovation and marketing,
the RMOs on sales and go-to-market strategies, and shared services on their respective areas of
expertise while also creating a more efficient and effective organizational structure. During the second
quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business,
currently located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in
the Boston, Massachusetts area. This geographic consolidation and relocation is the next step in our
initiative to streamline and simplify the organization and is expected to be completed during fiscal 2025.
We expect these changes will enable a greater opportunity to capture synergies and enhance
collaboration and innovation within the Beauty & Wellness segment. See Note 11 to the accompanying
consolidated financial statements for additional information.
Fiscal 2025 begins our “Elevate for Growth” era, which provides our strategic roadmap through fiscal
2030. The long-term objectives of Elevate for Growth include continued organic sales growth, further
margin expansion, and accretive capital deployment through strategic acquisitions, share repurchases
and capital structure management. The Elevate for Growth era includes an enhanced portfolio
management strategy to invest in our brands and grow internationally based upon defined criteria with an
emphasis on brand building, new product introductions and expanded distribution. We are continuing to
execute our initiatives under Project Pegasus, which we expect to generate incremental investments in
our brand portfolio and new capabilities. We intend to further leverage our operational scale and assets,
including our new state-of-the-art distribution center, improved go-to-market structure with our North
America RMO, and our expanded shared services capabilities. We also plan to complete the geographic
consolidation of our Beauty & Wellness businesses, create a centralized marketing organization that
embraces next-level data analytics and consumer insight capabilities, and further integrate our supply
chain and finance functions within our shared services. Additionally, we are committed to fostering a
winning culture and continuing our ESG efforts to support our Elevate for Growth era.
On April 22, 2022, we completed the acquisition of Recipe Products Ltd., a producer of innovative
prestige hair care products for all types of curly and wavy hair under the Curlsmith brand (“Curlsmith”).
The Curlsmith brand and products were added to the Beauty & Wellness segment. The total purchase
consideration was $147.9 million in cash, net of a final net working capital adjustment and cash acquired.
The acquisition of Curlsmith added another prestige market brand of products to our Beauty & Wellness
portfolio and further advanced our Phase II objective of continuing to expand margin.
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4
On December 29, 2021, we completed the acquisition of Osprey Packs, Inc. (“Osprey”), a longtime U.S.
leader in technical and everyday packs, for $409.3 million in cash, net of a final net working capital
adjustment and cash acquired. Osprey is highly respected in the outdoor industry with a product lineup
that includes a wide range of backpacks and daypacks for hiking, mountaineering, skiing, climbing,
mountain biking, trail running, commuting, and school, as well as rugged adventure travel packs, wheeled
luggage, and travel accessories. The Osprey brand and products were added to the Home & Outdoor
segment. The acquisition of Osprey complemented our outdoor platform, accelerated our international
strategy and added a 9th Leadership Brand to the Company.
Consistent with our Phase II transformation strategy of focusing resources on our Leadership Brands,
during the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Beauty
& Wellness segment's mass channel personal care business, which included liquid, powder and aerosol
products under brands such as Pert, Brut, Sure and Infusium (“Personal Care”). On June 7, 2021, we
completed the sale of our North America Personal Care business to HRB Brands LLC, for $44.7 million in
cash and recognized a gain on the sale in selling, general and administrative expense (“SG&A”) totaling
$0.5 million. On March 25, 2022, we completed the sale of the Latin America and Caribbean Personal
Care business to HRB Brands LLC, for $1.8 million in cash and recognized a gain on the sale in SG&A
totaling $1.3 million.
Our Products
The following table summarizes the types of products we sell by business segment:
Segment
Product Category
Primary Products
Home & Outdoor
Home Solutions
Food storage containers, kitchen utensils for cooking and preparing
salads, fruits, vegetables and meats, graters, slicers and choppers,
baking essentials, kitchen organization, bath, cleaning, infant and
toddler products and coffee preparation tools and electronics
Insulated Beverageware, Coolers
and Food Storage Solutions
Insulated beverageware including bottles, travel tumblers,
drinkware, and mugs, food and lunch containers, insulated totes,
soft coolers, outdoor kitchenware and accessories
Technical, Outdoor, Travel, and
Lifestyle Packs and Accessories
Technical and outdoor sports packs, bike packs and bags,
hydration and travel packs, duffel bags and luggage, lifestyle and
everyday packs, kid carrier packs, and accessories
Beauty & Wellness
Hair Tools and Accessories
Mass, professional and prestige hair appliances, brushes,
grooming tools and accessories
Hair Liquids
Prestige shampoos, liquid hair styling products, treatments and
conditioners
Wellness Devices and
Consumables
Thermometers, blood pressure monitors, pulse oximeters, nasal
aspirators, humidifiers, faucet mount and pitcher water filtration
systems, air purifiers, heaters, fans, and humidification,
thermometry, water filtration, and air purification consumables
Our Trademarks
We market products under a number of trademarks that we own and sell certain of our products under
trademarks licensed from third parties. We believe our principal trademarks, both owned and licensed,
have high levels of brand name recognition among retailers and consumers throughout the world.
Through our favorable partnerships with our licensors, we believe we have developed stable, enduring
relationships that provide access to unique brands that complement our owned and internally developed
trademarks.
The Beauty & Wellness segment relies on the continued use of trademarks licensed under various
agreements for a significant portion of its net sales revenue. New product introductions under licensed
trademarks require approval from the respective licensors. The licensors must also approve the product
packaging. Some of our license agreements require us to pay minimum royalties.
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5
The following table lists our key trademarks by segment:
Segment
Owned
Licensed
Home & Outdoor
OXO, Good Grips, Soft Works, OXO tot, OXO Brew, OXO Strive, OXO
Outdoor, Hydro Flask, Osprey
Beauty & Wellness
Drybar, Hot Tools, Curlsmith, PUR
Revlon, Bed Head,
Honeywell, Braun, Vicks
Patents and Other Intellectual Property
We maintain utility and design patents in the U.S. and several foreign countries. We also protect certain
details about our processes, products and strategies as trade secrets, keeping confidential the
information that we believe provides us with a competitive advantage.
Sales and Marketing
We currently market our products in over 100 countries throughout the world. Sales within the U.S.
comprised approximately 74% of total net sales revenue in both fiscal 2024 and 2023 and 78% of total
net sales revenue in fiscal 2022. Our segments primarily sell their products through mass
merchandisers, sporting goods retailers, department stores, drugstore chains, home improvement stores,
grocery stores, specialty stores, prestige beauty chains, beauty supply retailers, e-commerce retailers,
wholesalers, warehouse clubs, and various types of distributors, as well as directly to consumers. We
take a consumer-centric approach to assortment planning by fostering close collaborations with our retail
customers. In many instances, we produce specific versions of our product lines with exclusive designs
and packaging for our retail customers, which are appropriately priced for their respective customer
bases. We market products principally through the use of outside sales representatives and our own
internal sales staff, supported by our internal marketing, category management, engineering, creative
services, and customer and consumer service staff. These groups work closely together to develop
pricing and distribution strategies, to design packaging and to help develop product line extensions and
new products.
Research and Development
Our research and development activities focus on new, differentiated and innovative products designed to
drive sustained organic growth. We continually invest to strengthen our product design and research and
development capabilities, including extensive studies to gain consumer insights. Research and
development expenses consist primarily of salaries and employee benefits, contracted development and
testing efforts, and third-party design agencies associated with the development of products.
Manufacturing and Distribution
We contract with unaffiliated manufacturers, primarily in China, Mexico and Vietnam, to manufacture a
significant portion of our finished goods for the Home & Outdoor segment and our Beauty & Wellness
segment's hair appliances and accessories, as well as certain wellness product categories. The hair
liquids category of the Beauty & Wellness segment sources most of its products from U.S. manufacturers.
Finished goods manufactured by vendors in Asia comprised approximately 79%, 87%, and 88% of
finished goods purchased in fiscal 2024, 2023, and 2022, respectively.
We occupy owned and leased office and distribution space in various locations to support our operations.
These facilities include our U.S. headquarters in El Paso, Texas, and distribution centers in Southaven
and Olive Branch, Mississippi and Gallaway, Tennessee, which are used to support a significant portion
of our domestic distribution. See Note 4 to the accompanying consolidated financial statements for
additional information.
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6
Customers
Sales to our largest customer, Amazon.com Inc., accounted for approximately 21%, 17% and 19% of our
consolidated net sales revenue in fiscal 2024, 2023 and 2022, respectively. Sales to our second largest
customer, Target Corporation, accounted for approximately 10% in both fiscal 2024 and 2023 and 11% in
fiscal 2022 of our consolidated net sales revenue. Sales to our third largest customer, Walmart, Inc.,
including its worldwide affiliates, accounted for approximately 9%, 10% and 11% of our consolidated net
sales revenue in fiscal 2024, 2023 and 2022, respectively. No other customers accounted for 10% or
more of consolidated net sales revenue during these fiscal years. Sales to our top five customers
accounted for approximately 47%, 43% and 49% of our consolidated net sales revenue in fiscal 2024,
2023 and 2022, respectively.
Order Backlog
When placing orders, our individual consumer, retail and wholesale customers usually request that we
ship the related products within a short time frame. As such, there usually is no significant backlog of
orders in any of our distribution channels.
Seasonality
The following table illustrates the seasonality of our net sales revenue by fiscal quarter as a percentage
of annual net sales revenue for the periods presented:
Fiscal Quarters Ended Last Day of Month
2024
2023
2022
May
23.7 %
24.5 %
24.3 %
August
24.5 %
25.2 %
21.4 %
November
27.4 %
26.9 %
28.1 %
February
24.4 %
23.4 %
26.2 %
Our sales are seasonal due to different calendar events, holidays and seasonal weather and illness
patterns. Historically, the third fiscal quarter produces the highest net sales revenue during the fiscal
year.
Competitive Conditions
We generally sell our products in markets that are very competitive and mature. Our products compete
against similar products of many large and small companies, including well-known global competitors. In
many of the markets and industry segments in which we sell our products, we compete against other
branded products as well as retailers' private-label brands. We believe that we have certain key
competitive advantages, such as well recognized brands, engineering expertise and innovation, sourcing
and supply chain know-how, and productive co-development relationships with our manufacturers. We
support our products with advertising, promotions, strategic partnerships with ambassadors and
influencers, and other marketing activities, as well as an extensive sales force in order to build awareness
and to encourage new consumers to try our brands and products. We are well positioned in the industry
segments and markets in which we operate, often holding a leadership or significant market share
position. We believe these advantages allow us to bring our retailers a differentiated value proposition.
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7
The following table summarizes our primary competitors by business segment:
Segment
Competitor
Home & Outdoor
Lifetime Brands, Inc. (KitchenAid), Breville Group, Corning Incorporated (Pyrex), Progressive
International (SnapLock), Meyer Corporation (Farberware), Newell Brands Inc., Simple Human LLC,
Yeti Holdings, Inc., Bradshaw International (GoodCook), PMI Worldwide (Stanley), Patagonia, Gregory
Mountain Products, Mystery Ranch, CamelBak, The North Face, Deuter, Cotopaxi, Thule Group
Beauty & Wellness
Conair, Spectrum Brands Holdings Inc. (Remington), Coty Inc., Dyson Ltd, L'Oréal S.A., DevaCurl,
SharkNinja, Inc., Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands,
Inc., Lasko Products, LLC, Vesync Co., Ltd (Levoit), The Clorox Company (Brita), Zero Technologies,
LLC, Vornado Air Circulation Systems, Unilever (Blueair), Guardian Technologies LLC.
Environmental and Health and Safety Matters
Our operations are subject to national, state, local, and provincial jurisdictions’ environmental, health and
safety laws and regulations and industry-specific product certifications. Many of the products we sell are
subject to product safety laws and regulations in various jurisdictions. These laws and regulations specify
the maximum allowable levels of certain materials that may be contained in our products, provide
statutory prohibitions against misbranded and adulterated products, establish ingredients and
manufacturing procedures for certain products, specify product safety testing requirements, and set
product identification, labeling and claim requirements. For example, some of our Beauty & Wellness
segment’s customers require that our hair appliances comply with various safety certifications, including
UL certifications. Similarly, thermometers distributed by our Beauty & Wellness segment must comply
with various regulations governing the production and distribution of medical devices. Additionally, some
of our product lines are subject to product identification, labeling and claim requirements, which are
monitored and enforced by regulatory agencies, such as the U.S. Environmental Protection Agency (the
“EPA”), U.S. Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S.
Consumer Product Safety Commission.
During fiscal 2022, we were in discussions with the EPA regarding the compliance of packaging claims on
certain of our products in the air and water filtration categories and a limited subset of humidifier products
within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product
quality, safety or performance issues. As a result of these packaging compliance discussions, we
voluntarily implemented a temporary stop shipment action on the impacted products as we worked with
the EPA towards an expedient resolution. Our fiscal 2022 consolidated, and Beauty & Wellness
segment’s, net sales revenue, gross profit and operating income were materially and adversely impacted
by the stop shipment actions and the time needed to execute repackaging and relabeling plans. We
resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the
repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally,
as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on
certain additional humidifier products and certain additional air filtration products, which were also
completed during fiscal 2023. Although we have not been notified of any fines or penalties imposed
against us by the EPA related to this matter, there can be no assurances that such fines or penalties will
not be imposed in the future.
We recorded charges to cost of goods sold to write-off obsolete packaging for the affected products in our
inventory on-hand and in-transit. We have also incurred additional compliance costs comprised of
obsolete packaging, storage and other charges from vendors, which were recognized in cost of goods
sold and incremental warehouse storage costs and legal fees, which were recognized in SG&A. We refer
to these charges as “EPA compliance costs” throughout this Annual Report.
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8
The following table provides a summary of EPA compliance costs incurred during the periods presented:
Fiscal Years Ended Last Day of February
(in thousands)
2024
2023
2022
Cost of goods sold
$
—
$
16,928 1
$
17,728 2
SG&A
—
6,645
14,626
Total EPA compliance costs
$
—
$
23,573
$
32,354
(1) Includes a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and
affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal
2023.
(2) Includes a $13.1 million charge to cost of goods sold to write-off the obsolete packaging for the affected air filtration, water
filtration and humidifier products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022.
In addition, we incurred and capitalized into inventory costs to repackage a portion of our existing
inventory of the affected products beginning in the second quarter of fiscal 2022 through completion of
the repackaging in the third quarter of fiscal 2023.
An emerging trend with governmental and non-governmental organizations, consumers, shareholders,
retail customers, communities, and other stakeholders is increased focus and expectations on ESG
matters. These trends have led to, among other things, increased public and private social accountability
reporting requirements relating to labor practices, climate change, human trafficking and other ESG
matters and greater demands on our packaging and products. In our product space, some requirements
have already been mandated and we believe others may become required in the future. Examples of
current requirements include conflict minerals content reporting, customer reporting of foreign fair labor
practices in connection with our supply chain vendors, and evaluating the risks of human trafficking and
slavery.
We believe that we are in material compliance with these laws, regulations and other reporting
requirements. Due to the nature of our operations and the frequently changing nature of compliance and
social reporting standards and technology, we cannot predict with any certainty what future material
capital or operating expenditures, if any, will be required in order to comply with applicable laws,
regulations and other reporting mandates. Further, any failure to achieve our ESG goals or a perception
of our failure to act responsibly or to effectively respond to new, or changes in, legal or regulatory
requirements relating to ESG concerns could adversely affect our business, financial condition, results of
operations and reputation.
ESG Initiatives
We seek to maintain a best-in-class level of corporate governance on behalf of our stakeholders,
including our associates, customers, consumers, communities, and shareholders. We also recognize the
importance of environmental and social factors related to how we operate our business. We continued to
enhance and consolidate our ESG efforts and accelerate programs related to DEI&B to support our
Phase II transformation that concluded at the end of fiscal 2024, and we will continue these efforts as we
enter our Elevate for Growth era.
The Corporate Governance Committee of our Board of Directors has oversight of ESG-related matters,
including climate change risks and opportunities. Our ESG Task Force, which includes associate
representatives from our business segments and global shared services, leads the development and
implementation of our strategic ESG plan with the goal of aligning our ESG performance with relevant
standards, such as the Sustainability Accounting Standards Board (“SASB”) and the Task Force on
Climate Finance Disclosures (“TCFD”). In June 2023, we published our third ESG Report, which aligns
with relevant standards such as the SASB, the TCFD and the Global Reporting Initiative. Our ESG
Report summarizes our ESG strategy and performance, including in the areas of climate change, DEI&B
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9
and human capital, and environmental and natural capital management. Information in our ESG Report
is not part of this Annual Report or any other report we file with, or furnish to, the Securities and
Exchange Commission (“SEC”), except as expressly set forth by specific reference in such a filing.
We are implementing a system that is designed to minimize negative impacts of our practices on the
environment and we continue to work on initiatives to reduce emissions in our supply chain and product
use. As part of these efforts, and in order to strengthen our support of climate action, we became a
signatory of ‘We Mean Business’, a coalition of organizations and businesses with a goal of catalyzing
business action to accelerate the transition to a zero-carbon economy. With our participation in this
coalition, we intend to (1) report climate change data and measures to the Carbon Disclosure Project
aligned with the guidelines of the TCFD, (2) implement a responsible climate policy, and (3) develop
targets which were approved in October 2021 by the Science Based Targets initiative.
We will also continue to advance our DEI&B efforts as part of our ESG initiatives to support our focus on
attracting and retaining top talent, and to help promote a work environment where everyone has the
opportunity to grow to their fullest potential. We believe progress on these ESG initiatives will have a
positive impact on our shareholders, consumers, customers, our talented worldwide associates and the
communities in which we are proud to live and work.
Human Capital
Overview
We are committed to fostering a positive and engaging culture of inclusion, care, belonging, and support
where all people throughout our global workforce can thrive. Resources provided to enhance associates'
“total well-being” include learning and development opportunities, charitable leave policy, financial and
retirement planning advice and employee stock purchase programs, health and wellness programs, and
product discounts. Perks and benefits vary by region and office. We also monitor our culture and
associate engagement through a number of methods, including periodic culture surveys.
We have a performance evaluation and feedback process for all of our associates. We encourage career
planning at all levels of the Company. We have a formal system for identifying and developing talent and
growth for associates within our organization and support the creation of development and succession
plans across key positions in the Company. Our senior leadership team develops and recommends to
the Board of Directors succession plans for all of our senior management. Our compensation processes
support fair and equitable pay for all of our associates and is based on a ‘pay for performance’
philosophy.
We believe our culture, fair pay, benefits, rewards and recognition, healthy-living initiatives, collaborative
projects, and open communication between management and staff enables us to attract and retain
talented associates.
Our Associates
As of February 29, 2024, we employed 1,927 full-time associates worldwide. We also use temporary,
part-time and seasonal associates as needed.
None of our U.S. associates are covered by a collective bargaining agreement. Certain of our associates
in Europe and Vietnam are covered by collective arrangements or works counsel in accordance with local
practice. We have never experienced a work stoppage, and we believe that we have satisfactory working
relations with our associates.
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DEI&B
We believe that a diverse workforce is essential to innovation, growth, and the well-being of our
associates. We celebrate the diversity of our people and value the unique perspectives they bring. We
are committed to cultivating an inclusive culture where all of our associates can thrive and feel accepted
for who they are.
We are advancing short- and long-term initiatives which include: leadership coaching and training to build
awareness and sponsorship, recruitment actions to ensure we have diversity of new hires, associate
learning programs to develop skills that foster inclusion, associate resource groups to further support
inclusion, ongoing dialogue sessions with our associates and charitable donations to non-profit
organizations whose missions and values align with our culture.
Communities
We have a 50-plus-year tradition of supporting the communities where we live and work through
charitable donations from both the Company and its associates. In addition, we provide our associates
two paid community service days to donate their time to organizations that matter most to them. We
believe our community engagement and good corporate citizenship will lead to stronger communities and
shared success for our Company.
Available Information
We maintain our main Internet site at: http://www.helenoftroy.com. The information contained on this
website is not included as a part of, or incorporated by reference into, this Annual Report. We make
available on or through our main website’s Investor Relations page under the heading “Financials - SEC
Filings” certain reports and amendments to those reports that we file with, or furnish to, the SEC in
accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include
our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K,
our proxy statements on Schedule 14A, amendments to these reports, and the reports required under
Section 16 of the Exchange Act of transactions in our common stock by directors and officers. We make
this information available on our website free of charge as soon as reasonably practicable after we
electronically file the information with, or furnish it to, the SEC. The SEC maintains a website at https://
www.sec.gov that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. Also, on the Investor Relations page, under the heading
“Governance,” are our Code of Ethics, Code of Conduct, Corporate Governance Guidelines and the
Charters of the Committees of the Board of Directors.
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Item 1A. Risk Factors
Carefully consider the risks described below and all of the other information included in our Annual
Report when deciding whether to invest in our securities or otherwise evaluating our business. If any of
the risks or other events or circumstances described elsewhere in this Annual Report materialize, our
business, operating results or financial condition may suffer. In this case, the trading price of our
common stock and the value of your investment might significantly decline. The risks listed below are not
the only risks that we face. Additional risks unknown to us or that we currently believe are insignificant
may also affect our business.
You should also refer to the explanation of the qualifications and limitations on forward-looking
statements under “Information Regarding Forward-Looking Statements,” at the end of Item 7.,
“Management's Discussion and Analysis of Financial Condition and Results of Operations.” All forward-
looking statements made by us are qualified by the risk factors described below.
The following is a summary of some of the principal risk factors which are more fully described below.
Business, Operational and Strategic Risks
•
The geographic concentration of certain of our U.S. distribution facilities increases our risk to
disruptions that could affect our ability to deliver products in a timely manner.
•
The occurrence of cyber incidents, or failure by us or our third-party service providers to maintain
cybersecurity and the integrity of confidential internal or customer data could have a material
adverse effect on our operations and profitability.
•
A cybersecurity breach, obsolescence or interruptions in the operation of our central global
Enterprise Resource Planning systems and other peripheral information systems could have a
material adverse effect on our operations and profitability.
•
To compete successfully, we must develop and introduce a continuing stream of innovative new
products to meet changing consumer preferences.
•
Our operating results are dependent on sales to several large customers; furthermore, our large
customers may take actions that adversely affect our gross profit and operating results.
•
We are dependent on third-party manufacturers, most of which are located in Asia, and any
inability to obtain products from such manufacturers could have a material adverse effect on our
business, operating results and financial condition.
•
Our ability to deliver products to our customers in a timely manner and to satisfy our customers’
fulfillment standards are subject to several factors, some of which are beyond our control.
•
Our operating results may be adversely affected by trade barriers, exchange controls,
expropriations, and other risks associated with domestic and foreign operations including
uncertainty and business interruptions resulting from political changes and events in the U.S. and
abroad, and volatility in the global credit and financial markets and economy.
•
We are subject to risks related to our dependence on the strength of retail economies and may be
vulnerable in the event of a prolonged economic downturn, including a downturn from the effects
of macroeconomic conditions, any public health crises or similar conditions.
•
Our business is subject to weather conditions, the duration and severity of the cold and flu season
and other related factors.
•
We rely on our CEO and a limited number of other key senior officers to operate our business.
•
We are subject to risks associated with the use of licensed trademarks from or to third parties.
•
We may be unsuccessful in executing and realizing expected synergies from strategic business
initiatives such as acquisitions, divestitures and global restructuring plans, including Project
Pegasus.
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Legal, Regulatory and Tax Risks
•
Changes in laws and regulations, including environmental, employment and health and safety and
tax laws, and the costs and complexities of compliance with such laws could have a material
adverse impact on our business.
•
We face risks associated with the increased focus and expectations on climate change and other
environmental, social and governance matters.
•
Significant changes in or our compliance with regulations, interpretations or product certification
requirements could adversely impact our operations.
•
We face risks associated with global legal developments regarding privacy and data security that
could result in changes to our business practices, penalties, increased cost of operations, or
otherwise harm our business.
•
All of our products are manufactured by unaffiliated manufacturers, most of which are located in
China, Mexico and Vietnam; we face risks of significant tariffs or other restrictions being placed on
imports from China, Mexico or Vietnam or any retaliatory trade measures taken by China, Mexico
or Vietnam adversely impacting our business.
•
Under current U.S. federal income tax law, tax treatment of our non-U.S. income is dependent on
whether we are classified as a “controlled foreign corporation” for U.S. federal income tax
purposes.
•
Legislation enacted in Bermuda and Barbados in response to the European Union’s (“EU”) review
of harmful tax competition could adversely affect our operations.
•
Our judgments regarding the accounting for tax positions and the resolution of tax disputes may
impact our net earnings and cash flow.
•
We face risks associated with product recalls, product liability and other claims against us.
Financial Risks
•
Increased costs of raw materials, energy and transportation may adversely affect our operating
results and cash flow.
•
If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets
become impaired, we will be required to record impairment charges, which may be significant.
•
We face risks associated with foreign currency exchange rate fluctuations.
•
Our liquidity or cost of capital may be materially adversely affected by constraints or changes in
the capital and credit markets, interest rates and limitations under our financing arrangements.
•
Our projections of product demand, sales and net income are highly subjective in nature and our
future sales and net income could vary by a material amount from our projections.
You should carefully consider this summary with the more detailed descriptions of risks described below
and all of the other information included in our Annual Report when deciding whether to invest in our
securities or otherwise evaluating our business.
Business, Operational and Strategic Risks
Certain of our U.S. distribution facilities are geographically concentrated. This factor increases
our risk that disruptions could occur and significantly affect our ability to deliver products to our
customers in a timely manner. Such disruptions could have a material adverse effect on our
business.
During fiscal 2024, most of our U.S. distribution, receiving and storage functions were consolidated into
three distribution facilities in northern Mississippi and our new distribution facility in Gallaway, Tennessee
that became operational during the first quarter of fiscal 2024. Our new distribution facility is in proximity
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to our three distribution facilities in northern Mississippi. Approximately 59% of our consolidated gross
sales volume shipped from facilities in this region in fiscal 2024. Due to this geographical concentration,
any disruption in our distribution process in any of these facilities, even for a few days, could adversely
affect our business, operating results and financial condition. As examples, government mandated or
suggested isolation protocols relating to a pandemic or other public health crisis, or severe weather
events, could limit or disrupt the distribution process at these facilities, or even cause the closure of a
facility, which could have a material adverse effect on our business, operating results and financial
condition. These factors described above could cause delays in the delivery of our products that could
have a material and adverse effect on our business, operating results and financial condition.
The occurrence of cyber incidents, or failure by us or our third-party service providers to maintain
cybersecurity and the integrity of confidential internal or customer data could have a material
adverse effect on our operations and profitability. Such incidents may also result in faulty
business decisions, operational inefficiencies, damage to our reputation or our associate and
business relationships, and/or subject us to costs, fines, or lawsuits.
Information systems require constant updates to their security policies, networks, software, and hardware
systems to reduce the risk of unauthorized access, malicious destruction of data or information theft. In
addition, attacks upon information technology systems are increasing in their frequency, level of
sophistication, persistence and intensity, and are being conducted by sophisticated and organized groups
and individuals with a wide range of motives and expertise. We rely on commercially available systems,
software, tools, third-party service providers and monitoring to provide security for processing,
transmission and storage of confidential information and data. While we have security measures in
place, our systems, networks, and third-party service providers have been and will continue to be subject
to ongoing threats. We and our third-party service providers have experienced and expect to continue to
experience actual or attempted cyber-attacks of our information systems or networks. We do not believe
we have experienced any material system security breach that to date has had a material impact on our
operations or financial condition. However, if any such event, whether actual or perceived, were to occur,
it could have a material adverse effect on our business, operating results and financial condition. Our
security measures may also be breached in the future as a result of associate error, failure to implement
appropriate processes and procedures, advances in computer and software capabilities and encryption
technology, new tools and discoveries, malfeasance, third-party action, including cyber-attacks, hacking,
phishing attacks, malware (e.g., ransomware) or other misconduct by computer hackers or otherwise.
Additionally, we may have heightened cybersecurity, information security and operational risks as a result
of work-from-home arrangements. Our workforce operates with a combination of remote work and
flexible work schedules opening us up for cybersecurity threats and potential breaches as a result of
increased associate usage of networks other than company-managed networks. Furthermore, due to
geopolitical tensions around the world, the risk of cyber-attacks may be elevated. This could result in one
or more third-parties obtaining unauthorized access to our customer or supplier data or our internal data,
including personally identifiable information, intellectual property and other confidential business
information. Third-parties may also attempt through phishing attacks or other forms of social engineering
schemes or deceptive practices to fraudulently induce associates into disclosing sensitive information
such as usernames, passwords or other information in order to gain access to customer or supplier data
or our internal data, including intellectual property, financial, and other confidential business information.
Furthermore, although we limit the use of generative artificial intelligence (including machine learning)
(AI) technologies by our associates, our third-party manufacturers, vendors and service providers may
use generative AI technologies or systems. The development, adoption and use of AI technologies are
still in their early stages and are complex. The algorithms and models utilized in generative AI
technologies and systems may have limitations, including biases, errors, or inability to handle certain data
types or scenarios. There are also risks of system failures, disruptions or vulnerabilities that could
compromise the integrity, security or privacy of the AI generated content, including the use of
cyberattacks against such emerging technologies. The ineffective or inadequate AI development or
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deployment practices by any of our third-party manufacturers, vendors or service providers could result in
unintended consequences and may intensify our cybersecurity risks.
We believe our mitigation measures reduce but cannot eliminate the risk of a cyber incident; however,
there can be no assurance that our existing and planned precautions of backup systems, regular data
backups, security protocols and other procedures will be adequate to prevent significant damage, system
failure or data loss and the same is true for our partners, vendors and other third parties on which we rely.
Because techniques used to obtain unauthorized access or sabotage systems change frequently and
generally are not identified until they are launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative or mitigating measures. Though it is difficult to
determine what harm may directly result from any specific interruption or breach, any failure to maintain
performance, reliability, security and availability of our network infrastructure or otherwise maintain the
confidentiality, security, and integrity of data that we store or otherwise maintain on behalf of third-parties
may harm our reputation and our associate, customer and consumer relationships.
If such unauthorized disclosure or access does occur, we may be required to notify our customers,
consumers, associates or those persons whose information was improperly used, disclosed or accessed.
We may also be subject to claims of breach of contract for such use or disclosure, investigation and
penalties by regulatory authorities and potential claims by persons whose information was improperly
used or disclosed. We could also become the subject of regulatory action or litigation from our
consumers, customers, associates, suppliers, service providers, and shareholders, which could damage
our reputation, require significant expenditures of capital and other resources, and cause us to lose
business and revenue. Additionally, an unauthorized disclosure or use of information could cause
interruptions in our operations and might require us to spend significant management time and other
resources investigating the event and coordinating with local and federal law enforcement. Regardless of
the merits and ultimate outcome of these matters, we may be required to devote time and expense to
their resolution.
In addition, the increase in the number and the scope of data security incidents has increased regulatory
and industry focus on security requirements and heightened data security industry practices. The rapid
evolution and increased adoption of complex AI technologies has amplified this focus and continues to
influence and impact data security industry requirements and practices. New regulation, evolving
industry standards, and the interpretation of both, may cause us to incur additional expense in complying
with any new data security requirements. As a result, the failure to maintain the integrity of and protect
customer or supplier data or our confidential internal data could result in unintended consequences such
as reputational damage, legal liabilities or loss of business, which could have a material adverse effect on
our business, operating results and financial condition.
We rely on central global Enterprise Resource Planning (“ERP”) systems and other peripheral
information systems. A cybersecurity breach, obsolescence or interruptions in the operation of
our computerized systems or other information technologies could have a material adverse effect
on our operations and profitability.
Our operations are largely dependent on our ERP system. We continuously make adjustments to
improve the effectiveness of the ERP and other peripheral information systems, including the installation
of significant new subsystems. Our ERP system is subject to continually evolving cybersecurity and
technological risks, including risks associated with cloud data storage. Any failures or disruptions in the
ERP and other information systems, including a cybersecurity breach, or any complications resulting from
ongoing adjustments to our systems could cause interruption or loss of data in our information or
logistical systems that could materially impact our ability to procure products from our factories and
suppliers, transport them to our distribution facilities, and store and deliver them to our customers on time
and in the correct amounts. In addition, natural disasters or other extraordinary events may disrupt our
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information systems and other infrastructure, and our data recovery processes may not be sufficient to
protect against loss.
To compete successfully, we must develop and introduce a continuing stream of innovative new
products to meet changing consumer preferences.
Our long-term success in the competitive retail environment depends on our ability to develop and
commercialize a continuing stream of innovative new products that meet changing consumer preferences
and take advantage of opportunities sooner than our competition. We face the risk that our competitors
will introduce innovative new products that compete with our products. There are numerous uncertainties
inherent in successfully developing and commercializing new products on a continuing basis and new
product launches may not deliver expected growth in sales or operating income. If we are unable to
develop and introduce a continuing stream of competitive new products, it may have an adverse effect on
our business, operating results and financial condition.
Large customers may take actions that adversely affect our gross profit and operating results.
With the continuing trend towards retail trade consolidation, we are increasingly dependent upon key
customers whose bargaining strength is substantial and growing. We may be negatively affected by
changes in the policies of our customers, such as on-hand inventory reductions, limitations on access to
shelf space, use of private label brands, price and term demands, actions to respond to public health
crises, and other conditions, which could negatively impact our business, operating results and financial
condition.
Certain of our customers source and sell products under their own private label brands that compete with
our products. Additionally, as large traditional retail and online customers grow even larger and become
more sophisticated, they may continue to demand lower pricing, special packaging, shorter lead times for
the delivery of products, smaller more frequent shipments, or impose other requirements on product
suppliers. These business demands may relate to inventory practices, logistics or other aspects of the
customer-supplier relationship. If we do not effectively respond to these demands, these customers
could decrease their purchases from us. A reduction in the demand for our products by these customers
and the costs of complying with their business demands could have a material adverse effect on our
business, operating results and financial condition.
Our operating results are dependent on sales to several large customers and the loss of, or
substantial decline in, sales to a top customer could have a material adverse effect on our
revenues and profitability.
A few customers account for a substantial percentage of our net sales revenue. Our financial condition
and operating results could suffer if we lost all or a portion of the sales to any one of these customers. In
particular, sales to our two largest customers accounted for approximately 31% of our consolidated net
sales revenue in fiscal 2024. While only two customers individually accounted for 10% or more of our
consolidated net sales revenue in fiscal 2024, sales to our top five customers in aggregate accounted for
approximately 47% of fiscal 2024 consolidated net sales revenue. We expect that a small group of
customers will continue to account for a significant portion of our net sales revenue. Although we have
long-standing relationships with our major customers, we generally do not have written agreements that
require these customers to buy from us or to purchase a minimum amount of our products. A substantial
decrease in sales to any of our major customers could have a material adverse effect on our financial
condition and operating results. For example, we had reduced sales to Bed, Bath & Beyond during fiscal
2024 in comparison to the prior year as a result of its bankruptcy. Some of our customers'
creditworthiness may be vulnerable to the impact of a prolonged economic downturn or a public health
crisis. We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales
terms as appropriate. Despite these efforts, a deterioration in the credit worthiness or bankruptcy filing of
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a key customer could have a material adverse effect on our business, operating results and financial
condition.
We are dependent on third-party manufacturers, most of which are located in Asia, and any
inability to obtain products from such manufacturers could have a material adverse effect on our
business, operating results and financial condition.
All of our products are manufactured by unaffiliated companies, most of which are in Asia, principally in
China. For fiscal 2024, finished goods manufactured in Asia comprised approximately 79% of total
finished goods purchased. This concentration exposes us to risks associated with doing business
globally, including among others: global public health crises (such as pandemics and epidemics);
changing international political relations and conflicts; labor availability and cost; changes in laws,
including tax laws, regulations and treaties; changes in labor laws, regulations and policies; changes in
customs duties, additional tariffs and other trade barriers; changes in shipping costs; currency exchange
fluctuations; local political unrest; an extended and complex transportation cycle; the impact of changing
economic conditions; and the availability and cost of raw materials and merchandise. In recent years,
increasing labor costs, import tariffs, regional labor dislocations driven by new government policies, local
inflation, changes in ocean cargo carrier capacity and costs, the impact of energy prices on
transportation, and fluctuations in the Chinese Renminbi against the U.S. Dollar have resulted in
variability in our cost of goods sold. In the past, certain Chinese suppliers have closed operations due to
economic conditions that pressured their profitability. Although we have multiple sourcing partners for
certain products, occasionally we may be unable to source certain items on a timely basis due to
changes occurring with our suppliers. We believe that we can source certain similar products outside of
China and are moving towards a more diversified supplier base through continuously exploring the
expansion of sourcing alternatives in other countries, making progress towards such capabilities during
fiscal 2024. However, the relocation of any production capacity will continue to require more time and
could require substantial costs. The political, legal and cultural environment in Asia is rapidly evolving,
and any change that impairs our ability to obtain products from manufacturers in that region, or to obtain
products at marketable rates, could have a material adverse effect on our business, operating results and
financial condition.
Any disruption to our supply chain, even for a relatively short period of time, could cause a loss of
revenue, which could adversely affect our operating results. Additionally, any surges in demand and
shifts in shopping patterns, as well as other factors, can strain the global supply chain network resulting in
higher inbound freight costs and surges in prices for raw materials, components and semiconductor
chips, which could adversely impact our operating costs. During fiscal 2024, inbound freight costs have
continued to decline from the higher costs we experienced from the COVID-19 pandemic and related
global supply chain disruptions and have begun to approach levels seen prior to the impact of such
factors. However, if global supply chain disruptions re-emerge, we may experience further cost increases
which could have a material adverse effect on our business, operating results and financial condition.
With most of our manufacturers located in Asia, our production lead times are relatively long. Therefore,
we must commit to production in advance of customer orders. If we fail to forecast customer or consumer
demand accurately, we may encounter difficulties in filling customer orders on a timely basis or in
liquidating excess inventories. We may also find that customers are canceling orders or returning
products. Any of these results could have a material adverse effect on our business, operating results
and financial condition.
Our ability to deliver products to our customers in a timely manner and to satisfy our customers’
fulfillment standards are subject to several factors, some of which are beyond our control.
Retailers place great emphasis on timely delivery of our products for specific selling seasons, especially
during our third fiscal quarter, and on the fulfillment of consumer demand throughout the year. We cannot
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control all of the various factors that might affect product delivery to retailers. Vendor production delays,
difficulties encountered in shipping from overseas, customs clearance delays, and operational issues with
any of the third-party logistics providers we use in certain countries are on-going risks of our business.
We also rely upon third-party carriers for our product shipments from our distribution facilities to
customers. In certain circumstances, we rely on the shipping arrangements our suppliers have made in
the case of products shipped directly to retailers from the suppliers. Accordingly, we are subject to risks,
including labor disputes, inclement weather, public health crises (such as pandemics and epidemics),
natural disasters, possible acts of terrorism, port and canal backlogs and blockages, availability of
shipping containers, carrier-imposed capacity restrictions, carrier delays, shortages of qualified drivers,
and increased security restrictions associated with the carriers’ ability to provide delivery services to meet
our shipping needs. Our third-party manufacturing partners are not equipped to hold meaningful amounts
of inventory and if shipping container capacity is limited or unavailable, they could pause manufacturing,
which could ultimately impact our ability to meet consumer demand on a timely basis. Further, our
delivery process must often accommodate special vendor requirements to use specific carriers and
delivery schedules. Failure to deliver products to our retailers in a timely and effective manner could
damage our reputation and brands and result in the loss of customers or reduced orders, which could
have a material adverse effect on our business, operating results and financial condition.
Our operating results may be adversely affected by trade barriers, exchange controls,
expropriations, and other risks associated with domestic and foreign operations, including
uncertainty and business interruptions resulting from political changes and events in the U.S. and
abroad and volatility in the global credit and financial markets and economy.
The economies of foreign countries important to our operations, including countries in Asia, EMEA and
Latin America, could suffer slower economic growth or economic, social and/or political instability or
hyperinflation in the future. Our international operations in countries in Asia, EMEA and Latin America,
including manufacturing and sourcing operations (and the international operations of our customers), are
subject to inherent risks which could adversely affect us. Additionally, there may be uncertainty and
business interruptions resulting from political changes and events in the U.S. and abroad, ongoing
terrorist activity, and other global events. The global credit and financial markets have recently
experienced volatility and disruptions, including diminished liquidity and credit availability, declines in
consumer confidence, declines in economic growth, and uncertainty about economic stability. The
financial markets and the global economy may also be adversely affected by the current or anticipated
impact of military conflict or other geopolitical events. Sanctions imposed by the U.S. and other countries
in response to such conflicts may also adversely impact the financial markets and the global economy,
and any economic countermeasures by affected countries and others could exacerbate market and
economic instability. There can be no assurance that further deterioration in credit and financial markets
and confidence in economic conditions will not occur.
The domestic and foreign risks of these changes include, among other things:
•
protectionist policies restricting or impairing the manufacturing, sales or import and export of our
products;
•
new restrictions on access to markets;
•
lack of required infrastructure;
•
inflation (including hyperinflation) or recession;
•
changes in, and the burdens and costs of compliance with, a variety of U.S. and foreign laws and
regulations, including environmental laws, occupational health and safety laws, tax laws, and
accounting standards;
•
social, political or economic instability;
•
acts of war and terrorism;
•
natural disasters and public health crises, such as pandemics and epidemics;
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•
reduced protection of intellectual property rights in some countries;
•
increases in duties and taxation;
•
restrictions on transfer of funds or exchange of currencies;
•
currency devaluations;
•
expropriation of assets; and
•
other adverse changes in policies, including monetary, tax or lending policies, encouraging
foreign investment or foreign trade by our host countries.
Should any of these events occur, our ability to sell or export our products or repatriate profits could be
impaired, we could experience a loss of sales and profitability from our domestic or international
operations, and/or we could experience a substantial impairment or loss of assets, any of which could
materially and adversely affect our business, operating results and financial condition.
We are subject to risks related to our dependence on the strength of retail economies and may be
vulnerable in the event of a prolonged economic downturn, including a downturn from the effects
of macroeconomic conditions, any public health crises or similar conditions.
Our business depends on the strength of the retail economies in various parts of the world, primarily in
North America and to a lesser extent EMEA, Asia and Latin America. These retail economies are
affected for the most part by factors such as consumer demand and the condition of the retail industry,
which, in turn, are affected by general economic conditions and specific events such as natural disasters,
public health crises (such as pandemics and epidemics), terrorist attacks and political unrest. Consumer
spending in any geographic region is generally affected by a number of factors, including among others,
local economic conditions, government actions, inflation, interest rates and credit availability, energy
costs, commodity prices, unemployment rates, higher consumer debt levels, reductions in net worth,
home foreclosures and reductions in home values, gasoline prices, and consumer confidence, all of
which are beyond our control. Consumer purchases of discretionary items tend to decline during
recessionary periods, when disposable income is lower, and may impact sales of our products.
Measures imposed, or that may be imposed, by national, state and local authorities in response to any
public health crises may have impacts of uncertain severity and duration on domestic and foreign
economies. The effectiveness of economic stabilization efforts, including government payments and
loans to affected citizens and industries, is uncertain. Any sustained economic downturn in the U.S. or
any of the other countries in which we conduct significant business, may cause significant readjustments
in both the volume and mix of our product sales, which could materially and adversely affect our
business, operating results and financial condition. We cannot reasonably estimate the duration and
severity of existing macroeconomic conditions, which have had and may continue to have a material
impact on our business. Additionally, global issues may affect our business and the global economy,
including the geopolitical impact of military conflict and any related economic or other sanctions. As a
result, current financial information may not necessarily be indicative of future operating results, and our
plans to address the impact of macroeconomic trends and global issues may change.
Our business is subject to weather conditions, the duration and severity of the cold and flu
season and other related factors, which can cause our operating results to vary from quarter to
quarter and year to year.
Sales in our Beauty & Wellness segment are influenced by weather conditions. Sales volumes for
thermometers and humidifiers and heating appliances are higher during, and subject to the severity of,
the cold weather months, while sales of fans are higher during, and subject to weather conditions in,
spring and summer months. Weather conditions can also more broadly impact sales across the
organization. Additionally, natural disasters (such as wildfires, hurricanes and ice storms), public health
crises (such as pandemics and epidemics), or unusually severe winter weather may result in temporary
unanticipated fluctuations in retail traffic and consumer demand, may impact our ability to staff our
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distribution facilities or could otherwise impede timely transport and delivery of products to and from our
distribution facilities. Sales in our Beauty & Wellness segment are also impacted by cough, cold and flu
seasonal trends, including the duration and severity of the cold and flu season. These factors could have
a material effect on our business, operating results and financial condition.
We rely on our CEO and a limited number of other key senior officers to operate our business.
The loss of any of these individuals could have a material adverse effect on our business.
The loss of our CEO or any of our key senior officers could have a material adverse effect on our
business, operating results and financial condition, particularly if we are unable to hire and integrate
suitable replacements on a timely basis. Further, as we continue to grow our business, we will continue
to adjust our senior management team. If we are unable to attract or retain the right individuals for the
team, it could hinder our ability to efficiently execute our business, and could disrupt our operations or
otherwise have a material adverse effect on our business.
We rely on licensed trademarks from third parties and license certain trademarks to third parties
in exchange for royalty income, the loss of which could have a material adverse effect on our
revenues and profitability.
A significant portion of our sales revenue comes from selling products under licensed trademarks,
particularly in the Beauty & Wellness segment. As a result, we are dependent upon the continued use of
these trademarks. Additionally, we license certain owned trademarks to third parties in exchange for
royalty income. It is possible that certain actions taken by us, our licensors, licensees, or other third
parties might diminish greatly the value of any of our licensed trademarks. Some of our licensors and
licensees also have the ability to terminate their license agreements with us at their option subject to
each parties’ right to continue the license for a limited period of time following notice of termination. If we,
or our licensees, were unable to sell products under these licensed trademarks, or one or more of our
license agreements were terminated or the value of the trademarks were diminished, the effect on our
business, operating results and financial condition could be both negative and material.
We may be unsuccessful in executing and realizing expected synergies from strategic business
initiatives such as acquisitions, divestitures, and global restructuring plans (including Project
Pegasus), which may adversely affect the price of our common stock.
We continue to look for strategic business opportunities to drive long-term growth and operating
efficiencies, which may include acquisitions, divestitures and/or global restructuring plans. We frequently
evaluate our brand portfolio and product portfolio and may consider acquisitions that complement our
business or divestitures, or exits of businesses, that we no longer believe to be an appropriate strategic
fit. We have initiated, and may initiate in the future, global restructuring plans, such as Project Pegasus,
to achieve strategic objectives and improve financial results. Any acquisition, divestiture or global
restructuring plan, if not favorably received by consumers, shareholders, analysts, and others in the
investment community, could have a material adverse effect on the price of our common stock.
In addition, any acquisition, divestiture or global restructuring plan, including Project Pegasus, involves
numerous risks, including:
•
our ability to successfully complete the initiative in a timely manner, or at all;
•
the initiative may not advance our business strategy as expected;
•
challenges realizing anticipated cost savings, efficiencies, synergies, financial targets and other
benefits;
•
difficulties in accurately predicting costs and future savings;
•
costs incurred in completing the initiative may be greater than anticipated;
•
the initiative may lead to increases in costs in other aspects of our business such as increased
conversion, outsourcing or distribution costs;
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•
diversion of management's attention from other business concerns;
•
challenges in integrating or separating personnel and financial or other systems;
•
potential loss of key employees and/or reduced employee morale and productivity; and
•
difficulties in transitioning and preserving customer, contractor, supplier, and other important third-
party relationships.
Acquisitions pose additional risks, including:
•
difficulties in the assimilation of the operations, technologies, and products;
•
challenges in integrating distribution channels;
•
changes in cash flows or other market-based assumptions or conditions that cause the value of
acquired assets to fall below book value;
•
risks associated with subsequent losses or operating asset write-offs, contingent liabilities and
impairment of related acquired intangible assets including goodwill; and
•
risks of entering markets in which we have no or limited experience.
Divestitures pose additional risks, including:
•
our ability to find appropriate buyers;
•
difficulties executing transactions on favorable terms;
•
separating divested business operations with minimal impact to our remaining operations;
•
risks associated with operating asset write-offs and impairment charges; and
•
challenges effectively managing any transition service arrangements.
Legal, Regulatory and Tax Risks
Changes in laws and regulations, including environmental, employment and health and safety and
tax laws, and the costs and complexities of compliance with such laws could have a material
adverse impact on our business.
The impact of future legislation in the U.S. or abroad, including such things as employment and health
insurance laws, environmental and climate change related legislation, tax legislation, regulations or
treaties is always uncertain. Global, federal and local legislative agendas from time to time contain
numerous proposals dealing with environmental policy, energy policy, taxes, financial regulation,
transportation policy and infrastructure policy, among others that, if enacted into law, could increase our
costs of doing business. Changes in government administrations in the U.S. or abroad, increase the
uncertainty of future changes in legislation, enhanced regulations, and greater oversight, or more
stringent interpretations, of existing policies by regulatory agencies. Changes in such laws, regulations or
oversight could cause us to incur material capital or operating expenditures in the future to comply with
applicable laws and regulations, increase our effective income tax rate, delay or interrupt distribution of
our products, or make them more costly to produce, all of which could have a material adverse impact on
our business.
For example, the Organisation for Economic Co-operation and Development has introduced a framework
to implement a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Certain
countries in which we operate have enacted legislation to adopt Pillar Two and other countries are
considering changes to their tax laws to implement this framework. The EU agreed to implement Pillar
Two starting in 2024. In response to Pillar Two, the government of Bermuda enacted a 15% corporate
income tax in December 2023 that will become effective for us in fiscal 2026. Although we currently do
not expect this tax enacted by Bermuda to have a material impact to our consolidated financial
statements, we will continue to monitor and evaluate impact as further regulatory guidance becomes
available. Whether, and to what extent, Pillar Two is adopted or enacted by the other jurisdictions in
which we operate is uncertain and could increase the cost and complexity of compliance and may
adversely affect our global effective tax rate, financial condition and results of operations.
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As additional tax or financial regulatory guidance is issued by the applicable authorities and accounting
treatment is clarified, we perform additional analysis on the application of the law and we refine our
estimates. Our final analysis may be different from provisional amounts, which could materially affect our
tax obligations, effective tax rate and operating results in the period completed.
Increased focus and expectations on climate change and other ESG matters could have a material
adverse effect on our business, financial condition and results of operations and damage our
reputation.
Increased focus and expectations on ESG are emerging trends with governmental and non-governmental
organizations, consumers, shareholders, retail customers, communities, and other stakeholders. These
trends have led to, among other things, increased public and private social accountability reporting
requirements relating to labor practices, climate change, human trafficking and other ESG matters and
greater demands on our packaging and products. The increased focus on ESG matters may also lead to
new or more regulations and customer, shareholder and consumer demands that could require us to
incur additional costs or make changes to our operations to comply with new regulations or address
these demands. For example, we anticipate the reporting requirements under the EU Corporate
Sustainability Reporting Directive to be effective for us in fiscal 2029. We expect that these trends will
continue. If we are unable to adequately respond to, or we are not perceived as adequately responding
to, existing or new requirements or demands, customers and consumers may choose to purchase
products from another company or a competitor. Increased requirements and costs to comply with these
requirements, such as climate change regulations and international accords may also cause disruptions
in or higher costs associated with manufacturing or distributing our products. Any failure to achieve our
ESG goals or a perception of our failure to act responsibly or to effectively respond to new, or changes in,
legal or regulatory requirements relating to ESG matters could adversely affect our business, financial
condition, results of operations and reputation.
Significant changes in or our compliance with regulations, interpretations or product certification
requirements could adversely impact our operations.
As a global company, we are subject to U.S. and foreign regulations, including environmental, health and
safety laws, and industry-specific product certifications. Many of the products we sell are subject to
product safety laws and regulations in various jurisdictions. These laws and regulations specify the
maximum allowable levels of certain materials that may be contained in our products, provide statutory
prohibitions against misbranded and adulterated products, establish ingredients and manufacturing
procedures for certain products, specify product safety testing requirements, and set product
identification, labeling and claim requirements. For example, thermometers distributed by our Beauty &
Wellness segment must comply with various regulations governing the production and distribution of
medical devices.
Significant new regulations, material changes to existing regulations, or greater oversight, enforcement or
changes in interpretation of existing regulations, could further delay or interrupt distribution of our
products in the U.S. and other countries, result in fines or penalties or cause our costs of compliance to
increase. We cannot guarantee that our products will receive regulatory approval in all countries.
Similarly, some of our Beauty & Wellness segment’s customers require that our hair appliances comply
with various safety certifications, including UL certifications. Significant new certification requirements or
changes to existing certification requirements could further delay or interrupt distribution of our products,
or make them more costly to produce.
We are not able to predict the nature of potential changes to, or enforcement of laws, regulations, product
certification requirements, repeals or interpretations. Nor are we able to predict the impact that any of
these changes would have on our business in the future. Further, if we were found to be noncompliant
with applicable laws and regulations in these or other areas, we could be subject to governmental or
regulatory actions, including fines, import detentions, injunctions, product withdrawals or recalls or asset
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seizures, any of which could have a material adverse effect on our business, results of operations and
financial condition.
Additionally, some of our product lines are subject to product identification, labeling and claim
requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S. Customs
and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety
Commission. As discussed elsewhere in this Annual Report, during fiscal 2022, we were in discussions
with the EPA regarding the compliance of packaging claims on certain of our products in the air and water
filtration categories and a limited subset of humidifier products within the Beauty & Wellness segment that
are sold in the U.S. As a result of these packaging compliance discussions, we voluntarily implemented a
temporary stop shipment action on the impacted products as we worked with the EPA towards an
expedient resolution. We resumed normalized levels of shipping of the affected inventory during fiscal
2022 and we completed the repackaging and relabeling of our existing inventory of impacted products
during fiscal 2023. Additionally, as a result of continuing dialogue with the EPA, we executed further
repackaging and relabeling plans on certain additional humidifier products and certain additional air
filtration products, which were also completed during fiscal 2023. Although, we have not been notified of
any fines or penalties imposed against us by the EPA related to this matter, there can be no assurances
that such fines or penalties will not be imposed in the future. Additional impacts or more pronounced
adverse impacts may arise that we are not currently aware of today. As a result, our business, results of
operations and financial condition could be adversely and materially impacted in ways that we are not
able to predict today. For additional information refer to Item 7., “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” including “EPA Compliance Costs” in this Annual
Report.
Global legal developments regarding privacy and data security could result in changes to our
business practices, penalties, increased cost of operations, or otherwise harm our business.
As a global company, we are subject to global privacy and data security laws, regulations, and codes of
conduct that apply to our various business units. These laws and regulations may be inconsistent across
jurisdictions and are subject to evolving and differing interpretations. Government regulators, privacy
advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use,
store, share and transmit personal data. This increased scrutiny may result in new interpretations of
existing laws, thereby further impacting our business.
New and emerging global and local laws on privacy, data and related technologies, as well as industry
self-regulatory codes, are creating new compliance obligations and expanding the scope of potential
liability, either jointly or severally with our customers and suppliers. While we have invested in readiness
to comply with applicable requirements, these new and emerging laws, regulations and codes may affect
our ability to reach current and prospective consumers, to respond to consumer requests under such
laws (such as individual rights of access, correction, and deletion of their personal information), and to
implement our business models effectively. The costs of compliance or failure to comply with such laws,
regulations, codes of conduct and expectations could have a material adverse impact on our financial
condition and results of operations.
If significant tariffs or other restrictions are placed on imports from China, Mexico or Vietnam or
any retaliatory trade measures are taken by China, Mexico or Vietnam, our business and results of
operations could be materially and adversely affected.
All of our products are manufactured by unaffiliated manufacturers, most of which are located in China,
Mexico, Vietnam and the U.S. This concentration exposes us to risks associated with doing business
globally, including changes in tariffs. Any alteration of trade agreements and terms between China,
Mexico, Vietnam and the U.S., including limiting trade with China, Mexico and Vietnam, imposing
additional tariffs on imports from China, Mexico or Vietnam and potentially imposing other restrictions on
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imports from China, Mexico or Vietnam to the U.S. may result in further or higher tariffs, or retaliatory
trade measures by China, Mexico or Vietnam, all of which could have a material adverse effect on our
business and operating results.
Under current U.S. federal income tax law, tax treatment of our non-U.S. income is dependent on
whether we are classified as a “controlled foreign corporation” for U.S. federal income tax
purposes. Changes in the composition of our stock ownership could have an impact on our
classification. If our classification were to change, it could have a material adverse effect on the
largest U.S. shareholders and, in turn, on our business.
A non-U.S. corporation, such as ours, will constitute a “controlled foreign corporation” or “CFC” for U.S.
federal income tax purposes if its largest U.S. shareholders together own more than 50 percent of the
stock outstanding. A U.S. shareholder is defined as any U.S. person who owns directly, indirectly, or
constructively: (1) 10 percent or more of the total combined voting power of all classes of stock, or (2) 10
percent or more of the total value of shares of all classes of stock. If the IRS or a court determined that
we were a CFC at any time during the tax year, then each of our U.S. shareholders as defined above
would be required to include in gross income for U.S. federal income tax purposes its pro rata share of
our “subpart F income” (and the subpart F income of any of our subsidiaries determined to be a CFC) for
the period during which we (and our non-U.S. subsidiaries) were deemed a CFC. In addition, any gain
on the sale of our shares realized by such a shareholder may be treated as ordinary income to the extent
of the shareholder’s proportionate share of our and our CFC subsidiaries’ undistributed earnings and
profits accumulated during the shareholder’s holding period of the shares while we were deemed to be a
CFC.
Legislation enacted in Bermuda and Barbados in response to the EU's review of harmful tax
competition could adversely affect our operations.
Our jurisdiction of organization is Bermuda and one of our subsidiaries is organized in Barbados, two of
the countries identified in the EU Economic and Financial Affairs Council (“ECOFIN”) report issued in
December 2017 listing non-cooperative tax jurisdictions. In response to the ECOFIN report, “economic
substance” legislation was enacted in Bermuda and Barbados and ECOFIN subsequently declared that
both countries “cooperate with the EU” and are considered to have “implemented all commitments.”
The economic substance legislation in each of Bermuda and Barbados requires certain entities engaged
in “relevant activities” in that country to maintain a substantial economic presence in the country, and to
satisfy economic substance requirements. The list of “relevant activities” in the respective statutes
includes carrying on as a business any one or more of several enumerated activities, such as
headquarters, shipping, distribution and service center, intellectual property and holding entities. Any
entity that is required to satisfy economic substance requirements must file a declaration with the
Bermuda Registrar of Companies and the Ministry of International Business and Industry in Barbados, as
applicable.
Although the local authorities have released some implementing guidelines, the impact of the foregoing
legislation and developments is unclear, including how the requirements will be measured and whether
additional or revised requirements may be enacted by Bermuda or Barbados. Failure to comply with the
economic substance requirements could result in automatic disclosure of relevant information to
competent authorities in the relevant EU member state or other jurisdiction in which the Company has its
holding entity, its ultimate parent entity or an owner or beneficial owner. Other sanctions include financial
penalties, restriction or regulation of business activities and/or being struck off as a registered entity in
Bermuda or Barbados. We cannot predict the effect of Bermuda’s or Barbados’s current or future
economic substance requirements on our business, which may impact the manner and jurisdictions in
which we operate, and which could adversely affect our business, financial condition or results of
operations.
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Our judgments regarding the accounting for tax positions and the resolution of tax disputes may
impact our net earnings and cash flow.
Significant judgment is required to determine our effective tax rate and evaluate our tax positions. We
provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or
measurement criteria prescribed by applicable accounting standards. Fluctuations in federal, state, local
and foreign taxes or a change to uncertain tax positions, including related interest and penalties, may
impact our effective tax rate and financial results. Additionally, we are subject to audits in the various
taxing jurisdictions in which we conduct business. In cases where audits are conducted and issues are
raised, a number of years may elapse before such issues are finally resolved. Unfavorable resolution of
any tax matter could increase the effective tax rate, which could have an adverse effect on our operating
results and cash flow. For additional information regarding our taxes, see Note 18 to the accompanying
consolidated financial statements.
Our business involves the potential for product recalls, product liability and other claims against
us, which could materially and adversely affect our business, operating results and financial
condition.
We are, from time to time, involved in various claims, litigation matters and regulatory proceedings that
arise in the ordinary course of our business and that could have a material adverse effect on us. These
matters may include personal injury and other tort claims, deceptive trade practice disputes, intellectual
property disputes (including the Patent Litigation and ITC Action (each as defined below) regarding our
PUR gravity-fed water filters), product recalls, contract disputes, warranty disputes, employment and tax
matters and other proceedings and litigation, including class actions. It is not possible to predict the
outcome of pending or future litigation. As with any litigation, it is possible that some of the actions could
be decided unfavorably, resulting in significant liability and, regardless of the ultimate outcome, can be
costly to defend. Our results and our business could also be negatively impacted if one of our brands
suffers substantial damage to its reputation due to a significant product recall or other product-related
litigation and if we are unable to effectively manage real or perceived concerns about the safety, quality,
or efficacy of our products.
We also face exposure to product liability and other claims in the event that one of our products is alleged
to have resulted in property damage, bodily injury or other adverse effects. Although we maintain liability
insurance in amounts that we believe are reasonable, that insurance is, in most cases, subject to large
self-insured retentions for which we are responsible. We cannot provide assurance that we will be able to
maintain such insurance on acceptable terms, if at all in the future, or that product liability or other claims
will not exceed the amount of insurance coverage, or that all such matters would be covered by our
insurance. As a result, these types of claims could have a material adverse effect on our business,
operating results and financial condition.
Financial Risks
Increased costs of raw materials, energy and transportation may adversely affect our operating
results and cash flow.
Significant increases in the costs and availability of raw materials, energy and transportation may
negatively affect our operating results. Our suppliers purchase significant amounts of metals and plastics
to manufacture our products. In addition, they also purchase significant amounts of electricity to supply
the energy required in their production processes. Global political instabilities and tensions and many
other factors may increase fuel prices resulting in higher transportation prices and product costs. We are
heavily dependent on inbound sea, rail and truck freight. In the past, disruptions in the global supply
chain and freight networks increased our cost of goods sold and certain operating expenses and any
future disruptions could have a material adverse impact on our costs.
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The cost of raw materials, energy and transportation, in the aggregate, represents a significant portion of
our cost of goods sold and certain operating expenses, which we may not be able to pass on to our
customers. Our operating results could be adversely affected by future increases in these costs.
Additionally, the loss or disruption of essential manufacturing and supply elements such as raw materials
or other finished product components, restricted transportation or increased freight costs, reduced
workforce, or other manufacturing and distribution disruption could adversely impact our ability to meet
our customers’ needs.
If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets
become impaired, we will be required to record impairment charges, which may be significant.
A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a
result of past acquisitions. We do not amortize goodwill and indefinite-lived intangible assets, but rather
review them for impairment on an annual basis or more frequently whenever events or changes in
circumstances indicate that their carrying value may not be recoverable. We review intangible assets
with definite lives and long-lived assets held and used for impairment if a triggering event occurs during
the reporting period. We evaluate any long-lived assets held for sale quarterly to determine if fair value
less cost to sell has changed during the reporting period. We record impairment charges to the extent
the carrying values of these assets are not recoverable in accordance with the applicable accounting
standards.
Considerable management judgment is necessary in reaching a conclusion regarding the
reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external
conditions, considering the resulting operating changes and their impact on estimated future cash flows,
determining the appropriate discount factors to use, and selecting and weighting appropriate comparable
market level inputs. The recoverability of these non-current assets is dependent upon achievement of
our projections and the continued execution of key initiatives related to revenue growth and profitability.
The rates used in our projections are management’s estimate of the most likely results over time, given a
wide range of potential outcomes. The assumptions and estimates used in our impairment testing involve
significant elements of subjective judgment and analysis by our management. While we believe that the
assumptions we use are reasonable at the time made, changes in business conditions or other
unanticipated events and circumstances may occur that cause actual results to differ materially from
projected results and this could potentially require future adjustments to our asset valuations.
Events and changes in circumstances that may indicate there is impairment and which may indicate
interim impairment testing is necessary include, but are not limited to: strategic decisions to exit a
business or dispose of an asset made in response to changes in economic, political and competitive
conditions; the impact of the economic environment on our customer base and on broad market
conditions that drive valuation considerations by market participants; our internal expectations with regard
to future revenue growth and the assumptions we make when performing our impairment reviews; a
significant decrease in the market price of our assets; a significant adverse change in the extent or
manner in which our assets are used; a significant adverse change in legal factors or the business
climate that could affect our assets; an accumulation of costs significantly in excess of the amount
originally expected for the acquisition of an asset; and significant changes in the cash flows associated
with an asset. As a result of such circumstances, we may be required to revise certain accounting
estimates and judgments related to the valuation of goodwill, indefinite-lived and definite-lived intangible
assets and other long-lived assets, which could result in material impairment charges. Any such
impairment charges could have a material adverse effect on our results of operations.
Our operating results may be adversely affected by foreign currency exchange rate fluctuations.
The U.S. Dollar is the functional currency for the Company and all of its subsidiaries. Changes in the
relation of other foreign currencies to the U.S. Dollar will affect our sales and profitability and can result in
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exchange losses because we have operations and assets located outside the U.S. We transact a portion
of our international business in currencies other than the U.S. Dollar (“foreign currencies”). Such
transactions include sales and operating expenses. As a result, portions of our cash, trade accounts
receivable and trade accounts payable are denominated in foreign currencies. Accordingly, foreign
operations will continue to expose us to foreign currency exchange rate fluctuations, which may result in
the recognition of foreign exchange losses upon remeasurement to U.S. Dollars. Additionally, we
purchase a substantial amount of our products from Chinese manufacturers in U.S. Dollars, who source a
significant portion of their labor and raw materials in Chinese Renminbi. The Chinese Renminbi has
fluctuated against the U.S. Dollar in recent years. During fiscal 2024, the average exchange rate of the
Chinese Renminbi weakened against the U.S. dollar by approximately 5% compared to the average rate
during fiscal 2023. Chinese Renminbi currency fluctuations have the potential to add volatility to our
product costs over time.
Where operating conditions permit, we seek to reduce foreign currency risk by purchasing most of our
inventory with U.S. Dollars and by converting cash balances denominated in foreign currencies to U.S.
Dollars. We use derivative financial instruments including forward contracts and cross-currency debt
swaps to mitigate certain foreign currency exchange rate risk inherent in our transactions denominated in
foreign currencies. It is not practical for us to mitigate all our exposures, nor are we able to accurately
project the possible effect of foreign currency remeasurement on our operating results or future net
income due to our constantly changing exposure to various foreign currencies, difficulty in predicting
fluctuations in foreign currency exchange rates relative to the U.S. Dollar and the significant number of
currencies involved.
The impact of future foreign currency exchange rate fluctuations on our results of operations cannot be
accurately predicted. Accordingly, there can be no assurance that foreign currency exchange rates:
•
will be stable in the future;
•
can be mitigated with currency hedging or other risk management strategies; or
•
will not have a material adverse effect on our business, operating results and financial condition.
Our liquidity or cost of capital may be materially adversely affected by constraints or changes in
the capital and credit markets, interest rates and limitations under our financing arrangements.
We need sufficient sources of liquidity to fund our working capital requirements, service our outstanding
indebtedness and finance business opportunities. Without sufficient liquidity, we could be forced to curtail
our operations, or we may not be able to pursue business opportunities. The principal sources of our
liquidity are funds generated from operating activities, available cash, and credit facilities. If our sources
of liquidity do not satisfy our requirements, we may need to seek additional financing. The future
availability of financing will depend on a variety of factors, such as economic and market conditions, the
reaction by banks and financial institutions to a public health crisis (such as pandemics and epidemics),
the regulatory environment for banks and other financial institutions, the availability of credit and our
reputation with potential lenders. Further, disruptions in national and international credit markets,
including adverse developments impacting the financial services industry such as the recent bank
closures and investor concerns regarding the U.S. or international financial systems, could result in
limitations on credit availability, tighter lending standards, higher interest rates on consumer and business
loans, and higher fees associated with obtaining and maintaining credit availability. Disruptions may also
materially limit consumer credit availability and restrict credit availability to us and our customer base. In
addition, in the event of disruptions in the financial markets, current or future lenders may become
unwilling or unable to continue to advance funds under any agreements in place, increase their
commitments under existing credit arrangements or enter into new financing arrangements. The Federal
Open Market Committee increased the benchmark interest rate by 75 basis points during fiscal 2024 and
by 450 basis points during fiscal year 2023. If interest rates continue to increase and adverse economic
changes occur, our access to credit on favorable interest rate terms may be impacted. In an economic
downturn, we may also be unable to raise capital through debt or equity financings on terms acceptable
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to us or at all. Additionally, in challenging and uncertain economic environments, we cannot predict when
macroeconomic uncertainty may arise, whether or when such circumstances may improve or worsen or
what impact such circumstances could have on our business and our liquidity requirements. These
factors could materially adversely affect our liquidity, costs of borrowing and our ability to pursue business
opportunities or grow our business, and threaten our ability to meet our obligations as they become due.
In addition, covenants in our debt agreement could restrict or delay our ability to obtain additional
financing, potentially limiting our ability to adjust to rapidly changing market conditions or respond to
business opportunities, or in the event of a failure to comply with such covenants, could result in an event
of default, which if not cured or waived, could have a material adverse effect on us. We may also
assume or incur additional debt, including secured debt, in the future in connection with, or to fund, future
acquisitions or for other operating needs.
In addition, our variable rate debt and related interest swaps use the Secured Overnight Financing Rate
(“SOFR”), a rate equal to the secured overnight financing rate as administered by the Federal Reserve
Bank of New York (or a successor administrator of the secured overnight financing rate), as a benchmark
for establishing interest rates. SOFR is a backward-looking measure, calculated based on short-term
repurchase agreements, backed by U.S. Treasury securities. As such, if interest rates were to continue
to increase, our debt service obligations on variable rate debt subject to SOFR would increase, which
could negatively impact our net income, cash flows and financial condition.
SOFR began in April 2018, and it therefore has a limited history. The future performance of SOFR may
be difficult to predict accurately because of limited historical performance data. Prior observed patterns, if
any, in the behavior of market variables and their relation to SOFR, such as correlations, may change in
the future. In addition, the administrator of SOFR may make methodological or other changes that could
change the value of SOFR. Uncertainty as to SOFR or changes to SOFR will affect the interest rates of
our financial instruments linked to SOFR.
Furthermore, the composition and characteristics of SOFR are not the same as those of LIBOR, which
was previously used as a benchmark for our variable rate debt and which was a forward-looking
measure, based on bank estimates of borrowing costs. As a result of these and other differences, there
can be no assurance that SOFR will perform in the same way as LIBOR would have at any time, and
there is no guarantee that it is a comparable substitute for LIBOR.
Our projections of product demand, sales and net income are highly subjective in nature and our
future sales and net income could vary by a material amount from our projections.
From time to time, we may provide financial projections to our shareholders, lenders, investment
community, and other stakeholders of our future sales and net income. Since we do not require long-
term purchase commitments from our major customers and the customer order and ship process is very
short, it is difficult for us to accurately predict the demand for many of our products, or the amount and
timing of our future sales, related net income and cash flows.
Our projections are based on management’s best estimate of sales using historical sales data and other
relevant information available at the time. These projections are highly subjective since sales to our
customers can fluctuate substantially based on the demand of their retail consumers and related ordering
patterns, as well as other risks described in this Annual Report. Additionally, changes in consumer
demand, retailer inventory management strategies, transportation lead times, supplier capacity, and raw
material availability could make our inventory management and sales forecasting more difficult. Due to
these factors, our future sales and net income could vary materially from our projections.
We are dependent on discretionary spending, which is affected by, among other things, economic and
political conditions, consumer confidence, interest, inflation and tax rates, a public health crisis (such as
pandemics and epidemics), and financial and housing markets, which are all outside of our control.
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Consequently, these and other potential impacts we are not currently aware of could also cause future
sales and net income to vary materially from our projections.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
The Company relies on electronic information systems, networks and technologies to conduct and
support its operations and other functions and activities within the Company. We rely on commercially
available systems, software, tools, third-party service providers and monitoring to provide security for
processing, transmission and storage of confidential information and data. We have an enterprise-grade
information security management program designed to identify, protect, detect and respond to and
manage reasonably foreseeable material cybersecurity threats. To protect our information systems from
cybersecurity threats, we use various security tools that help prevent, identify, escalate, investigate,
remediate, respond and recover from identified vulnerabilities and cybersecurity incidents.
As part of the Company's cybersecurity risk management program, we follow the NIST Cybersecurity
Framework (“CSF”) to assess, identify and manage risks that arise from cybersecurity threats. The CSF
is closely tied to the Company’s enterprise risk management processes to identify and document
cybersecurity threats and prioritize responses. Included in the CSF process is the identification and
assessment of cybersecurity risks to systems, assets, data and resources. The Company also has a
vulnerability management process in place. This vulnerability management process helps us to detect
and identify threats and vulnerabilities and once identified, to remediate, respond and recover. In
addition, our cybersecurity team subscribes to expert and industry standard security feeds and reports,
which we use to identify new risks and new vulnerabilities in different systems and infrastructures. Our
cybersecurity risk management program also includes cybersecurity awareness training for our
associates and an incident response team (“IRT”).
The Company engages third-party service providers to be able to perform 24/7 proactive monitoring,
correlation and triage of logs and activity throughout our systems, networks and infrastructures. These
processes are performed by cybersecurity service providers as well as automated detection. These
processes include detection and response, as well as vulnerability management and remediation. The
Company also has a vendor risk management process to assess risks related to technology third-party
service providers where we initially assess their cybersecurity posture upon engaging their services. We
annually review these vendors to update our risk assessment and to monitor for any changes that could
present additional risks.
We also maintain a cyber incident response plan (“IRP”) with the objective of (1) providing a structured
and systematic incident response process for cybersecurity threats that affect any of our electronic
information systems and networks, (2) timely and effectively identifying, resolving and communicating
cybersecurity incidents and (3) managing internal and external communications and reporting. Under the
IRP, a dedicated information security coordinator is responsible for implementing the IRP, as well as:
•
identifying the IRT and any appropriate sub-teams to address specific cybersecurity incidents, or
categories of cybersecurity incidents;
•
coordinating IRT activities, including developing, maintaining, and following appropriate
procedures to respond to, communicate, and document identified cybersecurity incidents;
•
conducting post-incident reviews to gather feedback on cybersecurity incident response
procedures and address any identified gaps in security measures;
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•
providing training and conducting periodic exercises to promote associate and stakeholder
preparedness and awareness of the IRP; and
•
reviewing the IRP at least annually, or whenever there is a material change in our business
practices that may reasonably affect our cyber incident response procedures.
If a cybersecurity incident occurs, under the IRP, the information security coordinator or a designee is
required to notify, as necessary and applicable, the IRT and senior executives and organizational
leadership, including our Chief Legal Officer, our business partners or service providers and other
authorities. Our Chief Legal Officer, working with senior executives, is required under the IRP, as
appropriate, to notify the Audit Committee of any cybersecurity incident. As discussed below, the Audit
Committee of our Board of Directors oversees risk management relating to cybersecurity.
We and our third-party service providers have experienced and expect to continue to experience actual or
attempted cyber-attacks of our information systems and networks. We do not believe we have
experienced any material system security breach that to date has had a material impact on our
operations or financial condition. However, if any such event, whether actual or perceived, were to occur,
it could have a material adverse effect on our business, operating results and financial condition. For
more information regarding the risks we face from cybersecurity threats, see Item 1A., “Risk Factors.”
Cybersecurity Governance
Cybersecurity is an important part of our enterprise risk management processes and an area of focus for
our Board of Directors and management. The Company has a dedicated role in the Director of
Cybersecurity and IT Compliance, who reports to our Chief Information Officer (“CIO”). Our current
interim CIO has significant experience in information technology across a variety of industries, including
consumer goods, automotive, manufacturing and outsourcing. Our current interim CIO and Director of
Cybersecurity and IT Compliance also have experience in cybersecurity, information security, policy,
architecture, engineering and incident response. The CIO works with other functions within the Company
to implement controls, procedures and practices to help minimize the Company's risks, as well as to
introduce security by design. Our CIO provides regular updates on cybersecurity matters to our senior
management.
The Audit Committee assists the Board of Directors in its oversight of risks related to cybersecurity and
directly oversees risk management relating to cybersecurity. The Audit Committee is also responsible for
assessing the steps management has taken to monitor and control these risks and exposures and
evaluating guidelines and policies with respect to our risk assessment and risk management. Our Chief
Legal Officer working with the CIO and other senior management is responsible for determining and
coordinating reports and updates to the Audit Committee or the Board of Directors, or as requested by
the Audit Committee or the Board of Directors. The Audit Committee reviews our cybersecurity program
with management and reports to the Board of Directors with respect to, and its review of, the program.
Cybersecurity reviews by the Audit Committee generally occur at least annually, or more frequently as
determined to be necessary or advisable. The Board of Directors receives an update on the Company’s
risk management processes and the risk trends related to cybersecurity at least annually.
Item 2. Properties
As of February 29, 2024, we own, lease or otherwise utilize through third-party management service
agreements various properties worldwide for sales, procurement, research and development,
administrative and distribution facilities. We lease our U.S. headquarters, which is located in El Paso,
Texas, and we own three main distribution facilities, two of which are located in Southaven and Olive
Branch, Mississippi. We completed the construction in March 2023 of our third main distribution facility in
Gallaway, Tennessee, which became operational during the first quarter of fiscal 2024. We also lease
one distribution facility in Olive Branch, Mississippi. Our distribution facilities in Gallaway, Tennessee and
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Southaven, Mississippi currently service our Home & Outdoor segment. Our distribution facilities in Olive
Branch, Mississippi currently service our Beauty & Wellness segment. We believe our facilities are
adequate to conduct our business. See Note 4 to the accompanying consolidated financial statements
for additional information.
Item 3. Legal Proceedings
We are involved in various legal claims and proceedings in the normal course of operations. We believe
the outcome of these matters will not have a material adverse effect on our consolidated financial
position, results of operations or liquidity, except as described below.
Water Filtration Patent Litigation
On December 23, 2021, Brita LP filed a complaint against Kaz USA, Inc. and Helen of Troy Limited in the
United States District Court for the Western District of Texas (the “Patent Litigation”), alleging patent
infringement by the Company relating to its PUR gravity-fed water filtration systems. In the Patent
Litigation, Brita LP seeks monetary damages and injunctive relief relating to the alleged infringement.
Brita LP simultaneously filed a complaint with the United States International Trade Commission (“ITC”)
against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration
systems (the “ITC Action”). The complaint in the ITC Action also alleged patent infringement by the
Company with respect to a limited set of PUR gravity-fed water filtration systems. In the ITC Action, Brita
LP requested the ITC to initiate an unfair import investigation relating to such filtration systems. This
action sought injunctive relief to prevent entry of certain accused PUR products (and certain other
products) into the U.S. and cessation of marketing and sales of existing inventory that is already in the
U.S. On January 25, 2022, the ITC instituted the investigation requested by the ITC Action. Discovery
closed in the ITC Action in May 2022, and approximately half of the originally identified PUR gravity-fed
water filters were removed from the case and are no longer included in the ITC Action. In August 2022,
the parties participated in the evidentiary hearing, with additional supplemental hearings in October 2022.
On February 28, 2023, the ITC issued an Initial Determination in the ITC Action, tentatively ruling against
the Company and the other unrelated respondents. The ITC has a guaranteed review process, and thus
all respondents, including the Company, filed a petition with the ITC for a full review of the Initial
Determination. On September 19, 2023, the ITC issued its Final Determination in the Company’s favor.
The ITC determined there was no violation by the Company and terminated the investigation. Brita LP is
appealing the ITC's decision to the Federal Circuit (“CAFC Appeal”) and filed its Notice of Appeal on
October 24, 2023. The Company intervened in the CAFC Appeal, but as of the filing date of this Form
10-K, no hearings have been scheduled. The Patent Litigation remains stayed for the time being. We
cannot predict the outcome of these legal proceedings, the amount or range of any potential loss, when
the proceedings will be resolved, or customer acceptance of any replacement water filter. Litigation is
inherently unpredictable, and the resolution or disposition of these proceedings could, if adversely
determined, have a material and adverse impact on our financial position and results of operations.
EPA Regulatory Matter
During fiscal 2022, we were in discussions with the EPA regarding the compliance of packaging claims on
certain of our products in the air and water filtration categories and a limited subset of humidifier products
within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product
quality, safety or performance issues. As a result of these packaging compliance discussions, we
voluntarily implemented a temporary stop shipment action on the impacted products as we worked with
the EPA towards an expedient resolution. Our fiscal 2022 consolidated, and Beauty & Wellness
segment’s, net sales revenue, gross profit and operating income were materially and adversely impacted
by the stop shipment actions and the time needed to execute repackaging plans. We resumed
normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the
repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally,
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as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on
certain additional humidifier products and certain additional air filtration products, which were also
completed during fiscal 2023. Although we have not been notified of any fines or penalties imposed
against us by the EPA related to this matter, there can be no assurances that such fines or penalties will
not be imposed in the future.
See Note 12 to the accompanying consolidated financial statements for further discussion.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Market Information for Common Stock
Our common stock is listed on the NASDAQ Global Select Market under symbol: HELE.
Approximate Number of Equity Security Holders of Record
Our common stock is our only class of equity security outstanding at February 29, 2024. As of April 18,
2024, there were 102 holders of record of our common stock. A substantially greater number of holders
of our common stock are “street name” or beneficial holders whose shares are held of record by banks,
brokers and other financial institutions.
Cash Dividends
Our current policy is to retain earnings to provide funds for the operation and expansion of our business,
common stock repurchases and for potential acquisitions. We have not paid any cash dividends on our
common stock since inception. Any change in dividend policy will depend upon future conditions,
including earnings and financial condition, general business conditions, any applicable contractual
limitations, and other factors deemed relevant by our Board of Directors.
Issuer Purchases of Equity Securities
In August 2021, our Board of Directors authorized the repurchase of up to $500 million of our outstanding
common stock. The authorization became effective August 25, 2021, for a period of three years, and
replaced our former repurchase authorization, of which approximately $79.5 million remained. These
repurchases may include open market purchases, privately negotiated transactions, block trades,
accelerated stock repurchase transactions, or any combination of such methods. The number of shares
purchased and the timing of the purchases will depend on a number of factors, including share price,
trading volume and general market conditions, working capital requirements, general business
conditions, financial conditions, any applicable contractual limitations, and other factors, including
alternative investment opportunities. See Note 10 to the accompanying consolidated financial statements
for additional information.
Our current equity-based compensation plans include provisions that allow for the “net exercise” of share-
settled awards by all plan participants. In a net exercise, any required payroll taxes, federal withholding
taxes and exercise price of the shares due from the option or other share-based award holders are
settled by having the holder tender back to us a number of shares at fair value equal to the amounts due.
Net exercises are treated as purchases and retirements of shares.
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33
Share repurchase activity during the three-month period ended February 29, 2024, was as follows:
Period
Total Number of
Shares
Purchased (1)
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
Maximum Dollar
Value of Shares
that May Yet be
Purchased Under
the Plans or
Programs
(in thousands) (2)
December 1 through December 31, 2023
21
$
107.33
21
$
348,780
January 1 through January 31, 2024
5
121.43
5
348,779
February 1 through February 29, 2024
3,208
117.83
3,208
348,401
Total
3,234
$
117.77
3,234
(1) The number of shares includes shares of common stock acquired from associates who tendered shares to: (i) satisfy the
tax withholding on equity awards as part of our long-term incentive plans or (ii) satisfy the exercise price on stock option
exercises. For the periods presented, there were no common stock open market repurchases.
(2) Reflects the remaining dollar value of shares that could be purchased under our current stock repurchase authorization
through the expiration or termination of the plan. For additional information, see Note 10 to the accompanying
consolidated financial statements.
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Performance Graph
The graph below compares the cumulative total return of our Company to the NASDAQ Composite Index
and a Peer Group Index, assuming $100 was invested on February 28, 2019. The Peer Group Index is
the Dow Jones U.S. Personal Products Index. The comparisons in this table are required by the SEC
and are not intended to forecast or be indicative of the possible future performance of our common stock.
The Performance Graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or
subject to the liabilities of Section 18 under the Exchange Act. In addition, it shall not be deemed
incorporated by reference by any statement that incorporates this Annual Report by reference into any
filing under the Securities Act of 1933 or the Exchange Act, except to the extent that we specifically
incorporate this information by reference.
Item 6. [Reserved]
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
should be read in conjunction with the other sections of this Annual Report, including Item 1., “Business”
and Item 8., “Financial Statements and Supplementary Data.” The various sections of this MD&A contain
a number of forward-looking statements, all of which are based on our current expectations. Actual
results may differ materially due to a number of factors, including those discussed in Item 1A.,“Risk
Factors,” and in the section entitled “Information Regarding Forward-Looking Statements” following this
MD&A, and in Item 7A., “Quantitative and Qualitative Disclosures About Market Risk.” Throughout this
MD&A, we refer to our Leadership Brands, which are brands that have leading positions in their
respective categories and include OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools
and Drybar.
Management uses the following key financial measures, some of which are non-GAAP, as further
described below: net sales revenue, organic business sales revenue, adjusted operating margin, and
adjusted diluted EPS. Management uses these measures to evaluate historical performance on a
comparable basis, predict future performance and benchmark our performance against our competitors.
We believe these measures provide management and investors with important information that is useful
in understanding our business results and trends.
This MD&A, including the tables under the headings “Operating Income, Operating Margin, Adjusted
Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment” and “Net
Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP),” reports
operating income, operating margin, net income and diluted earnings per share (“EPS”) without the
impact of acquisition-related expenses, a charge for uncollectible receivables due to the bankruptcy of
Bed, Bath & Beyond (“Bed, Bath & Beyond bankruptcy”), EPA compliance costs, gain from insurance
recoveries, gain on sale of distribution and office facilities, restructuring charges, amortization of
intangible assets, and non-cash share-based compensation for the periods presented, as applicable.
These measures may be considered non-GAAP financial measures as defined by SEC Regulation G,
Rule 100. The tables reconcile these measures to their corresponding GAAP-based financial measures
presented in our consolidated statements of income. We believe that adjusted operating income,
adjusted operating margin, adjusted income, and adjusted diluted EPS provide useful information to
management and investors regarding financial and business trends relating to our financial condition and
results of operations. We believe that these non-GAAP financial measures, in combination with our
financial results calculated in accordance with GAAP, provide investors with additional perspective
regarding the impact of such charges and benefits on applicable income, margin and earnings per share
measures. We also believe that these non-GAAP measures facilitate a more direct comparison of our
performance to our competitors. We further believe that including the excluded charges and benefits
would not accurately reflect the underlying performance of our operations for the period in which the
charges and benefits were incurred and reflected in our GAAP financial results. The material limitation
associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not
reflect the full economic impact of our activities. Our adjusted operating income, adjusted operating
margin, adjusted income, and adjusted diluted EPS are not prepared in accordance with GAAP, are not
an alternative to GAAP financial measures and may be calculated differently than non-GAAP financial
measures disclosed by other companies. Accordingly, undue reliance should not be placed on non-
GAAP financial measures. These non-GAAP financial measures are discussed further and reconciled to
their applicable GAAP-based financial measures contained in this MD&A beginning on page 50.
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Overview
We are a leading global consumer products company offering creative products and solutions for our
customers through a diversified portfolio of brands. We have built leading market positions through new
product innovation, product quality and competitive pricing. We currently operate two segments
consisting of Home & Outdoor and Beauty & Wellness.
Fiscal 2020 began Phase II of our transformation, which was designed to drive the next five years of
progress. The long-term objectives of Phase II included improved organic sales growth, continued
margin expansion, and strategic and effective capital deployment. Phase II included plans to continue to
invest in our Leadership Brands, with a focus on growing them through consumer-centric innovation,
expanding them more aggressively outside the U.S., and adding new brands through acquisition. We
sought to build further shared service capability and operating efficiency, as well as focus on attracting,
retaining, unifying and training the best people. Additionally, we strove to enhance and consolidate our
ESG efforts and accelerate programs related to DEI&B to support our Phase II transformation.
Fiscal 2024 concluded Phase II of our transformation strategy, which produced net sales and organic net
sales growth and gross profit margin expansion. We expanded our Leadership Brands and international
footprint with the acquisitions of Drybar, Osprey and Curlsmith. We completed the divestiture of our
Personal Care business and extended our Revlon trademark license for a period of up to 100 years. We
strategically and effectively deployed capital to construct our new distribution facility in Gallaway,
Tennessee, repurchased shares of our common stock, and repaid amounts outstanding under our long-
term debt agreement. We began publishing an annual ESG Report, which summarizes our ESG strategy
and performance, providing further transparency into our ESG efforts. During Phase II, we also initiated
Project Pegasus, which included the creation of a North America RMO responsible for sales and go-to-
market strategies for all categories and channels in the U.S. and Canada, and further centralization of
certain functions under shared services, particularly in operations and finance to better support our
business segments and RMOs.
Project Pegasus is a global restructuring plan intended to expand operating margins through initiatives
designed to improve efficiency and effectiveness and reduce costs. Project Pegasus includes initiatives
to further optimize our brand portfolio, streamline and simplify the organization, accelerate cost of goods
savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending and
improve our cash flow and working capital, as well as other activities. We anticipate these initiatives will
create operating efficiencies, as well as provide a platform to fund future growth investments. During
fiscal 2024 and 2023, we incurred $18.7 million and $27.4 million, respectively, of pre-tax restructuring
costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the
consolidated statements of income. See further discussion below within “Significant Trends Impacting
the Business,” under “Project Pegasus” and Note 11 to the accompanying consolidated financial
statements.
Fiscal 2025 begins our Elevate for Growth era, which provides our strategic roadmap through fiscal 2030.
The long-term objectives of Elevate for Growth include continued organic sales growth, further margin
expansion, and accretive capital deployment through strategic acquisitions, share repurchases and
capital structure management. The Elevate for Growth era includes an enhanced portfolio management
strategy to invest in our brands and grow internationally based upon defined criteria with an emphasis on
brand building, new product introductions and expanded distribution. We are continuing to execute our
initiatives under Project Pegasus, which we expect to generate incremental investments in our brand
portfolio and new capabilities. We intend to further leverage our operational scale and assets, including
our new state-of-the-art distribution center, improved go-to-market structure with our North America RMO,
and our expanded shared services capabilities. We also plan to complete the geographic consolidation
of our Beauty & Wellness businesses, create a centralized marketing organization that embraces next-
level data analytics and consumer insight capabilities, and further integrate our supply chain and finance
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functions within our shared services. Additionally, we are committed to fostering a winning culture and
continuing our ESG and DEI&B efforts to support our Elevate for Growth era.
On April 22, 2022, we completed the acquisition of Curlsmith, a producer of innovative prestige hair care
products for all types of curly and wavy hair. The Curlsmith brand and products were added to the
Beauty & Wellness segment. The total purchase consideration was $147.9 million in cash, net of a final
net working capital adjustment and cash acquired.
On December 29, 2021, we completed the acquisition of Osprey, a longtime U.S. leader in technical and
everyday packs, for $409.3 million in cash, net of a final net working capital adjustment and cash
acquired. Osprey is highly respected in the outdoor industry with a product lineup that includes a wide
range of backpacks and daypacks for hiking, mountaineering, skiing, climbing, mountain biking, trail
running, commuting, and school, as well as rugged adventure travel packs, wheeled luggage, and travel
accessories. The Osprey brand and products were added to the Home & Outdoor segment.
On March 30, 2022, a third-party facility that we utilized for inventory storage incurred severe damage
from a weather-related incident. The inventory that was stored at this facility primarily related to our
Beauty & Wellness segment. While the inventory was insured, some seasonal inventory and inventory
designated for specific customer promotions was not accessible and subsequently determined to be
damaged, and as a result, unfavorably impacted our net sales revenue during the first quarter of fiscal
2023. As a result of the damages to the inventory stored at the facility, we recorded a charge to write-off
the damaged inventory totaling $34.4 million during fiscal 2023. These charges were fully offset by
probable insurance recoveries of $34.4 million also recorded during fiscal 2023, which represented
anticipated insurance proceeds, not to exceed the amount of the associated losses, for which receipt was
deemed probable. The charges for the damaged inventory and the expected insurance recoveries were
included in cost of goods sold in our consolidated statement of income for the fiscal year ended February
28, 2023. During fiscal 2023, we received proceeds of $46.0 million from our insurance carriers related
to this incident which were included in cash flows from operating activities in our consolidated statement
of cash flows for the fiscal year ended February 28, 2023. As a result, during fiscal 2023, the Company
recorded a gain of $9.7 million, net of costs incurred to dispose of the inventory, as a reduction of SG&A
expense in our consolidated statement of income.
On September 28, 2023, we completed the sale of our distribution and office facilities in El Paso, Texas,
for a sales price of $50.6 million, less transaction costs of $1.1 million. Concurrently, we entered into an
agreement to leaseback the office facilities for a period of up to 18 months substantially rent free, which
we estimated to have a fair value of approximately $1.9 million. The transaction qualified for sales
recognition under the sale leaseback accounting requirements. Accordingly, we increased the sales price
by the $1.9 million of prepaid rent and recognized a gain on the sale of $34.2 million within SG&A during
fiscal 2024, of which $18.0 million and $16.2 million was recognized by our Beauty & Wellness and Home
& Outdoor segments, respectively. The related property and equipment, totaling $17.2 million net of
accumulated depreciation of $36.8 million, was derecognized from the consolidated balance sheet, and
at lease commencement, we recorded an operating lease asset, which includes the imputed rent
payments described above, and an operating lease liability. We used the proceeds from the sale to repay
amounts outstanding under our long-term debt agreement.
During fiscal 2022 and fiscal 2023, we divested our Personal Care business. On June 7, 2021, we
completed the sale of our North America Personal Care business to HRB Brands LLC, for $44.7 million in
cash and recognized a gain on the sale in SG&A totaling $0.5 million. On March 25, 2022, we completed
the sale of the Latin America and Caribbean Personal Care business to HRB Brands LLC, for $1.8 million
in cash and recognized a gain on the sale in SG&A totaling $1.3 million.
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Significant Trends Impacting the Business
Project Pegasus
During fiscal 2023, we initiated Project Pegasus, a global restructuring plan intended to expand operating
margins through initiatives designed to improve efficiency and effectiveness and reduce costs. Project
Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the
organization, accelerate cost of goods savings projects, enhance the efficiency of our supply chain
network, optimize our indirect spending and improve our cash flow and working capital, as well as other
activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to
fund future growth investments.
During the fourth quarter of fiscal 2023, we made changes to the structure of our organization, which
resulted in our previous Health & Wellness and Beauty operating segments being combined into a single
reportable segment. As part of our initiative focused on streamlining and simplifying the organization, we
made further changes to the structure of our organization, which included the creation of a North America
RMO responsible for sales and go-to-market strategies for all categories and channels in the U.S. and
Canada, and further centralization of certain functions under shared services, particularly in operations
and finance to better support our business segments and RMOs. This new structure reduced the size of
our global workforce by approximately 10%. We believe that these changes better focus business
segment resources on brand development, consumer-centric innovation and marketing, the RMOs on
sales and go-to-market strategies, and shared services on their respective areas of expertise while also
creating a more efficient and effective organizational structure.
During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S.
Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our
Wellness business in the Boston, Massachusetts area. This geographic consolidation and relocation is
the next step in our initiative to streamline and simplify the organization and is expected to be completed
during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and
enhance collaboration and innovation within the Beauty & Wellness segment.
We have updated our expectations regarding Project Pegasus charges and savings. We have lowered
our total estimate of one-time pre-tax restructuring charges to approximately $50 million to $55 million
over the duration of the plan. We continue to expect these charges to be completed during fiscal 2025.
We previously estimated total pre-tax restructuring charges of approximately $60 million to $65 million. In
addition, we now have the following expectations regarding Project Pegasus charges:
•
Pre-tax restructuring charges to be comprised of approximately $15 million to $19 million of
severance and employee related costs, $28 million of professional fees, $3 million to $4 million of
contract termination costs, and $4 million of other exit and disposal costs.
•
All of our operating segments and shared services will be impacted by the plan and pre-tax
restructuring charges include approximately $16 million to $17 million in Home & Outdoor and
$34 million to $38 million in Beauty & Wellness.
•
Pre-tax restructuring charges represent primarily cash expenditures, which we continue to expect
to be substantially paid by the end of fiscal 2025.
We have the following expectations regarding Project Pegasus savings:
•
We continue to expect targeted annualized pre-tax operating profit improvements of
approximately $75 million to $85 million, which began in fiscal 2024 and which we now expect to
be substantially achieved by the end of fiscal 2027.
•
We have updated our expectations regarding the estimated cadence of the recognition of the
savings to be approximately 25% in fiscal 2024, which was achieved, approximately 35% in fiscal
2025, approximately 25% in fiscal 2026, and approximately 15% in fiscal 2027. We previously
estimated recognition of the savings to be approximately 25% in fiscal 2024, approximately 50%
in fiscal 2025 and approximately 25% in 2026.
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•
We continue to expect total profit improvements to be realized approximately 60% through
reduced cost of goods sold and 40% through lower SG&A.
In addition, we implemented plans to reduce inventory levels, increase inventory turns, and improve cash
flow and working capital during the second quarter of fiscal 2023. Improvements related to these
initiatives began in the second half of fiscal 2023 and continued during fiscal 2024, enabling us to repay
amounts outstanding under our long-term debt agreement and reduce our interest expense. During fiscal
2024, our gross margin and operating margins were favorably impacted by our SKU rationalization efforts
in Beauty & Wellness and lower commodity costs in Home & Outdoor driven by our cost of goods savings
projects. In addition, during fiscal 2024 we had lower personnel costs as a result of our Project Pegasus
role reductions; however, they were offset by higher annual incentive compensation expense, annual
merit increases, and share-based compensation expense. Expectations regarding our Project Pegasus
initiatives and our ability to realize targeted savings, including expectations concerning costs and savings,
are based on management’s estimates available at the time and are subject to a number of assumptions
that could materially impact our estimates.
During fiscal 2024 and 2023, we incurred $18.7 million and $27.4 million of pre-tax restructuring costs,
respectively, in connection with Project Pegasus, which were recorded as “Restructuring charges” in the
consolidated statements of income. We made total cash restructuring payments of $18.7 million and
$20.8 million during fiscal 2024 and 2023, respectively, and had a remaining liability of $4.8 million as of
February 29, 2024. See Note 11 to the accompanying consolidated financial statements for additional
information.
Water Filtration Patent Litigation
On December 23, 2021, Brita LP filed the Patent Litigation, alleging patent infringement by the Company
relating to its PUR gravity-fed water filtration systems. Brita LP simultaneously filed the ITC Action
against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration
systems. The complaint in the ITC Action also alleged patent infringement by the Company with respect
to a limited set of PUR gravity-fed water filtration systems. This action sought injunctive relief to prevent
entry of certain accused PUR products (and certain other products) into the U.S. and cessation of
marketing and sales of existing inventory that is already in the U.S. On February 28, 2023, the ITC
issued an Initial Determination in the ITC Action, tentatively ruling against the Company and the other
unrelated respondents. The ITC has a guaranteed review process, and thus all respondents, including
the Company, filed a petition with the ITC for a full review of the Initial Determination. On September 19,
2023, the ITC issued its Final Determination in the Company's favor. The ITC determined there was no
violation by the Company and terminated the investigation. Brita LP is appealing the ITC's decision to the
Federal Circuit and filed its Notice of Appeal on October 24, 2023. The Company intervened in the CAFC
Appeal, but as of the date of the filing of this Form 10-K, no hearings have been scheduled. The Patent
Litigation remains stayed for the time being. We cannot predict the outcome of these legal proceedings,
the amount or range of any potential loss, when the proceedings will be resolved, or customer
acceptance of any replacement water filter. Litigation is inherently unpredictable, and the resolution or
disposition of these proceedings could, if adversely determined, have a material and adverse impact on
our financial position and results of operations. For additional information regarding the Patent Litigation
and the ITC Action, see Item 3., “Legal Proceedings” and Note 12 to the accompanying consolidated
financial statements.
Impact of Macroeconomic Trends
The Federal Open Market Committee increased the benchmark interest rate by 75 basis points during
fiscal 2024 and 450 basis points during fiscal 2023. As a result, during fiscal 2024 and 2023, we incurred
higher average interest rates compared to previous periods. The Federal Open Market Committee has
indicated that it may lower interest rates in fiscal 2025. While the actual timing and extent of future
changes in interest rates remains unknown, lower average interest rates would reduce interest expense
on our outstanding variable rate debt. The financial markets, the global economy and global supply chain
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may also be adversely affected by the current or anticipated impact of military conflicts or other
geopolitical events. High inflation and interest rates have also negatively impacted consumer disposable
income, credit availability and spending, among others, which have adversely impacted our business,
financial condition, cash flows and results of operations and may continue to have an adverse impact.
See further discussion below under “Consumer Spending and Changes in Shopping Preferences.” We
expect continued uncertainty in our business and the global economy due to pressure from inflation,
volatility in employment trends and consumer confidence, any of which may adversely impact our results.
Consumer Spending and Changes in Shopping Preferences
Our business depends upon discretionary consumer demand for most of our products and primarily
operates within mature and highly developed consumer markets. The principal driver of our operating
performance is the strength of the U.S. retail economy. Approximately 74% of our consolidated net sales
revenue in both fiscal 2024 and 2023 was from U.S. shipments compared to 78% of consolidated net
sales revenue in fiscal 2022.
Among other things, high levels of inflation and interest rates may negatively impact consumer
disposable income, credit availability and spending. Consumer purchases of discretionary items,
including the products that we offer, generally decline during recessionary periods or periods of economic
uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence.
Dynamic changes in consumer spending and shopping patterns are also having an impact on retailer
inventory levels. Our ability to sell to retailers is predicated on their ability to sell to the end consumer.
During fiscal year 2023, we experienced an adverse impact on orders from retail customers as they
aimed to rebalance their inventory levels due to lower consumer demand and shifts in consumer
spending patterns. We experienced some improvement in replenishment orders from certain retail
customers in certain product categories during fiscal 2024. If orders from our retail customers continue to
be adversely impacted, our sales, results of operations and cash flows may continue to be adversely
impacted. We expect continued uncertainty in our business and the global economy due to inflation and
changes in consumer spending patterns. Accordingly, our liquidity and financial results could be
impacted in ways that we are not able to predict today. For additional information on our related material
risks, see Item 1A., “Risk Factors.”
Our concentration of sales reflects the continued evolution of consumer shopping preferences. For fiscal
2024, 2023 and 2022, our net sales to pure-play online retailers and retail customers fulfilling end-
consumer online orders, as well as our own online sales directly to consumers comprised approximately
28%, 23% and 24%, respectively, of our total consolidated net sales revenue and grew approximately
14.3% in fiscal 2024, while decreasing approximately 8.9% and 1.3% in fiscal 2023 and 2022,
respectively, over the prior fiscal year periods.
With the continued importance of online sales in the retail landscape, many brick and mortar retailers are
aggressively looking for ways to improve their customer delivery capabilities to be able to meet customer
expectations. As a result, it has become increasingly important for us to leverage our distribution
capabilities in order to meet the changing demands of our customers, including increasing our online
capabilities to support our direct-to-consumer sales channels and online channel sales by our retail
customers. In March 2023, we completed the construction of an additional distribution facility in
Gallaway, Tennessee that became operational during the first quarter of fiscal 2024 and includes state-of-
the-art automation suited to fulfill direct-to-consumer and online channel orders. Additionally, we continue
to invest in a centralized cloud-based e-commerce platform that we anticipate will enable us to leverage a
common system and rapidly deploy new capabilities across all of our brands, as well as more easily
integrate new brands. We anticipate this platform will enhance the customer experience by strengthening
the digital presentation and product browsing capabilities and improving the checkout process, order
delivery and post-order customer care.
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41
Global Supply Chain and Related Cost Inflation Trends
During fiscal 2022, the impact of COVID-19, including the related surges in demand and shifts in
shopping patterns, as well as other factors, strained the global supply chain network resulting in higher
inbound freight costs and surges in prices for raw materials, components and semiconductor chips, which
adversely impacted our operating costs. During fiscal 2023, as consumer demand slowed in reaction to a
highly inflationary economic environment, global supply chain capacity improved and freight costs began
to recede from their previous peaks. During fiscal 2024, inbound freight costs have continued to decline
and have begun to approach levels seen prior to the impact of COVID-19. Reemergence of these global
supply chain disruptions and related inflationary cost trends could have negative impacts to our business,
results of operations and financial condition.
EPA Compliance Costs
Some of our product lines are subject to product identification, labeling and claim requirements, which are
monitored and enforced by regulatory agencies, such as the EPA, U.S. Customs and Border Protection,
the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.
During fiscal 2022, we were in discussions with the EPA regarding the compliance of packaging claims on
certain of our products in the air and water filtration categories and a limited subset of humidifier products
within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product
quality, safety or performance issues. As a result of these packaging compliance discussions, we
voluntarily implemented a temporary stop shipment action on the impacted products as we worked with
the EPA towards an expedient resolution. Our fiscal 2022 consolidated, and Beauty & Wellness
segment’s, net sales revenue, gross profit and operating income were materially and adversely impacted
by the stop shipment actions and the time needed to execute repackaging and relabeling plans. We
resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the
repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally,
as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on
certain additional humidifier products and certain additional air filtration products, which were also
completed during fiscal 2023.
We recorded charges to cost of goods sold to write-off obsolete packaging for the affected products in our
inventory on-hand and in-transit. We have also incurred additional compliance costs comprised of
obsolete packaging, storage and other charges from vendors, which were recognized in cost of goods
sold and incremental warehouse storage costs and legal fees, which were recognized in SG&A. We refer
to these charges as “EPA compliance costs” throughout this Annual Report.
The following table provides a summary of EPA compliance costs incurred during the periods presented:
Fiscal Years Ended Last Day of February
(in thousands)
2024
2023
2022
Cost of goods sold
$
—
$
16,928 1
$
17,728 2
SG&A
—
6,645
14,626
Total EPA compliance costs
$
—
$
23,573
$
32,354
(1) Includes a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and
affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal
2023.
(2) Includes a $13.1 million charge to cost of goods sold to write-off the obsolete packaging for the affected air filtration, water
filtration and humidifier products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022.
In addition, we incurred and capitalized into inventory costs to repackage a portion of our existing
inventory of the affected products beginning in the second quarter of fiscal 2022 through completion of
the repackaging in the third quarter of fiscal 2023.
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Although we have not been notified of any fines or penalties imposed against us by the EPA related to
this matter, there can be no assurances that such fines or penalties will not be imposed in the future. See
Note 12 to the accompanying consolidated financial statements for additional information and Item 1A.,
“Risk Factors” in this Annual Report for additional information on our related material risks.
Potential Impact of Tariffs
Since 2019, the Office of the U.S. Trade Representative (“USTR”) has imposed, and in certain cases
subsequently reduced or suspended, additional tariffs on products imported from China. We purchase a
high concentration of our products from unaffiliated manufacturers located in China. This concentration
exposes us to risks associated with doing business globally, including changes in tariffs. Any alteration of
trade agreements and terms between China and the U.S., including limiting trade with China, imposing
additional tariffs on imports from China and potentially imposing other restrictions on imports from China
to the U.S. may result in further or higher tariffs or retaliatory trade measures by China. Furthermore, in
certain cases, we have been successful in obtaining tariff exclusions from the USTR on certain products
that we import. These exclusions generally expire after a designated period of time. In the case that a
tariff exclusion is not granted or extended, higher tariffs would be assessed on the related products.
Foreign Currency Exchange Rate Fluctuations
Due to the nature of our operations, we have exposure to the impact of fluctuations in exchange rates
from transactions that are denominated in a currency other than our functional currency (the U.S. Dollar).
Such transactions include sales and operating expenses. The most significant currencies affecting our
operating results are the Euro, British Pound and Canadian Dollar.
Changes in foreign currency exchange rates had a favorable impact on consolidated U.S. Dollar reported
net sales revenue of approximately $6.8 million, or 0.3% for fiscal 2024, an unfavorable impact of
approximately $17.0 million, or 0.8% for fiscal 2023 and a favorable impact of approximately $6.8 million,
or 0.3% for fiscal 2022.
Variability of the Cough/Cold/Flu Season
Sales in several of our Beauty & Wellness segment categories are highly correlated to the severity of
winter weather and cough/cold/flu incidence. In the U.S., the cough/cold/flu season historically runs from
November through March, with peak activity normally in January to March. The 2023-2024 cough/cold/flu
season was below historical averages seen prior to the impact of COVID-19. The 2022-2023 cough/cold/
flu season was above historical averages, primarily early in the season, as respiratory infections surged
in both children and adults and COVID-19 continued to be prevalent. The 2021-2022 cough/cold/flu
season was below historical averages.
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43
Results of Operations
This section provides an analysis of our results of operations for fiscal year 2024 as compared to fiscal
year 2023 including discussion of material changes. Refer to Item 7., “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” in our 2023 Annual Report on Form 10-K,
filed with the SEC on April 27, 2023, for an analysis and discussion of the fiscal year 2023 results of
operations as compared to fiscal year 2022, which such discussion is hereby incorporated by reference.
The following table provides selected operating data, in U.S. Dollars, as a percentage of net sales
revenue, and as a year-over-year percentage change.
Fiscal Years Ended
Last Day of February,
% of Sales Revenue, net
% Change
(in thousands)
2024 (1)(2)
2023 (1)(2)
2022 (2)
2024
2023
2022
24/23
23/22
Sales revenue by segment, net
Home & Outdoor
$
916,381 $
915,685 $
865,844
45.7 %
44.2 %
38.9 %
0.1 %
5.8 %
Beauty & Wellness
1,088,669 1,156,982 1,357,511
54.3 %
55.8 %
61.1 %
(5.9) %
(14.8) %
Total sales revenue, net
2,005,050 2,072,667 2,223,355
100.0 %
100.0 %
100.0 %
(3.3) %
(6.8) %
Cost of goods sold
1,056,390 1,173,316 1,270,168
52.7 %
56.6 %
57.1 %
(10.0) %
(7.6) %
Gross profit
948,660
899,351
953,187
47.3 %
43.4 %
42.9 %
5.5 %
(5.6) %
SG&A
669,359
660,198
680,257
33.4 %
31.9 %
30.6 %
1.4 %
(2.9) %
Restructuring charges
18,712
27,362
380
0.9 %
1.3 %
— %
(31.6) %
*
Operating income
260,589
211,791
272,550
13.0 %
10.2 %
12.3 %
23.0 %
(22.3) %
Non-operating income, net
1,518
249
260
0.1 %
— %
— %
*
(4.2) %
Interest expense
53,065
40,751
12,844
2.6 %
2.0 %
0.6 %
30.2 %
*
Income before income tax
209,042
171,289
259,966
10.4 %
8.3 %
11.7 %
22.0 %
(34.1) %
Income tax expense
40,448
28,016
36,202
2.0 %
1.4 %
1.6 %
44.4 %
(22.6) %
Net income
$
168,594 $
143,273 $
223,764
8.4 %
6.9 %
10.1 %
17.7 %
(36.0) %
(1) Fiscal 2024 includes a full year of operating results from Curlsmith, acquired on April 22, 2022, compared to approximately
forty-five weeks of operating results in fiscal 2023. For additional information see Note 6 to the accompanying
consolidated financial statements.
(2) Fiscal 2024 and 2023 include a full year of operating results from Osprey, acquired on December 29, 2021, compared to
approximately nine weeks of operating results in fiscal 2022. For additional information see Note 6 to the accompanying
consolidated financial statements.
*
Calculation is not meaningful.
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44
Fiscal 2024 Financial Results
•
Consolidated net sales revenue decreased 3.3%, or $67.6 million, to $2,005.1 million compared to
$2,072.7 million for the same period last year.
•
Consolidated operating income increased 23.0%, or $48.8 million, to $260.6 million, compared to
$211.8 million for the same period last year. Consolidated operating margin increased 2.8
percentage points to 13.0%, compared to 10.2% for the same period last year. Consolidated
operating income for fiscal 2024 includes a pre-tax gain on sale of distribution and office facilities
of $34.2 million, pre-tax restructuring charges of $18.7 million related to Project Pegasus, and a
pre-tax Bed, Bath & Beyond bankruptcy charge of $4.2 million. Consolidated operating income for
fiscal 2023 included pre-tax restructuring charges of $27.4 million related to Project Pegasus, pre-
tax EPA compliance costs of $23.6 million, a pre-tax gain from insurance recoveries of
$9.7 million, and pre-tax acquisition-related expenses of $2.8 million.
•
Consolidated adjusted operating income increased 0.2%, or $0.6 million, to $301.5 million,
compared to $300.9 million for the same period last year. Consolidated adjusted operating margin
increased 0.5 percentage points to 15.0% of consolidated net sales revenue, compared to 14.5%
for the same period last year.
•
Net income increased 17.7%, or $25.3 million, to $168.6 million, compared to $143.3 million for
the same period last year. Diluted EPS increased 18.2% to $7.03, compared to $5.95 for the
same period last year.
•
Adjusted income decreased 6.2% to $213.5 million, compared to $227.7 million for the same
period last year. Adjusted diluted EPS decreased 5.7% to $8.91, compared to $9.45 for the same
period last year.
Fiscal 2023 Financial Results
•
Consolidated net sales revenue decreased 6.8%, or $150.7 million, to $2,072.7 million in fiscal
2023, compared to $2,223.4 million in fiscal 2022.
•
Consolidated operating income decreased 22.3%, or $60.8 million, to $211.8 million in fiscal 2023,
compared to $272.6 million in fiscal 2022. Consolidated operating margin decreased 2.1
percentage points to 10.2% in fiscal 2023, compared to 12.3% in fiscal 2022. Consolidated
operating income for fiscal 2023 included pre-tax restructuring charges of $27.4 million related to
Project Pegasus, pre-tax EPA compliance costs of $23.6 million, a pre-tax gain from insurance
recoveries of $9.7 million, and pre-tax acquisition-related expenses of $2.8 million. Consolidated
operating income for fiscal 2022 included pre-tax restructuring charges of $0.4 million, pre-tax
EPA compliance costs of $32.4 million, and pre-tax acquisition-related expenses of $2.4 million.
•
Consolidated adjusted operating income decreased 15.3%, or $54.2 million, to $300.9 million in
fiscal 2023, compared to $355.1 million in fiscal 2022. Consolidated adjusted operating margin
decreased 1.5 percentage point to 14.5% of consolidated net sales revenue in fiscal 2023,
compared to 16.0% in fiscal 2022.
•
Net income decreased 36.0%, or $80.5 million, to $143.3 million in fiscal 2023, compared to
$223.8 million in fiscal 2022. Diluted EPS decreased 35.1% to $5.95 in fiscal 2023, compared to
$9.17 in fiscal 2022.
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•
Adjusted income decreased 24.6% to $227.7 million in fiscal 2023, compared to $301.8 million in
fiscal 2022. Adjusted diluted EPS decreased 23.5% to $9.45 in fiscal 2023, compared to $12.36
in fiscal 2022.
Consolidated and Segment Net Sales Revenue
The following tables summarize the impact that Organic business, foreign currency, and acquisitions had
on our net sales revenue by segment:
Fiscal Year Ended Last Day of February,
(in thousands)
Home & Outdoor
Beauty & Wellness
Total
Fiscal 2023 sales revenue, net
$
915,685
$
1,156,982
$
2,072,667
Organic business
(2,499)
(78,066)
(80,565)
Impact of foreign currency
3,195
3,651
6,846
Acquisition (1)
—
6,102
6,102
Change in sales revenue, net
696
(68,313)
(67,617)
Fiscal 2024 sales revenue, net
$
916,381
$
1,088,669
$
2,005,050
Total net sales revenue growth (decline)
0.1 %
(5.9) %
(3.3) %
Organic business
(0.3) %
(6.7) %
(3.9) %
Impact of foreign currency
0.3 %
0.3 %
0.3 %
Acquisition
— %
0.5 %
0.3 %
Fiscal Year Ended Last Day of February,
(in thousands)
Home & Outdoor
Beauty & Wellness
Total
Fiscal 2022 sales revenue, net
$
865,844
$
1,357,511
$
2,223,355
Organic business
(93,569)
(228,403)
(321,972)
Impact of foreign currency
(9,313)
(7,656)
(16,969)
Acquisition (1)(2)
152,723
35,530
188,253
Change in sales revenue, net
49,841
(200,529)
(150,688)
Fiscal 2023 sales revenue, net
$
915,685
$
1,156,982
$
2,072,667
Total net sales revenue growth (decline)
5.8 %
(14.8) %
(6.8) %
Organic business
(10.8) %
(16.8) %
(14.5) %
Impact of foreign currency
(1.1) %
(0.6) %
(0.8) %
Acquisition
17.6 %
2.6 %
8.5 %
(1) On April 22, 2022, we completed the acquisition of Curlsmith. Curlsmith sales prior to the first annual anniversary of the
acquisition are reported in Acquisition for the Beauty & Wellness segment in fiscal 2024 and fiscal 2023 and consist of
approximately seven weeks and forty-five weeks of incremental operating results, respectively. For additional information
see Note 6 to the accompanying consolidated financial statements.
(2) On December 29, 2021, we completed the acquisition of Osprey. Osprey sales prior to the first annual anniversary of the
acquisition are reported in Acquisition for the Home & Outdoor segment in fiscal 2023 and consist of approximately forty-
three weeks of incremental operating results. For additional information see Note 6 to the accompanying consolidated
financial statements.
In the above tables, Organic business refers to our net sales revenue associated with product lines or
brands after the first twelve months from the date the product line or brand was acquired, excluding the
impact that foreign currency remeasurement had on reported net sales revenue. Net sales revenue from
internally developed brands or product lines is considered Organic business activity.
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46
Leadership Brand and Other Net Sales Revenue
The following table summarizes our Leadership Brand and other net sales revenue:
Fiscal Years Ended
Last Day of February,
$ Change
% Change
(in thousands)
2024
2023
2022
24/23
23/22
24/23
23/22
Leadership Brand sales revenue, net (1)
$ 1,707,964 $ 1,753,734 $ 1,810,249 $ (45,770) $ (56,515)
(2.6) %
(3.1) %
All other sales revenue, net
297,086
318,933
413,106
(21,847) (94,173)
(6.9) % (22.8) %
Total sales revenue, net
$ 2,005,050 $ 2,072,667 $ 2,223,355 $ (67,617) $ (150,688)
(3.3) %
(6.8) %
(1) Fiscal 2024 and 2023 include a full year of operating results from Osprey, acquired on December 29, 2021, compared to
approximately nine weeks of operating results in fiscal 2022. For additional information see Note 6 to the accompanying
consolidated financial statements.
Consolidated Net Sales Revenue
Comparison of Fiscal 2024 to 2023
Consolidated net sales revenue decreased $67.6 million, or 3.3%, to $2,005.1 million, compared to
$2,072.7 million. The decline was driven by a decrease from Organic business of $80.6 million, or 3.9%,
primarily due to:
•
lower sales of fans, humidifiers, air purifiers, and heaters in Beauty & Wellness primarily driven by
softer consumer demand, our SKU rationalization efforts, and reduced orders from retail
customers as they rebalanced trade inventory in line with softer consumer demand;
•
a decline in sales of hair appliances in Beauty & Wellness; and
•
a decline in Home & Outdoor primarily due to lower brick and mortar sales in the insulated
beverageware category and lower closeout and club channel sales in the home category.
These factors were partially offset by:
•
an increase in consolidated online channel sales reflecting improved replenishment orders from
certain retail customers and the launch of the new travel tumbler in Home & Outdoor;
•
stronger consumer demand for travel, lifestyle and everyday packs in Home & Outdoor; and
•
growth in sales of thermometry and prestige hair care products in Beauty & Wellness.
The Curlsmith acquisition contributed $6.1 million, or 0.3%, to consolidated net sales revenue growth.
Net sales revenue was favorably impacted by net foreign currency fluctuations of approximately $6.8
million, or 0.3%.
Net sales revenue from our Leadership Brands was $1,708.0 million, compared to $1,753.7 million, a
decrease of 2.6%.
Segment Net Sales Revenue
Home & Outdoor
Comparison of Fiscal 2024 to 2023
Net sales revenue increased $0.7 million, or 0.1%, to $916.4 million, compared to $915.7 million,
primarily due to the favorable impact of net foreign currency fluctuations of $3.2 million, or 0.3%. The
increase was partially offset by a decrease from Organic business of $2.5 million, or 0.3%, primarily due
to:
•
a brick and mortar sales decline in the insulated beverageware category;
•
reduced sales to Bed, Bath & Beyond as a result of its bankruptcy; and
•
lower closeout and club channel sales in the home category.
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These factors were partially offset by:
•
an increase in online channel sales reflecting the launch of the new travel tumbler, improved
replenishment orders from certain retail customers, and stronger demand for products in the home
category;
•
stronger consumer demand for travel, lifestyle and everyday packs;
•
higher brick and mortar home category sales due to new and expanded retailer distribution and
improved replenishment orders from certain retail customers; and
•
an increase in closeout channel sales in the insulated beverageware and technical and lifestyle
pack categories.
Beauty & Wellness
Comparison of Fiscal 2024 to 2023
Net sales revenue decreased $68.3 million, or 5.9%, to $1,088.7 million, compared to $1,157.0 million.
The decrease was primarily driven by a decrease from Organic business of $78.1 million, or 6.7%,
primarily due to:
•
lower sales of fans, air purifiers, and heaters, primarily driven by softer consumer demand, our
SKU rationalization efforts, and reduced orders from retail customers as they rebalanced trade
inventory in line with softer consumer demand;
•
a decline in humidification reflecting reduced orders from retail customers as they rebalanced
trade inventory levels and the comparative impact of high COVID-related demand in the prior
year; and
•
a decline in sales of hair appliances.
These factors were partially offset by:
•
growth in sales of thermometry which helped drive higher overall international sales;
•
an increase in sales of prestige hair care products; and
•
an increase in water filtration product sales.
The Curlsmith acquisition contributed $6.1 million, or 0.5%, to segment net sales revenue growth. Net
sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $3.7
million, or 0.3%.
Consolidated Gross Profit Margin
Comparison of Fiscal 2024 to 2023
Consolidated gross profit margin increased 3.9 percentage points to 47.3%, compared to 43.4%. The
increase in consolidated gross profit margin was primarily due to:
•
lower inbound freight costs;
•
the favorable comparative impact of EPA compliance costs of $16.9 million incurred in the prior
year;
•
the favorable impact of our SKU rationalization efforts in Beauty & Wellness; and
•
a decrease in inventory obsolescence expense.
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48
Consolidated SG&A
Comparison of Fiscal 2024 to 2023
Consolidated SG&A ratio increased 1.5 percentage points to 33.4%, compared to 31.9%. The increase in
the consolidated SG&A ratio was primarily due to:
•
an increase in annual incentive compensation expense;
•
higher marketing expense;
•
the unfavorable comparative impact of a gain from insurance recoveries of $9.7 million recognized
in the prior year;
•
higher share-based compensation expense;
•
an increase in depreciation and distribution expense primarily due to our new distribution facility;
•
a charge of $4.2 million related to the bankruptcy of Bed, Bath & Beyond; and
•
the unfavorable operating leverage impact of the overall decrease in net sales.
These factors were partially offset by a gain on the sale of our distribution and office facilities in El Paso,
Texas of $34.2 million and the favorable comparative impact of EPA compliance costs of $6.6 million
incurred in the prior year.
Restructuring Charges
Fiscal 2024
We incurred $18.7 million of pre-tax restructuring costs related primarily to professional fees and
severance and employee related costs under Project Pegasus. During fiscal 2024, we made total cash
restructuring payments of $18.7 million and had a remaining liability of $4.8 million as of February 29,
2024.
Fiscal 2023
We incurred $27.4 million of pre-tax restructuring costs related primarily to professional fees and
severance and employee related costs under Project Pegasus. During fiscal 2023, we made total cash
restructuring payments of $20.8 million and had a remaining liability of $6.6 million as of February 28,
2023.
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49
Operating Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted
Operating Margin (non-GAAP) by Segment
In order to provide a better understanding of the impact of certain items on our operating income, the
tables that follow report the comparative pre-tax impact of acquisition-related expenses, Bed, Bath &
Beyond bankruptcy, EPA compliance costs, gain from insurance recoveries, gain on sale of distribution
and office facilities, restructuring charges, amortization of intangible assets, and non-cash share-based
compensation, as applicable, on operating income and operating margin for each segment and in total for
the periods presented below. Adjusted operating income and adjusted operating margin may be
considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. For
additional information regarding management’s decision to present this non-GAAP financial information,
see the introduction to this Item 7., “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
Fiscal Year Ended February 29, 2024
(in thousands)
Home & Outdoor (1)
Beauty & Wellness (2)
Total
Operating income, as reported (GAAP)
$
142,732
15.6 % $
117,857
10.8 % $
260,589
13.0 %
Bed, Bath & Beyond bankruptcy
3,087
0.3 %
1,126
0.1 %
4,213
0.2 %
Gain on sale of distribution and office facilities
(16,175)
(1.8) %
(18,015)
(1.7) %
(34,190)
(1.7) %
Restructuring charges
5,144
0.6 %
13,568
1.2 %
18,712
0.9 %
Subtotal
134,788
14.7 %
114,536
10.5 %
249,324
12.4 %
Amortization of intangible assets
7,057
0.8 %
11,269
1.0 %
18,326
0.9 %
Non-cash share-based compensation
16,319
1.8 %
17,553
1.6 %
33,872
1.7 %
Adjusted operating income (non-GAAP)
$
158,164
17.3 % $
143,358
13.2 % $
301,522
15.0 %
Fiscal Year Ended February 28, 2023
(in thousands)
Home & Outdoor (1)
Beauty & Wellness (2)
Total
Operating income, as reported (GAAP)
$
134,053
14.6 % $
77,738
6.7 % $
211,791
10.2 %
Acquisition-related expenses
117
— %
2,667
0.2 %
2,784
0.1 %
EPA compliance costs
—
— %
23,573
2.0 %
23,573
1.1 %
Gain from insurance recoveries
—
— %
(9,676)
(0.8) %
(9,676)
(0.5) %
Restructuring charges
8,689
0.9 %
18,673
1.6 %
27,362
1.3 %
Subtotal
142,859
15.6 %
112,975
9.8 %
255,834
12.3 %
Amortization of intangible assets
7,020
0.8 %
11,302
1.0 %
18,322
0.9 %
Non-cash share-based compensation
10,751
1.2 %
16,002
1.4 %
26,753
1.3 %
Adjusted operating income (non-GAAP)
$
160,630
17.5 % $
140,279
12.1 % $
300,909
14.5 %
Fiscal Year Ended February 28, 2022
(in thousands)
Home & Outdoor (1)
Beauty & Wellness
Total
Operating income, as reported (GAAP)
$
134,925
15.6 % $
137,625
10.1 % $
272,550
12.3 %
Acquisition-related expenses
2,424
0.3 %
—
— %
2,424
0.1 %
EPA compliance costs
—
— %
32,354
2.4 %
32,354
1.5 %
Restructuring charges
369
— %
11
— %
380
— %
Subtotal
137,718
15.9 %
169,990
12.5 %
307,708
13.8 %
Amortization of intangible assets
2,891
0.3 %
9,873
0.7 %
12,764
0.6 %
Non-cash share-based compensation
13,812
1.6 %
20,806
1.5 %
34,618
1.6 %
Adjusted operating income (non-GAAP)
$
154,421
17.8 % $
200,669
14.8 % $
355,090
16.0 %
(1) Fiscal 2024 and 2023 include a full year of operating results from Osprey, acquired on December 29, 2021, compared to
approximately nine weeks of operating results in fiscal 2022. For additional information see Note 6 to the accompanying
consolidated financial statements.
(2) Fiscal 2024 includes a full year of operating results from Curlsmith, acquired on April 22, 2022, compared to approximately
forty-five weeks of operating results in fiscal 2023. For additional information see Note 6 to the accompanying
consolidated financial statements.
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50
Consolidated Operating Income
Comparison of Fiscal 2024 to 2023
Consolidated operating income was $260.6 million, or 13.0% of net sales revenue, compared to $211.8
million, or 10.2% of net sales revenue. Fiscal 2024 includes a pre-tax Bed, Bath & Beyond bankruptcy
charge of $4.2 million, a pre-tax gain on sale of distribution and office facilities of $34.2 million and pre-tax
restructuring charges of $18.7 million, compared to pre-tax acquisition-related expenses of $2.8 million,
pre-tax EPA compliance costs of $23.6 million, pre-tax gain from insurance recoveries of $9.7 million, and
pre-tax restructuring charges of $27.4 million in fiscal 2023. The effect of these items favorably impacted
the year-over-year comparison of consolidated operating margin by a combined 2.7 percentage points.
The remaining 0.1 percentage point increase in consolidated operating margin was primarily driven by:
•
lower inbound freight costs;
•
the favorable impact of our SKU rationalization efforts in Beauty & Wellness; and
•
a decrease in inventory obsolescence expense.
These factors were partially offset by:
•
increased annual incentive compensation expense;
•
higher marketing expense;
•
higher share-based compensation expense;
•
an increase in depreciation and distribution expense primarily due to our new distribution facility;
and
•
the unfavorable operating leverage impact of the overall decrease in net sales.
Consolidated adjusted operating income increased 0.2% to $301.5 million, or 15.0% of net sales
revenue, compared to $300.9 million, or 14.5% of net sales revenue.
Home & Outdoor
Comparison of Fiscal 2024 to 2023
Operating income was $142.7 million, or 15.6% of segment net sales revenue, compared to $134.1
million, or 14.6% of segment net sales revenue. The 1.0 percentage point increase in segment operating
margin was primarily due to:
•
lower inbound freight costs;
•
a gain on the sale of our distribution and office facilities in El Paso, Texas of $16.2 million;
•
lower commodity costs; and
•
a decrease in restructuring charges of $3.5 million.
These factors were partially offset by:
•
increased marketing expense;
•
higher annual incentive compensation expense;
•
an increase in depreciation and distribution expense primarily due to our new distribution facility;
•
higher share-based compensation expense; and
•
a charge of $3.1 million related to the bankruptcy of Bed, Bath & Beyond.
Adjusted operating income decreased 1.5% to $158.2 million, or 17.3% of segment net sales revenue,
compared to $160.6 million, or 17.5% of segment net sales revenue.
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Beauty & Wellness
Comparison of Fiscal 2024 to 2023
Operating income was $117.9 million, or 10.8% of segment net sales revenue, compared to $77.7 million,
or 6.7% of segment net sales revenue. The 4.1 percentage point increase in segment operating margin
was primarily due to:
•
lower inbound and outbound freight costs;
•
the favorable comparative impact of EPA compliance costs of $23.6 million incurred in the prior
year;
•
a gain on the sale of our distribution and office facilities in El Paso, Texas of $18.0 million;
•
a decrease in inventory obsolescence expense;
•
decreased distribution expense;
•
the favorable impact of our SKU rationalization efforts; and
•
a decrease in restructuring charges of $5.1 million.
These factors were partially offset by:
•
higher annual incentive compensation expense;
•
higher marketing expense;
•
the unfavorable comparative impact of a gain from insurance recoveries of $9.7 million recognized
in the prior year; and
•
unfavorable operating leverage.
Adjusted operating income increased 2.2% to $143.4 million, or 13.2% of segment net sales revenue,
compared to $140.3 million, or 12.1% of segment net sales revenue.
Interest Expense
Comparison of Fiscal 2024 to 2023
Interest expense was $53.1 million, compared to $40.8 million. The increase in interest expense was
primarily due to a higher average effective interest rate, partially offset by lower average borrowings
outstanding compared to the prior year.
Income Tax Expense
The period-over-period comparison of our effective tax rate is often impacted by the mix of income in our
various tax jurisdictions. Due to our organization in Bermuda and the ownership structure of our foreign
subsidiaries, many of which are not owned directly or indirectly by a U.S. parent company, an immaterial
amount of our foreign income is subject to U.S. taxation on a permanent basis under current law.
Additionally, our intellectual property is largely owned by our foreign subsidiaries, resulting in
proportionally higher earnings in jurisdictions with lower statutory tax rates, which decreases our overall
effective tax rate.
The Organisation for Economic Co-operation and Development has introduced a framework to implement
a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Many aspects of Pillar Two
are effective for tax years beginning after January 1, 2024, with certain remaining aspects to be effective
for tax years beginning January 1, 2025 or later. Certain countries have adopted legislation to implement
Pillar Two, and other countries are in the process of introducing legislation to implement Pillar Two.
Based on the countries in which we operate and those that have adopted legislation that is already
effective (or with effective dates during our fiscal 2025), we currently do not expect the global minimum
tax rules will have a material impact to our global effective tax rate in fiscal 2025. We will continue to
assess the impact of Pillar Two and monitor developments in legislation, regulation, and interpretive
guidance.
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In response to Pillar Two, on December 27, 2023, Bermuda enacted a corporate income tax effective for
fiscal years beginning on or after January 1, 2025. The 15% corporate income tax regime applies to
Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million
or more and is effective for us in fiscal 2026. The Bermuda corporate income tax allows for a beginning
net operating loss balance related to the five years preceding the effective date. Accordingly, during fiscal
2024, we recorded a deferred tax asset of $9.3 million for the Bermuda net operating losses generated
from fiscal 2021 through 2024 with an offsetting valuation allowance of $9.3 million. Although we
currently do not expect the tax regime to have a material impact to our consolidated financial statements,
we will continue to monitor and evaluate impact as further regulatory guidance becomes available.
On August 16, 2022, the Inflation Reduction Act (the “Act”) was enacted and signed into law. The Act is a
budget reconciliation package that includes significant law changes relating to tax, climate change,
energy, and health care. The tax provisions include, among other items, a corporate alternative minimum
tax of 15%, an excise tax of 1% on corporate stock buy-backs, energy-related tax credits, and additional
IRS funding. We do not expect these tax provisions to have a material impact to our consolidated
financial statements.
Fiscal 2024 income tax expense as a percentage of income before income tax was 19.3% compared to
income tax expense of 16.4% for fiscal 2023, primarily due to shifts in the mix of income in our various
tax jurisdictions and tax expense recognized for the gain on the sale of our distribution and office facilities
in El Paso, Texas during fiscal 2024.
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53
Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP)
In order to provide a better understanding of the impact of certain items on our income and diluted EPS,
the tables that follow report the comparative after-tax impact of acquisition-related expenses, Bed, Bath &
Beyond bankruptcy, EPA compliance costs, gain from insurance recoveries, gain on sale of distribution
and office facilities, restructuring charges, amortization of intangible assets, and non-cash share-based
compensation, as applicable, on income and diluted EPS for the periods presented below. Adjusted
income and adjusted diluted EPS may be considered non-GAAP financial measures as contemplated by
SEC Regulation G, Rule 100. For additional information regarding management’s decision to present this
non-GAAP financial information, see the introduction to this Item 7., “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
Fiscal Year Ended February 29, 2024
Income
Diluted EPS
(in thousands, except per share data)
Before Tax
Tax
Net of Tax
Before Tax
Tax
Net of Tax
As reported (GAAP)
$ 209,042 $ 40,448 $ 168,594 $
8.72 $
1.69 $
7.03
Bed, Bath & Beyond bankruptcy
4,213
53
4,160
0.18
—
0.17
Gain on sale of distribution and office facilities
(34,190)
(8,787)
(25,403)
(1.43)
(0.37)
(1.06)
Restructuring charges
18,712
234
18,478
0.78
0.01
0.77
Subtotal
197,777
31,948
165,829
8.25
1.33
6.92
Amortization of intangible assets
18,326
2,447
15,879
0.76
0.10
0.66
Non-cash share-based compensation
33,872
2,110
31,762
1.41
0.09
1.33
Adjusted (non-GAAP)
$ 249,975 $ 36,505 $ 213,470 $
10.43 $
1.52 $
8.91
Weighted average shares of common stock used in computing diluted EPS
23,970
Fiscal Year Ended February 28, 2023
Income
Diluted EPS
(in thousands, except per share data)
Before Tax
Tax
Net of Tax
Before Tax
Tax
Net of Tax
As reported (GAAP)
$ 171,289 $ 28,016 $ 143,273 $
7.11 $
1.16 $
5.95
Acquisition-related expenses
2,784
2
2,782
0.12
—
0.12
EPA compliance costs
23,573
354
23,219
0.98
0.01
0.96
Gain from insurance recoveries
(9,676)
(121)
(9,555)
(0.40)
(0.01)
(0.40)
Restructuring charges
27,362
388
26,974
1.14
0.02
1.12
Subtotal
215,332
28,639
186,693
8.94
1.19
7.75
Amortization of intangible assets
18,322
2,275
16,047
0.76
0.09
0.67
Non-cash share-based compensation
26,753
1,830
24,923
1.11
0.08
1.03
Adjusted (non-GAAP)
$ 260,407 $ 32,744 $ 227,663 $
10.81 $
1.36 $
9.45
Weighted average shares of common stock used in computing diluted EPS
24,090
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Fiscal Year Ended February 28, 2022
Income
Diluted EPS
(in thousands, except per share data)
Before Tax
Tax
Net of Tax
Before Tax
Tax
Net of Tax
As reported (GAAP)
$ 259,966 $ 36,202 $ 223,764 $
10.65 $
1.48 $
9.17
Acquisition-related expenses
2,424
87
2,337
0.10
—
0.10
EPA compliance costs
32,354
485
31,869
1.33
0.02
1.31
Restructuring charges
380
6
374
0.02
—
0.02
Subtotal
295,124
36,780
258,344
12.09
1.51
10.58
Amortization of intangible assets
12,764
1,010
11,754
0.52
0.04
0.48
Non-cash share-based compensation
34,618
2,965
31,653
1.42
0.12
1.30
Adjusted (non-GAAP)
$ 342,506 $ 40,755 $ 301,751 $
14.03 $
1.67 $
12.36
Weighted average shares of common stock used in computing diluted EPS
24,410
Comparison of Fiscal 2024 to 2023
Net income was $168.6 million compared to $143.3 million. Diluted EPS was $7.03 compared to $5.95.
Diluted EPS increased primarily due to higher operating income in both the Beauty & Wellness and Home
& Outdoor segments, an increase in interest income, and lower weighted average diluted shares
outstanding, partially offset by higher interest expense and an increase in the effective income tax rate.
Adjusted income decreased $14.2 million, or 6.2%, to $213.5 million compared to $227.7 million.
Adjusted diluted EPS decreased 5.7% to $8.91 compared to $9.45.
Liquidity and Capital Resources
We principally rely on our cash flow from operations and borrowings under our Credit Agreement to
finance our operations, capital and intangible asset expenditures, acquisitions and share repurchases.
Historically, our principal uses of cash to fund our operations have included operating expenses, primarily
SG&A, and working capital, predominantly for inventory purchases and the extension of credit to our
retail customers. We have typically been able to generate positive cash flow from operations sufficient to
fund our operating activities. In the past, we have utilized a combination of available cash and existing,
or additional, sources of financing to fund strategic acquisitions, share repurchases and capital
investments. We generated $306.1 million in cash from operations during fiscal 2024 and had $18.5
million in cash and cash equivalents at February 29, 2024. As of February 29, 2024, the amount of cash
and cash equivalents held by our foreign subsidiaries was $17.5 million. We have no existing activities
involving special purpose entities or off-balance sheet financing.
Our anticipated material cash requirements in fiscal 2025 include the following:
•
operating expenses, primarily SG&A and working capital predominately for inventory purchases
and to carry normal levels of accounts receivable on our balance sheet;
•
repayment of a current maturity of long term debt of $6.3 million;
•
estimated interest payments of approximately $47.4 million based on outstanding debt
obligations, weighted average interest rates and interest rate swaps in effect at February 29,
2024;
•
minimum operating lease payments under existing obligations of approximately $10.6 million;
•
minimum royalty payments under existing license agreements of approximately $6.3 million;
•
restructuring payments under Project Pegasus of approximately $11.7 million (refer to Note 11 for
additional information); and
•
capital and intangible asset expenditures between approximately $30 million to $35 million to
support ongoing operations and future infrastructure needs.
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Our anticipated material cash requirements beyond fiscal 2025 include the following:
•
operating expenses, primarily SG&A and working capital predominately for inventory purchases
and to carry normal levels of accounts receivable on our balance sheet;
•
outstanding long-term debt obligations maturing between fiscal 2026 and fiscal 2029, in an
aggregate principal value of approximately $665.7 million, with $631.3 million of that amount
maturing in fiscal 2029 (refer to Note 13 for additional information);
•
estimated interest payments of approximately $50.0 million, $48.9 million, $48.1 million, and
$45.4 million in fiscal 2026, fiscal 2027, fiscal 2028, and fiscal 2029, respectively, based on
outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at
February 29, 2024 (refer to Note 13 for additional information);
•
minimum operating lease payments of approximately $45.9 million over the term of our existing
operating lease arrangements (refer to Note 3 for additional information);
•
minimum royalty payments of approximately $20.3 million over the term of the existing license
agreements (refer to Note 12 for additional information); and
•
capital and intangible asset expenditures to support ongoing operations and future infrastructure
needs.
Based on our current financial condition and current operations, we believe that cash flows from
operations and available financing sources will continue to provide sufficient capital resources to fund our
foreseeable short- and long-term liquidity requirements.
We continue to evaluate acquisition opportunities on a regular basis. We may finance acquisition activity
with available cash, the issuance of shares of common stock, additional debt, or other sources of
financing, depending upon the size and nature of any such transaction and the status of the capital
markets at the time of such acquisition.
We may also elect to repurchase additional shares of common stock under our Board of Directors'
authorization, subject to limitations contained in our debt agreement and based upon our assessment of
a number of factors, including share price, trading volume and general market conditions, working capital
requirements, general business conditions, financial conditions, any applicable contractual limitations,
and other factors, including alternative investment opportunities. We may finance share repurchases with
available cash, additional debt or other sources of financing. For additional information, see Item 5.,
“Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities” in this Annual Report.
Operating Activities
Comparison of Fiscal 2024 to 2023
Operating activities provided net cash of $306.1 million compared to $208.2 million. The increase was
primarily driven by higher cash earnings, decreases in payments for inventory, inbound freight, annual
incentive compensation, income taxes and restructuring activities, partially offset by increases in cash
used primarily for accounts receivable and interest payments.
Investing Activities
Investing activities provided cash of $5.4 million in fiscal 2024 and used cash of $319.3 million in fiscal
2023.
Highlights from Fiscal 2024
•
We received proceeds of $49.5 million from the sale of our distribution and office facilities in El
Paso, Texas and made investments in capital and intangible asset expenditures of $36.6 million,
of which $19.3 million related to expenditures, primarily equipment, for our new two million square
foot distribution facility. Capital and intangible asset expenditures also included expenditures for
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computer, furniture and other equipment and tooling, molds, and other production equipment. In
addition, we invested $9.6 million in U.S. Treasury Bills.
Highlights from Fiscal 2023
•
We paid $147.9 million, net of cash acquired, to acquire Curlsmith and made investments in
capital and intangible asset expenditures of $174.9 million, of which $147.0 million was for
construction expenditures inclusive of capitalized interest related to our new two million square
foot distribution facility. Capital and intangible asset expenditures also included $27.9 million
primarily for computer, software, furniture and other equipment and tooling, molds, and other
production equipment.
Financing Activities
Financing activities used cash of $322.1 million in fiscal 2024 and provided cash of $106.8 million in fiscal
2023.
Highlights from Fiscal 2024
•
we had proceeds of $1,415.5 million from revolving loans under our Credit Agreement and Prior
Credit Agreement, net of lender fees paid in connection with the refinancing of our Credit
Agreement;
•
we repaid $1,686.6 million of revolving loans drawn under our Credit Agreement and Prior Credit
Agreement;
•
we received proceeds, net of lender fees, of $248.9 million from term loans under our Credit
Agreement;
•
we repaid $246.9 million of long-term debt which included the repayment of amounts outstanding
on our term loans under the Prior Credit Agreement;
•
we paid $2.0 million of third-party financing costs in connection with the refinancing of our Credit
Agreement; and
•
we repurchased and retired 432,532 shares of common stock at an average price of $127.67 per
share for a total purchase price of $55.2 million through a combination of open market purchases
and the settlement of certain stock awards.
Highlights from Fiscal 2023
•
we had draws of $685.8 million in revolving loans under our Credit Agreement;
•
we repaid $795.3 million of revolving loans drawn under our Credit Agreement;
•
we received proceeds of $250.0 million from term loans under our Credit Agreement;
•
we repaid $19.8 million of long-term debt; and
•
we repurchased and retired 90,462 shares of common stock at an average price of $203.02 per
share for a total purchase price of $18.4 million through the settlement of certain stock awards.
Credit Agreement and Other Debt Agreements
Credit Agreement and Prior Credit Agreement
On February 15, 2024, we entered into a credit agreement (the “Credit Agreement”) with Bank of
America, N.A., as administrative agent, and other lenders. The Credit Agreement replaces our prior
credit agreement (the “Prior Credit Agreement”), which terminated on February 15, 2024 and is further
described below. We utilized the proceeds from the refinancing to repay all principal, interest, and fees
outstanding under the Prior Credit Agreement without penalty. As a result, we recognized a loss on
extinguishment of debt within interest expense of $0.5 million during fiscal 2024, which consisted of a
write-off of $0.4 million of unamortized prepaid financing fees related to the Prior Credit Agreement and
$0.1 million of lender fees related to debt under the Credit Agreement treated as an extinguishment.
Additionally, we expensed $0.3 million of third-party fees in fiscal 2024 related to debt under the Credit
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57
Agreement treated as a modification, which was recognized within interest expense. We capitalized $4.0
million of lender fees and $2.2 million of third-party fees incurred in connection with the Credit Agreement,
which were recorded as prepaid financing fees in long-term debt and prepaid expenses and other current
assets in the amounts of $5.4 million and $0.8 million, respectively.
The Credit Agreement provides for aggregate commitments of $1.5 billion, which are available through (i)
a $1.0 billion revolving credit facility, which includes a $50 million sublimit for the issuance of letters of
credit, (ii) a $250 million term loan facility, and (iii) a committed $250 million delayed draw term loan
facility, which may be borrowed in multiple drawdowns until August 15, 2025. Proceeds can be used for
working capital and other general corporate purposes, including funding permitted acquisitions. At the
closing date of the Credit Agreement, we borrowed $457.5 million under the revolving credit facility and
$250.0 million under the term loan facility and utilized the proceeds to repay all debt outstanding under
the Prior Credit Agreement. The Credit Agreement matures on February 15, 2029. The Credit
Agreement includes an accordion feature, which permits the Company to request to increase its
borrowing capacity by an additional $300 million plus an unlimited amount when the Leverage Ratio (as
defined in the Credit Agreement) on a pro-forma basis is less than 3.25 to 1.00. The Company’s exercise
of the accordion is subject to certain conditions being met, including lender approval.
Outstanding letters of credit reduce the borrowing availability under the Credit Agreement on a dollar-for-
dollar basis. We are able to repay amounts borrowed at any time without penalty. Borrowings accrue
interest under one of two alternative methods pursuant to the Credit Agreement as described below. With
each borrowing against our credit line, we can elect the interest rate method based on our funding needs
at the time. We also incur loan commitment and letter of credit fees under the Credit Agreement. The
term loans are payable at the end of each fiscal quarter in equal installments of 0.625% through February
28, 2025, 0.9375% through February 28, 2026, and 1.25% thereafter of the original principal balance of
the term loans, beginning in the first quarter of fiscal 2025, with the remaining balance due at the maturity
date. Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term
SOFR (as defined in the Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined
in the Credit Agreement) of 0% to 1.125% and 1.0% to 2.125% for Base Rate and Term SOFR
borrowings, respectively.
Our Prior Credit Agreement with Bank of America, N.A., as administrative agent, and other lenders,
provided for an unsecured total revolving commitment of $1.25 billion and a $300 million accordion, which
could be used for term loan commitments. In June 2022, we exercised the accordion under the Prior
Credit Agreement and borrowed $250 million as term loans. The proceeds from the term loans were
used to repay revolving loans under the Prior Credit Agreement. The maturity date of the term loans and
the revolving loans under the Prior Credit Agreement was March 13, 2025. Borrowings under the Prior
Credit Agreement bore floating interest at either the Base Rate or Term SOFR (as defined in the Prior
Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Prior Credit
Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively.
The floating interest rates on our borrowings under the Credit Agreement and Prior Credit Agreement are
hedged with interest rate swaps to effectively fix interest rates on $500 million and $425 million of the
outstanding principal balance under the revolving loans as of February 29, 2024 and February 28, 2023,
respectively. See Notes 14, 15, and 16 for additional information regarding our interest rate swaps.
As of February 29, 2024, the outstanding Credit Agreement principal balance was $672.0 million
(excluding prepaid financing fees) and the balance of outstanding letters of credit was $15.5 million. The
weighted average interest rate on borrowings outstanding under the Credit Agreement was 6.0% at
February 29, 2024. As of February 29, 2024, the amount available for revolving loans under the Credit
Agreement was $562.6 million. Covenants in the Credit Agreement limit the amount of total indebtedness
we can incur. As of February 29, 2024, these covenants effectively limited our ability to incur more than
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$474.6 million of additional debt from all sources, including the Credit Agreement, or $562.6 million in the
event a qualified acquisition is consummated.
Other Debt Agreements
On February 28, 2023, we paid the remaining balance of $15.1 million, including principal and interest,
outstanding under our unsecured loan agreement (the “MBFC Loan”) with the Mississippi Business
Finance Corporation (the “MBFC”), without penalty. As a result, as of February 28, 2023, we no longer
had outstanding debt related to the MBFC Loan and the MBFC Loan terminated pursuant to its terms.
The loan agreement was entered into in connection with the issuance by MBFC of taxable industrial
development revenue bonds. Borrowings under the MBFC Loan bore interest at either the Base Rate or
Term SOFR (both as defined in the loan agreement), plus a margin based on the Net Leverage Ratio (as
defined in the loan agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR
borrowings, respectively. The borrowings were used to fund construction of our Olive Branch, Mississippi
distribution facility. The maturity date of the MBFC Loan was March 1, 2023.
Debt Covenants
Our debt under our Credit Agreement is unconditionally guaranteed, on a joint and several basis, by the
Company and certain of its subsidiaries. Our Credit Agreement requires the maintenance of certain key
financial covenants, defined in the table below. Our Credit Agreement also contains other customary
covenants, including, among other things, covenants restricting or limiting us, except under certain
conditions set forth therein, from (1) incurring liens on our properties, (2) making certain types of
investments, (3) incurring additional debt, and (4) assigning or transferring certain licenses. Our Credit
Agreement also contains customary events of default, including failure to pay principal or interest when
due, among others. Upon an event of default under our Credit Agreement, the lenders may, among other
things, accelerate the maturity of any amounts outstanding. The commitments of the lenders to make
loans to us under the Credit Agreement are several and not joint. Accordingly, if any lender fails to make
loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such
lender’s commitments under the Credit Agreement.
As of February 29, 2024, we were in compliance with all covenants as defined under the terms of the
Credit Agreement.
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The table below provides the formulas currently in effect for certain key financial covenants as defined
under our Credit Agreement:
Applicable Financial Covenant
Credit Agreement
Minimum Interest Coverage Ratio
EBIT (1) ÷ Interest Expense (1)
Minimum Required: 3.00 to 1.00
Maximum Leverage Ratio
Total Current and Long Term Debt (2) ÷
EBITDA (1) + Pro Forma Effect of Transactions
Maximum Currently Allowed: 3.50 to 1.00 (3)
Key Definitions:
EBIT:
Earnings + Interest Expense + Taxes + Non-Cash Charges (4) + Certain Allowed Addbacks
(4) - Certain Non-Cash Income (4)
EBITDA:
EBIT + Depreciation and Amortization Expense
Pro Forma Effect of
Transactions:
For any acquisition, pre-acquisition EBITDA of the acquired business is included so that the
EBITDA of the acquired business included in the computation equals its twelve month
trailing total. In addition, the amount of certain pro forma run-rate cost savings for
acquisitions or dispositions may be added to EBIT and EBITDA.
(1) Computed using totals for the latest reported four consecutive fiscal quarters.
(2) Computed using the ending debt balances plus outstanding letters of credit as of the latest reported fiscal quarter.
(3) In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.50 to 1.00 for the first four fiscal
quarters after the qualified acquisition is consummated.
(4) As defined in the Credit Agreement.
Critical Accounting Policies and Estimates
The SEC defines critical accounting estimates as those made in accordance with generally accepted
accounting principles that involve a significant level of estimation uncertainty and have had or are
reasonably likely to have a material impact on a company's financial condition or results of operations.
We consider the following estimates to meet this definition and represent our more critical estimates and
assumptions used in the preparation of our consolidated financial statements.
Income Taxes
We must make certain estimates and judgments in determining our provision for income tax expense.
The provision for income tax expense is calculated on reported income before income taxes based on
current tax law and includes, in the current period, the cumulative effect of any changes in tax rates from
those used previously in determining deferred tax assets and liabilities. Tax laws may require items to be
included in the determination of taxable income at different times from when the items are reflected in the
financial statements. Deferred tax balances reflect the effects of temporary differences between the
financial statement carrying amounts of assets and liabilities and their tax bases, as well as from net
operating losses and tax credit carryforwards, and are stated at enacted tax rates in effect for the year
taxes are expected to be paid or recovered.
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and
require certain estimates and assumptions to determine whether it is more likely than not that all or a
portion of the benefit will not be realized. The recoverability of these future tax deductions and credits is
determined by assessing the adequacy of future expected taxable income from all sources, including the
future reversal of existing taxable temporary differences, taxable income in carryback years, estimated
future taxable income and available tax planning strategies. In projecting future taxable income, we
begin with historical results and incorporate assumptions including future operating income, the reversal
of temporary differences and the implementation of feasible and prudent tax planning strategies. These
assumptions require significant judgement and are consistent with the plans and estimates we are using
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to manage our underlying business. Should a change in facts or circumstances, such as changes in our
business plans, economic conditions or future tax legislation, lead to a change in judgment about the
ultimate recoverability of a deferred tax asset, we record or adjust the related valuation allowance in the
period that the change in facts and circumstances occurs, along with a corresponding increase or
decrease in income tax expense. Additionally, if future taxable income varies from projected taxable
income, we may be required to adjust our valuation allowance in future years.
In addition, the calculation of our tax liabilities requires us to account for uncertainties in the application of
complex and evolving tax regulations. We recognize liabilities for uncertain tax positions based on the
two-step process prescribed within GAAP. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the position will
be sustained upon examination by the tax authority based upon its technical merits assuming the tax
authority has full knowledge of all relevant information. To be recognized in the financial statements, the
tax position must meet this more-likely-than-not threshold. For positions meeting this recognition
threshold, the second step requires us to estimate and measure the tax benefit as the largest amount that
has greater than a 50 percent likelihood of being realized upon ultimate settlement. It is inherently
difficult and subjective to estimate such amounts, as this requires us to determine the probability of
various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This
evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in
tax law, effectively settled issues under audit, historical experience with similar tax matters, guidance from
our tax advisors, and new audit activity. For tax positions that do not meet the threshold requirement, we
record liabilities for unrecognized tax benefits as a tax expense or benefit in the period recognized or
reversed and disclose as a separate liability in our financial statements, including related accrued interest
and penalties. A change in recognition or measurement would result in the recognition of a tax benefit or
an additional charge to the tax provision in the period in which the change occurs.
Valuation of Inventory
We record inventory on our balance sheet at the lower of average cost or net realizable value. We write
down a portion of our inventory to net realizable value based on the historical sales trends of products
and estimates about future demand and market conditions, among other factors. We regularly review our
inventory for slow-moving items and for items that we are unable to sell at prices above their original cost.
When we identify such an item, we use net realizable value as the basis for recording such inventory and
base our estimates on expected future selling prices less expected disposal costs. These estimates
entail a significant amount of inherent subjectivity and uncertainty. As a result, these estimates could vary
significantly from the amounts that we may ultimately realize upon the sale of inventories if future
economic conditions, product demand, product discontinuances, competitive conditions or other factors
differ from our estimates and expectations. Additionally, changes in consumer demand, retailer inventory
management strategies, transportation lead times, supplier capacity and raw material availability could
make our inventory management and reserves more difficult to estimate.
Acquisitions, Goodwill and Indefinite-Lived Intangibles, and Related Impairment Testing
A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a
result of past acquisitions. Accounting for business combinations requires the use of estimates and
assumptions in determining the fair value of assets acquired and liabilities assumed in order to properly
allocate the purchase price. Goodwill is recorded as the difference, if any, between the aggregate
consideration paid and the fair value of the net tangible and intangible assets received in the acquisition
of a business. Our intangible assets acquired primarily include trade names and customer relationships.
The fair value of our assets acquired and liabilities assumed are typically based upon valuations
performed by independent third-party appraisers using the income approach, including estimated future
discounted cash flow models (“DCF Models”), the relief from royalty method for trade names, and the
distributor method for customer relationships. The fair value of our trade names and customer
relationships acquired involved significant estimates and assumptions, including revenue growth rates,
gross profit and operating profit margins, discount rates and royalty and customer attrition rates (as
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applicable). We believe that the fair value assigned to the assets acquired and liabilities assumed are
based on reasonable assumptions and estimates that marketplace participants would use.
We review goodwill and indefinite-lived intangible assets for impairment on an annual basis or more
frequently whenever events or changes in circumstances indicate that their carrying value may not be
recoverable. We consider whether circumstances or conditions exist which suggest that the carrying
value of our goodwill and indefinite-lived intangible assets might be impaired. If such circumstances or
conditions exist, we perform a qualitative assessment to determine whether it is more likely than not that
the assets are impaired. We evaluate goodwill at the reporting unit level (operating segment or one level
below an operating segment). If the results of the qualitative assessment indicate that it is more likely
than not that the assets are impaired, further steps are required in order to determine whether the
carrying value of each reporting unit and indefinite-lived intangible assets exceeds its fair market value.
An impairment charge is recognized to the extent the goodwill or indefinite-lived intangible asset recorded
exceeds the reporting unit’s or asset's fair value. We perform our annual impairment testing for goodwill
and indefinite-lived assets as of the beginning of the fourth quarter of our fiscal year. Based on our
qualitative assessment performed during the fourth quarter of fiscal 2024 and fiscal 2023, we determined
that it is not more likely than not that the fair value of each reporting unit and indefinite-lived intangible
asset is lower than its carrying value; therefore, quantitative impairment testing was not required.
Our quantitative impairment test methodology primarily uses DCF Models. The DCF Models use a
number of assumptions including expected future cash flows from the assets, volatility, risk free rate, and
the expected life of the assets, the determination of which require significant judgments from
management. In determining the assumptions to be used, we consider the existing rates on Treasury
Bills, yield spreads on assets with comparable expected lives, historical volatility of our common stock
and that of comparable companies, and general economic and industry trends, among other
considerations. When stock market or other conditions warrant, we expand our traditional impairment
test methodology to give weight to other methods that provide additional observable market information in
order to better reflect the current risk level being incorporated into market prices and in order to
corroborate the fair values of each of our reporting units. Management will place increased reliance on
these additional methods in conjunction with its DCF Models in the event that the total market
capitalization of its stock drops below its consolidated stockholders’ equity balance for a sustained period.
Considerable management judgment is necessary, in determining the fair value of goodwill and intangible
assets (initially acquired and as part of our impairment testing), including the reasonableness of fair value
estimates, evaluating the most likely impact of a range of possible external conditions, considering the
resulting operating changes and their impact on estimated future cash flows, determining the appropriate
discount factors to use, and selecting and weighting appropriate comparable market level inputs. The
recoverability of these assets is dependent upon achievement of our projections and the continued
execution of key initiatives related to revenue growth and profitability. The rates used in our projections
are management’s estimate of the most likely results over time, given a wide range of potential outcomes.
The assumptions and estimates used in our fair value analysis involve significant elements of subjective
judgment and analysis by our management. While we believe that the assumptions we use are
reasonable at the time made, changes in business conditions or other unanticipated events and
circumstances may occur that cause actual results to differ materially from projected results and this
could potentially require future adjustments to our asset valuations.
Impairment of Long-Lived Assets
We review intangible assets with definite lives and long-lived assets held and used if a triggering event
occurs during the reporting period. If such circumstances or conditions exist, further steps are required in
order to determine whether the carrying value of each of the individual assets exceeds its fair market
value. If our analysis indicates that an individual asset’s carrying value does exceed its fair market value,
the next step is to record a loss equal to the excess of the individual asset’s carrying value over its fair
value. We evaluate any long-lived assets held for sale quarterly to determine if estimated fair value less
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cost to sell has changed during the reporting period. The determination of the fair value of definite-lived
intangible assets and long-lived assets can entail a significant amount of judgment and subjectivity,
including revenue growth rates, discount rates, royalty and customer attrition rates (as applicable), and
estimated market prices (as applicable).
Economic Useful Lives of Intangible Assets
We amortize intangible assets, such as trademark licenses, trade names, customer relationships and
lists, patents and non-compete agreements over their economic useful lives, unless those assets'
economic useful lives are indefinite. If an intangible asset’s economic useful life is deemed indefinite, that
asset is not amortized. The determination of the economic useful life of an intangible asset requires a
significant amount of judgment and entails significant subjectivity and uncertainty. When we acquire an
intangible asset, we consider factors such as the asset's history, our plans for that asset and the market
for products associated with the asset. We consider these same factors when reviewing the economic
useful lives of our previously acquired intangible assets as well. We review the economic useful lives of
our intangible assets at least annually. We complete our analysis of the remaining useful economic lives
of our intangible assets during the fourth quarter of each fiscal year or when a triggering event occurs.
Share-Based Compensation
We grant share-based compensation awards to non-employee directors and certain associates under our
equity plans. We measure the cost of services received in exchange for equity awards, which include
grants of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock awards
(“PSAs”), and performance stock units (“PSUs”), based on the fair value of the awards on the grant date.
These awards may be subject to attainment of certain service conditions, performance conditions and/or
market conditions.
We grant PSAs and PSUs to certain officers and associates, which cliff vest after three years and are
contingent upon meeting one or more defined operational performance metrics over the three year
performance period (“Performance Condition Awards”). The quantity of shares ultimately awarded can
range from 0% to 200% of “Target”, as defined in the award agreement as 100%, based on the level of
achievement against the defined operational performance metrics. We recognize compensation expense
for Performance Condition Awards over the requisite service period to the extent performance conditions
are considered probable. Estimating the number of shares of Performance Condition Awards that are
probable of vesting requires judgment, including assumptions about future operating performance. While
the assumptions used to estimate the probability of achievement against the defined operational
performance metrics are management's best estimates, such estimates involve inherent uncertainties.
The extent actual results or updated estimates differ from our current estimates, such amounts will be
recorded as a cumulative adjustment to share-based compensation expense in the period estimates are
revised.
The critical accounting estimates described above supplement the description of our accounting policies
disclosed in Note 1 to the accompanying consolidated financial statements. Note 1 describes several
other policies that are important to the preparation of our consolidated financial statements, but do not
meet the SEC's definition of critical accounting estimates.
Information Regarding Forward-Looking Statements
Certain written and oral statements in this Annual Report may constitute “forward-looking statements” as
defined under the Private Securities Litigation Reform Act of 1995. This includes statements made in this
Annual Report, in other filings with the SEC, in press releases, and in certain other oral and written
presentations. Generally, the words “anticipates”, “believes”, “expects”, “plans”, “may”, “will”, “might”,
“would”, “should”, “seeks”, “estimates”, “project”, “predict”, “potential”, “currently”, “continue”, “intends”,
“outlook”, “forecasts”, “targets”, “could”, and other similar words identify forward-looking statements. All
statements that address operating results, events or developments that we expect or anticipate may
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occur in the future, including statements related to sales, expenses, EPS results, and statements
expressing general expectations about future operating results, are forward-looking statements and are
based upon our current expectations and various assumptions. We believe there is a reasonable basis
for our expectations and assumptions, but there can be no assurance that we will realize our
expectations or that our assumptions will prove correct. Forward-looking statements are only as of the
date they are made and are subject to risks that could cause them to differ materially from actual results.
Accordingly, we caution readers not to place undue reliance on forward-looking statements. We believe
that these risks include but are not limited to the risks described in this Annual Report under Item 1A.,
“Risk Factors” and that are otherwise described from time to time in our SEC reports as filed. We
undertake no obligation to publicly update or revise any forward-looking statements as a result of new
information, future events or otherwise.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Changes in currency exchange rates and interest rates are our primary financial market risks.
Foreign Currency Risk
The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the
reporting currency for the Company. By operating internationally, we are subject to foreign currency risk
from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such
transactions include sales and operating expenses. As a result of such transactions, portions of our
cash, accounts receivable and accounts payable are denominated in foreign currencies. Approximately
14%, 13%, and 10% of our net sales revenue was denominated in foreign currencies during fiscal 2024,
2023 and 2022, respectively. These sales were primarily denominated in Euros, British Pounds and
Canadian Dollars. We make most of our inventory purchases from manufacturers in Asia and primarily
use the U.S. Dollar for such purchases.
In our consolidated statements of income, foreign currency exchange rate gains and losses resulting from
the remeasurement of foreign income taxes receivables and payables, and deferred income tax assets
and liabilities are recognized in income tax expense, and all other foreign currency exchange rate gains
and losses are recognized in SG&A. We recorded in income tax expense foreign currency exchange rate
net gains of $0.3 million during fiscal 2024 and net losses of $0.4 million and $0.5 million during fiscal
2023 and 2022, respectively. We recorded in SG&A foreign currency exchange rate net losses of $0.5
million, $1.7 million and $0.2 million during fiscal 2024, 2023 and 2022, respectively.
We identify foreign currency risk by regularly monitoring our foreign currency denominated transactions
and balances. Where operating conditions permit, we reduce our foreign currency risk by purchasing
most of our inventory with U.S. Dollars and by converting cash balances denominated in foreign
currencies to U.S. Dollars.
We mitigate certain foreign currency exchange rate risk by using a series of forward contracts and cross-
currency debt swaps to protect against the foreign currency exchange rate risk inherent in our
transactions denominated in foreign currencies. Our primary objective in holding derivatives is to reduce
the volatility of net earnings, cash flows, and the net asset value associated with changes in foreign
currency exchange rates. Our foreign currency risk management strategy includes both hedging
instruments and derivatives that are not designated as hedging instruments, which have terms of
generally 12 to 24 months. We do not enter into any derivatives or similar instruments for trading or other
speculative purposes. We expect that as currency market conditions warrant, and our foreign currency
denominated transaction exposure grows, we will continue to execute additional contracts in order to
hedge against certain potential foreign currency exchange rate losses.
As of February 29, 2024 and February 28, 2023, a hypothetical adverse 10% change in foreign currency
exchange rates would reduce the carrying and fair values of our derivatives by $8.3 million and $8.8
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million on a pre-tax basis, respectively. This calculation is for risk analysis purposes and does not purport
to represent actual losses or gains in fair value that we could incur. It is important to note that the change
in value represents the estimated change in fair value of the contracts. Actual results in the future may
differ materially from these estimated results due to actual developments in the global financial markets.
Because the contracts hedge an underlying exposure, we would expect a similar and opposite change in
foreign currency exchange rate gains or losses over the same periods as the contracts. Refer to Note 15
to the accompanying consolidated financial statements for further information regarding these
instruments.
A significant portion of the products we sell are purchased from third-party manufacturers in China, who
source a significant portion of their labor and raw materials in Chinese Renminbi. The Chinese Renminbi
has fluctuated against the U.S. Dollar in recent years and in fiscal 2024 the average exchange rate of the
Chinese Renminbi weakened against the U.S. Dollar by approximately 5.0% compared to the average
rate during fiscal 2023. If China’s currency continues to fluctuate against the U.S. Dollar in the short-to-
intermediate term, we cannot accurately predict the impact of those fluctuations on our results of
operations. Accordingly, there can be no assurance that foreign exchange rates will be stable in the
future or that fluctuations in Chinese foreign currency markets will not have a material adverse effect on
our business, results of operations and financial condition.
Interest Rate Risk
Interest on our outstanding debt as of February 29, 2024 is based on variable floating interest rates. As
such, we are exposed to changes in short-term market interest rates and these changes in rates will
impact our net interest expense. As of February 29, 2024, certain borrowings under the Credit
Agreement bore interest at an adjusted Term SOFR (as defined in the Credit Agreement). SOFR began
in April 2018 and it therefore has a limited history. The future performance of SOFR cannot reliably be
predicted based on hypothetical or limited historical performance data. Uncertainty as to SOFR or
changes to SOFR may affect the interest rate of certain borrowings under the Credit Agreement. We
hedge against interest rate volatility by using interest rate swaps to hedge a portion of our outstanding
floating rate debt. Additionally, our cash and short-term investments generate interest income that will
vary based on changes in short-term interest.
As of February 29, 2024 and February 28, 2023, a hypothetical adverse 10% change in interest rates
would reduce the carrying and fair values of the interest rate swaps by $2.7 million and $4.3 million on
a pre-tax basis, respectively. This calculation is for risk analysis purposes and does
not purport to represent actual losses or gains in fair value that we could incur. It is important to
note that the change in value represents the estimated change in the fair value of the swaps. Actual
results in the future may differ materially from these estimated results due to actual developments in the
global financial markets. Because the swaps hedge an underlying exposure, we would expect a similar
and opposite change in floating interest rates over the same periods as the swaps. Refer to Notes 13
and 15 to the accompanying consolidated financial statements for further information regarding our
interest rate sensitive assets and liabilities.
As of February 29, 2024 and February 28, 2023, a hypothetical 1% increase in interest rates would
increase our annual interest expense, net of the effect of our interest rate swaps, by approximately
$1.7 million and $5.1 million, respectively. This calculation is for risk analysis purposes and does
not purport to represent actual increases or decreases in interest expense that we could incur. Actual
results in the future may differ materially from these estimated results due to actual developments in the
global financial markets. Refer to Item 1A., “Risk Factors” and Item 7., “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in this Annual Report for further information
regarding our interest rate risks.
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
PAGE
Management’s Report on Internal Control Over Financial Reporting
67
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
68
Consolidated Financial Statements:
Consolidated Balance Sheets as of February 29, 2024 and February 28, 2023
70
Consolidated Statements of Income for each of the years in the three-year period ended February 29, 2024
71
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended
February 29, 2024
72
Consolidated Statements of Stockholders' Equity for each of the years in the three-year period ended
February 29, 2024
73
Consolidated Statements of Cash Flows for each of the years in the three-year period ended February 29,
2024
74
Notes to Consolidated Financial Statements
75
Note 1 - Summary of Significant Accounting Policies and Related Information
75
Note 2 - New Accounting Pronouncements
82
Note 3 - Leases
83
Note 4 - Property and Equipment
84
Note 5 - Accrued Expenses and Other Current Liabilities
85
Note 6 - Acquisitions
85
Note 7 - Goodwill and Intangibles
88
Note 8 - Share-Based Compensation Plans
90
Note 9 - Defined Contribution Plans
93
Note 10 - Repurchases of Common Stock
93
Note 11 - Restructuring Plan
93
Note 12 - Commitments and Contingencies
96
Note 13 - Long-Term Debt
99
Note 14 - Fair Value
102
Note 15 - Financial Instruments and Risk Management
103
Note 16 - Accumulated Other Comprehensive Income (Loss)
106
Note 17 - Segment and Geographic Information
106
Note 18 - Income Taxes
108
Note 19 - Earnings Per Share
112
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for each of the years in the three-year period ended
February 29, 2024
113
All other schedules are omitted as the required information is included in the consolidated financial
statements or is not applicable.
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Helen of Troy’s management is responsible for establishing and maintaining adequate internal control
over financial reporting as defined by Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act.
Our internal control system is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles and includes those policies and procedures that:
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our
transactions and dispositions of assets;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with authorizations of our
management and Board of Directors; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on the financial statements.
There are inherent limitations in the effectiveness of internal control over financial reporting, including the
possibility that misstatements may not be prevented or detected. Furthermore, the effectiveness of
internal controls may become inadequate because of future changes in conditions, or variations in the
degree of compliance with our policies or procedures.
Our management assesses the effectiveness of our internal control over financial reporting using the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal Control-Integrated Framework. Based on our assessment, we have concluded that our
internal control over financial reporting was effective as of February 29, 2024.
Our independent registered public accounting firm, Grant Thornton LLP, has issued an audit report on the
effectiveness of our internal control over financial reporting. Their report appears on the following page.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Helen of Troy Limited
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Helen of Troy Limited and subsidiaries
(the “Company”) as of February 29, 2024, based on criteria established in the 2013 Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of February 29, 2024, based on criteria established in the 2013 Internal
Control-Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the
year ended February 29, 2024, and our report dated April 24, 2024 expressed an unqualified opinion on
those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’s
Report”). Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
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 (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) 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 (3) 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/ GRANT THORNTON LLP
Dallas, Texas
April 24, 2024
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68
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Helen of Troy Limited
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Helen of Troy Limited and
subsidiaries (the “Company”) as of February 29, 2024 and February 28, 2023, the related consolidated
statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three
years in the period ended February 29, 2024, and the related notes and financial statement schedule
included under Schedule II – Valuation and Qualifying Accounts (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of February 29, 2024 and February 28, 2023, and the results of its operations
and its cash flows for each of the three years in the period ended February 29, 2024, in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of February
29, 2024, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated
April 24, 2024 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2007.
Dallas, Texas
April 24, 2024
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69
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except shares and par value)
February 29,
2024
February 28,
2023
Assets
Assets, current:
Cash and cash equivalents
$
18,501 $
29,073
Receivables, less allowances of $7,481 and $1,678
394,536
377,604
Inventory
395,995
455,485
Prepaid expenses and other current assets
27,012
24,721
Income taxes receivable
7,874
5,158
Total assets, current
843,918
892,041
Property and equipment, net of accumulated depreciation of $169,021 and $178,961
336,646
351,793
Goodwill
1,066,730
1,066,479
Other intangible assets, net of accumulated amortization of $186,882 and $168,574
536,696
553,883
Operating lease assets
35,962
38,751
Deferred tax assets, net
3,662
2,781
Other assets
15,008
7,987
Total assets
$
2,838,622 $ 2,913,715
Liabilities and Stockholders' Equity
Liabilities, current:
Accounts payable
$
245,349 $
190,598
Accrued expenses and other current liabilities
181,391
200,718
Income taxes payable
17,821
14,778
Long-term debt, current maturities
6,250
6,064
Total liabilities, current
450,811
412,158
Long-term debt, excluding current maturities
659,421
928,348
Lease liabilities, non-current
37,262
42,672
Deferred tax liabilities, net
41,253
28,048
Other liabilities, non-current
12,433
13,678
Total liabilities
1,201,180
1,424,904
Commitments and contingencies
Stockholders' equity:
Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; none issued
—
—
Common stock, $0.10 par. Authorized 50,000,000 shares; 23,751,258 and 23,994,405 shares
issued and outstanding
2,375
2,399
Additional paid in capital
348,739
317,277
Accumulated other comprehensive income
2,099
4,947
Retained earnings
1,284,229
1,164,188
Total stockholders' equity
1,637,442
1,488,811
Total liabilities and stockholders' equity
$
2,838,622 $ 2,913,715
See accompanying notes to consolidated financial statements.
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70
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Income
Fiscal Years Ended Last Day of February,
(in thousands, except per share data)
2024
2023
2022
Sales revenue, net
$ 2,005,050 $ 2,072,667 $ 2,223,355
Cost of goods sold
1,056,390
1,173,316
1,270,168
Gross profit
948,660
899,351
953,187
Selling, general and administrative expense (“SG&A”)
669,359
660,198
680,257
Restructuring charges
18,712
27,362
380
Operating income
260,589
211,791
272,550
Non-operating income, net
1,518
249
260
Interest expense
53,065
40,751
12,844
Income before income tax
209,042
171,289
259,966
Income tax expense
40,448
28,016
36,202
Net income
$
168,594 $
143,273 $
223,764
Earnings per share (“EPS”):
Basic
$
7.06 $
5.98 $
9.27
Diluted
7.03
5.95
9.17
Weighted average shares used in computing EPS:
Basic
23,865
23,955
24,142
Diluted
23,970
24,090
24,410
See accompanying notes to consolidated financial statements.
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71
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
Net income
$
168,594 $
143,273 $
223,764
Other comprehensive (loss) income, net of tax:
Cash flow hedge activity - interest rate swaps
(2,477)
6,520
5,450
Cash flow hedge activity - foreign currency contracts
(371)
(1,775)
6,408
Total other comprehensive (loss) income, net of tax
(2,848)
4,745
11,858
Comprehensive income
$
165,746 $
148,018 $
235,622
See accompanying notes to consolidated financial statements.
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72
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Common Stock
Additional
Paid in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Stockholders'
Equity
(in thousands, including shares)
Shares
Par
Value
Balances at February 28, 2021
24,406 $ 2,441 $ 283,396 $
(11,656) $ 965,166 $
1,239,347
Net income
—
—
—
—
223,764
223,764
Other comprehensive income, net of tax
—
—
—
11,858
—
11,858
Exercise of stock options
23
2
1,693
—
—
1,695
Issuance and settlement of restricted stock
202
20
(20)
—
—
—
Issuance of common stock related to stock purchase plan
24
2
4,259
—
—
4,261
Common stock repurchased and retired
(855)
(85)
(20,206)
—
(167,913)
(188,204)
Share-based compensation
—
—
34,618
—
—
34,618
Balances at February 28, 2022
23,800 $ 2,380 $ 303,740 $
202 $ 1,021,017 $
1,327,339
Net income
—
—
—
—
143,273
143,273
Other comprehensive income, net of tax
—
—
—
4,745
—
4,745
Exercise of stock options
9
1
724
—
—
725
Issuance and settlement of restricted stock
242
24
(24)
—
—
—
Issuance of common stock related to stock purchase plan
33
3
4,338
—
—
4,341
Common stock repurchased and retired
(90)
(9)
(18,254)
—
(102)
(18,365)
Share-based compensation
—
—
26,753
—
—
26,753
Balances at February 28, 2023
23,994 $ 2,399 $ 317,277 $
4,947 $ 1,164,188 $
1,488,811
Net income
—
—
—
—
168,594
168,594
Other comprehensive loss, net of tax
—
—
—
(2,848)
—
(2,848)
Exercise of stock options
6
1
264
—
—
265
Issuance and settlement of restricted stock
142
14
(14)
—
—
—
Issuance of common stock related to stock purchase plan
42
4
3,966
—
—
3,970
Common stock repurchased and retired
(433)
(43)
(6,626)
—
(48,553)
(55,222)
Share-based compensation
—
—
33,872
—
—
33,872
Balances at February 29, 2024
23,751 $ 2,375 $ 348,739 $
2,099 $ 1,284,229 $
1,637,442
See accompanying notes to consolidated financial statements.
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73
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
Cash provided by operating activities:
Net income
$
168,594 $
143,273 $
223,764
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
51,499
44,683
35,829
Amortization of financing costs
1,235
1,114
986
Non-cash operating lease expense
10,191
9,702
9,580
Provision for credit losses
6,103
1,798
312
Non-cash share-based compensation
33,872
26,753
34,618
Non-cash restructuring charges
1,772
—
—
Loss on extinguishment of debt
489
—
—
Gain on sale of distribution and office facilities
(34,190)
—
—
Gain on sale of Personal Care business
—
(1,336)
(513)
(Gain) loss on the sale or disposal of property and equipment
(233)
63
(2,243)
Deferred income taxes and tax credits
13,210
(2,242)
(8,871)
Changes in operating capital, net of effects of acquisition of businesses:
Receivables
(18,668)
83,624
(66,834)
Inventory
58,192
110,304
(45,913)
Prepaid expenses and other current assets
(2,405)
2,778
(5,589)
Other assets and liabilities, net
(2,830)
(355)
(6,595)
Accounts payable
54,403
(115,931)
(43,745)
Accrued expenses and other current liabilities
(36,287)
(88,040)
(3,593)
Accrued income taxes
1,120
(7,946)
19,630
Net cash provided by operating activities
306,067
208,242
140,823
Cash provided (used) by investing activities:
Capital and intangible asset expenditures
(36,644)
(174,864)
(78,039)
Net payments to acquire businesses, net of cash acquired
—
(146,342)
(410,880)
Payments for purchases of U.S. Treasury Bills
(9,605)
—
—
Proceeds from maturity of U.S. Treasury Bills
622
—
—
Proceeds from sale of distribution and office facilities
49,456
—
—
Proceeds from sale of Personal Care business
—
1,804
44,700
Proceeds from the sale of property and equipment
1,620
69
5,305
Net cash provided (used) by investing activities
5,449
(319,333)
(438,914)
Cash (used) provided by financing activities:
Proceeds from revolving loans
1,415,511
685,800
998,200
Repayment of revolving loans
(1,686,580)
(795,300)
(527,700)
Proceeds from term loans
248,868
250,000
—
Repayment of long-term debt
(246,875)
(19,832)
(1,900)
Payment of financing costs
(2,025)
(586)
—
Proceeds from share issuances under share-based compensation plans
4,235
5,066
5,956
Payments for repurchases of common stock
(55,222)
(18,365)
(188,204)
Net cash (used) provided by financing activities
(322,088)
106,783
286,352
Net decrease in cash and cash equivalents
(10,572)
(4,308)
(11,739)
Cash and cash equivalents, beginning balance
29,073
33,381
45,120
Cash and cash equivalents, ending balance
$
18,501 $
29,073 $
33,381
Supplemental cash flow information:
Interest paid
$
52,537 $
43,687 $
11,694
Income taxes paid, net of refunds
28,855
37,082
22,831
Supplemental non-cash investing activity:
Capital expenditures included in accounts payable
7,491
5,847
6,858
See accompanying notes to consolidated financial statements.
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74
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. Dollars, except share and per share data, unless indicated otherwise)
Note 1 - Summary of Significant Accounting Policies and Related Information
Corporate Overview
When used in these notes within this Annual Report on Form 10-K (the “Annual Report”), unless
otherwise indicated or the context suggests otherwise, references to “the Company”, “our Company”,
“Helen of Troy”, “we”, “us”, or “our” refer to Helen of Troy Limited and its subsidiaries, which are all wholly-
owned. We refer to our common shares, par value $0.10 per share, as “common stock.” References to
“the FASB” refer to the Financial Accounting Standards Board. References to “GAAP” refer to accounting
principles generally accepted in the United States of America (the “U.S.”). References to “ASU” refer to
the codification of GAAP in the Accounting Standards Updates issued by the FASB. References to “ASC”
refer to the codification of GAAP in the Accounting Standards Codification issued by the FASB.
We incorporated as Helen of Troy Corporation in Texas in 1968 and were reorganized as Helen of Troy
Limited in Bermuda in 1994. We are a leading global consumer products company offering creative
products and solutions for our customers through a diversified portfolio of brands. As of February 29,
2024, we operated two reportable segments: Home & Outdoor and Beauty & Wellness.
Our Home & Outdoor segment offers a broad range of outstanding world-class brands that help
consumers enjoy everyday living inside their homes and outdoors. Our innovative products for home
activities include food preparation and storage, cooking, cleaning, organization, and beverage service.
Our outdoor performance range, on-the-go food storage, and beverageware includes lifestyle hydration
products, coolers and food storage solutions, backpacks, and travel gear. The Beauty & Wellness
segment provides consumers with a broad range of outstanding world-class brands for beauty and
wellness. In Beauty, we deliver innovation through products such as hair styling appliances, grooming
tools, and liquid and aerosol personal care products that help consumers look and feel more beautiful. In
Wellness, we are there when you need us most with highly regarded humidifiers, thermometers, water
and air purifiers, heaters, and fans.
Our business is seasonal due to different calendar events, holidays and seasonal weather and illness
patterns. Our fiscal reporting period ends on the last day in February. Historically, our highest sales
volume and operating income occur in our third fiscal quarter ending November 30th. We purchase our
products from unaffiliated manufacturers, most of which are located in China, Mexico, Vietnam and the
U.S.
During fiscal 2023, we initiated a global restructuring plan intended to expand operating margins through
initiatives designed to improve efficiency and effectiveness and reduce costs (referred to as “Project
Pegasus”). See Note 11 for additional information.
On April 22, 2022, we completed the acquisition of Recipe Products Ltd., a producer of innovative
prestige hair care products for all types of curly and wavy hair under the Curlsmith brand (“Curlsmith”).
The total purchase consideration was $147.9 million in cash, net of a final net working capital adjustment
and cash acquired. The Curlsmith brand and products were added to the Beauty & Wellness segment.
See Note 6 for additional information.
On December 29, 2021, we completed the acquisition of Osprey Packs, Inc. (“Osprey”), a longtime U.S.
leader in technical and everyday packs, for $409.3 million in cash, net of a final net working capital
adjustment and cash acquired. The Osprey brand and products were added to the Home & Outdoor
segment. See Note 6 for additional information.
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During fiscal 2022 and fiscal 2023, we divested certain assets within our Beauty & Wellness segment's
mass channel personal care business, which included liquid, powder and aerosol products under brands
such as Pert, Brut, Sure and Infusium (“Personal Care”). On June 7, 2021, we completed the sale of our
North America Personal Care business to HRB Brands LLC, for $44.7 million in cash and recognized a
gain on the sale in SG&A totaling $0.5 million. On March 25, 2022, we completed the sale of the Latin
America and Caribbean Personal Care business to HRB Brands LLC, for $1.8 million in cash and
recognized a gain on the sale in SG&A totaling $1.3 million. The net assets sold included intangible
assets, inventory, certain net trade receivables, fixed assets and certain accrued sales discounts and
allowances relating to our Personal Care business. Income before income tax expense for our Personal
Care business was $5.5 million in fiscal 2022, inclusive of corporate overhead expenses that were
allocable to the business.
Principles of Consolidation
The accompanying consolidated financial statements are prepared in accordance with GAAP and include
all of our subsidiaries. Our consolidated financial statements are prepared in U.S. Dollars. All
intercompany balances and transactions are eliminated in consolidation.
The preparation of consolidated financial statements in accordance with GAAP requires management to
make estimates and assumptions that affect the amounts reported in our consolidated financial
statements and accompanying notes. Actual results may differ materially from those estimates.
Reclassifications
We have recast or separately disclosed certain amounts in the prior years’ accompanying footnotes to
conform with the current year’s presentation.
Cash and Cash Equivalents
Cash equivalents include all highly liquid investments with an original maturity of three months or less.
We maintain cash and cash equivalents at several financial institutions, which at times may not be
federally insured or may exceed federally insured limits. We have not experienced any losses in such
accounts and believe we are not exposed to any significant credit risks on such accounts. We consider
money market accounts to be cash equivalents.
Receivables
Our receivables are comprised of trade receivables from customers, primarily in the retail industry, offset
by an allowance for credit losses. Our allowance for credit losses reflects our best estimate of expected
credit losses over the receivables' term, determined principally based on historical experience, specific
allowances for known at-risk accounts, and consideration of current economic conditions and
management’s expectations of future economic conditions. Our policy is to write off receivables when we
have determined they will no longer be collectible. Write-offs are applied as a reduction to the allowance
for credit losses and any recoveries of previous write-offs are netted against bad debt expense in the
period recovered.
We have a significant concentration of credit risk with three major customers at February 29, 2024
representing approximately 20%, 14%, and 12% of our gross trade receivables, respectively. As of
February 28, 2023, our significant concentration of credit risk with three major customers represented
approximately 18%, 15%, and 13% of our gross trade receivables, respectively. In addition, as of
February 29, 2024 and February 28, 2023, approximately 55% and 52%, respectively, of our gross trade
receivables were due from our five top customers.
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Foreign Currency Transactions
The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the
reporting currency for the Company; therefore, we do not have a translation adjustment recorded through
accumulated other comprehensive income. All our non-U.S. subsidiaries' transactions denominated in
other currencies have been remeasured into U.S. Dollars using exchange rates in effect on the date each
transaction occurred. In our consolidated statements of income, foreign currency exchange rate gains
and losses resulting from the remeasurement of foreign income taxes receivables and payables and
deferred income tax assets and liabilities are recognized in income tax expense, and all other foreign
currency exchange rate gains and losses are recognized in SG&A.
We mitigate certain foreign currency exchange rate risk by using forward contracts and cross-currency
debt swaps to protect against the foreign currency exchange rate risk inherent in our transactions
denominated in foreign currencies. For additional information on our derivatives see “Financial
Instruments” below.
Inventory and Cost of Goods Sold
Our inventory consists almost entirely of finished goods. Inventories are stated at the lower of average
cost or net realizable value. We write down a portion of our inventory to net realizable value based on the
historical sales trends of products and estimates about future demand and market conditions, among
other factors. Our average costs include the amounts we pay manufacturers for product, tariffs and
duties associated with transporting product across national borders, freight costs associated with
transporting the product from our manufacturers to our distribution facilities, and general and
administrative expenses directly attributable to acquiring inventory, as applicable.
General and administrative expenses directly attributable to acquiring inventory include all the expenses
of operating our sourcing activities and expenses incurred for packaging. We capitalized $23.4 million,
$22.9 million, and $26.0 million of such general and administrative expenses into inventory during fiscal
2024, 2023 and 2022, respectively. We estimate that $8.9 million and $11.7 million of general and
administrative expenses directly attributable to the procurement of inventory were included in our
inventory balances on hand at February 29, 2024 and February 28, 2023, respectively.
The “Cost of goods sold” line item in the consolidated statements of income is comprised of the book
value of inventory sold to customers during the reporting period and depreciation expense of tooling,
molds and other production equipment. When circumstances dictate that we use net realizable value as
the basis for recording inventory, we base our estimates on expected future selling prices less expected
disposal costs.
For fiscal 2024, 2023, and 2022, finished goods purchased from vendors in Asia comprised
approximately 79%, 87%, and 88%, respectively, of total finished goods purchased. During fiscal 2024,
we had two vendors (located in China) who fulfilled approximately 7% and 5% of our product
requirements compared to two vendors (located in China) who each fulfilled approximately 6% for fiscal
2023. During fiscal 2022, we had one vendor (located in China) who fulfilled approximately 9% of our
product requirements. Additionally, during fiscal 2024, we had one vendor (located in Mexico) who
fulfilled approximately 12% of our product requirements compared to approximately 7% for both fiscal
2023 and 2022. For fiscal 2024, 2023, and 2022, our top two vendors combined fulfilled approximately
19%, 13%, and 16% of our product requirements, respectively. For fiscal 2024, 2023 and 2022, our top
five vendors fulfilled approximately 33%, 29%, and 36% of our product requirements, respectively.
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Property and Equipment
These assets are recorded at cost. Depreciation is recorded on a straight-line basis over the estimated
useful lives of the assets. Expenditures for repair and maintenance of property and equipment are
expensed as incurred. For tax purposes, accelerated depreciation methods are used where allowed by
tax laws.
Trademark License Agreements, Trade Names, Patents, and Other Intangible Assets
A significant portion of our sales are made subject to trademark license agreements with various
licensors. Our license agreements are reported on our consolidated balance sheets at cost, less
accumulated amortization. The cost of our license agreements represent amounts paid to licensors to
acquire the license or to alter the terms of the license in a manner that we believe to be in our best
interest. Certain licenses have extension terms that may require additional payments to the licensor as
part of the terms of renewal. We capitalize costs incurred to renew or extend the term of a license
agreement and amortize such costs on a straight-line basis over the remaining term or economic life of
the agreement, whichever is shorter. Royalty payments are not included in the cost of license
agreements. Royalty expense under our license agreements is recognized as incurred and is included in
our consolidated statements of income in SG&A. Net sales revenue subject to trademark license
agreements, the majority of which require royalty payments, comprised approximately 37%, 40%, and
46% of consolidated net sales revenue for fiscal 2024, 2023 and 2022, respectively. During fiscal 2024,
two license agreements each accounted for net sales revenue of approximately 10% of consolidated net
sales revenue, one of which does not require royalty payments. No other trademark license agreements
had associated net sales revenue that accounted for 10% or more of consolidated net sales revenue.
We also sell products under trade names that we own for which we have registered trademarks. Trade
names that we acquire through acquisition from other entities are generally recorded on our consolidated
balance sheets based upon the appraised fair value of the acquired asset, net of any accumulated
amortization and impairment charges. Costs associated with developing trade names internally are
recorded as expenses in the period incurred. In certain instances where trade names have readily
determinable useful lives, we amortize their costs on a straight-line basis over such lives. In some
instances, we have determined that such acquired assets have an indefinite useful life. In these cases,
no amortization is recorded. Patents acquired through acquisition, if material, are recorded on our
consolidated balance sheets based upon the appraised value of the acquired patents and amortized over
the remaining life of the patent. Additionally, we incur certain costs in connection with the design and
development of products to be covered by patents, which are capitalized as incurred and amortized on a
straight-line basis over the life of the patent in the jurisdiction filed, typically 12 to 14 years.
Other intangible assets include customer relationships, customer lists and non-compete agreements that
we acquired. These are recorded on our consolidated balance sheets based upon the fair value of the
acquired asset and amortized on a straight-line basis over the remaining life of the asset as determined
either by a third-party appraisal or the term of any controlling agreements.
Goodwill, Intangible and Other Long-Lived Assets and Related Impairment Testing
Goodwill is recorded as the difference, if any, between the aggregate consideration paid and the fair
value of the net tangible and intangible assets received in the acquisition of a business. The fair value of
our assets acquired and liabilities assumed are typically based upon valuations performed by
independent third-party appraisers.
We review goodwill and indefinite-lived intangible assets for impairment on an annual basis or more
frequently whenever events or changes in circumstances indicate that their carrying value may not be
recoverable. We consider whether circumstances or conditions exist which suggest that the carrying
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value of our goodwill and indefinite-lived intangible assets might be impaired. If such circumstances or
conditions exist, we perform a qualitative assessment to determine whether it is more likely than not that
the assets are impaired. We evaluate goodwill at the reporting unit level (operating segment or one level
below an operating segment). If the results of the qualitative assessment indicate that it is more likely
than not that the assets are impaired, further steps are required in order to determine whether the
carrying value of each reporting unit and indefinite-lived intangible assets exceeds its fair market value.
An impairment charge is recognized to the extent the goodwill or indefinite-lived intangible asset recorded
exceeds the reporting unit’s or asset's fair value. We perform our annual impairment testing for goodwill
and indefinite-lived intangible assets as of the beginning of the fourth quarter of our fiscal year (see Note
7).
We review intangible assets with definite lives and long-lived assets held and used if a triggering event
occurs during the reporting period. If such circumstances or conditions exist, further steps are required in
order to determine whether the carrying value of each of the individual assets exceeds its fair market
value. If our analysis indicates that an individual asset’s carrying value does exceed its fair market value,
the next step is to record a loss equal to the excess of the individual asset’s carrying value over its fair
value. We evaluate any long-lived assets held for sale quarterly to determine if estimated fair value less
cost to sell has changed during the reporting period.
The assumptions and estimates used in our impairment testing involve significant elements of subjective
judgment and analysis. While we believe that the assumptions we use are reasonable at the time made,
changes in business conditions or other unanticipated events and circumstances may occur that cause
actual results to differ materially from projected results and this could potentially require future
adjustments to our asset valuations.
Economic Useful Lives and Amortization of Intangible Assets
Intangible assets consist primarily of trademark license agreements, trade names, customer relationships
and lists, patents, and non-compete agreements. We amortize intangible assets over their economic
useful lives, unless those assets' economic useful lives are indefinite. If an intangible asset’s economic
useful life is deemed indefinite, that asset is not amortized. The determination of the economic useful life
of an intangible asset requires a significant amount of judgment and entails significant subjectivity and
uncertainty. When we acquire an intangible asset, we consider factors such as the asset's history, our
plans for that asset and the market for products associated with the asset. We consider these same
factors when reviewing the economic useful lives of our previously acquired intangible assets as well.
We review the economic useful lives of our intangible assets at least annually. We complete our analysis
of the remaining useful economic lives of our intangible assets during the fourth quarter of each fiscal
year or when a triggering event occurs. For certain intangible assets subject to amortization, we use the
straight-line method over appropriate periods ranging from 5 to 40 years for trademark licenses, 15 to 30
years for trade names, 4.5 to 24 years for customer relationships and lists, and 5 to 20 years for other
definite-lived intangible assets (see Note 7).
Financial Instruments
We use derivatives to manage our exposure to changes in foreign currency exchange rates, which
include foreign currency forward contracts and cross-currency debt swaps. In addition, we use interest
rate swaps to manage our exposure to changes in interest rates. All of our derivative assets and
liabilities are recorded at fair value. Derivatives for which we have elected and qualify for hedge
accounting include certain of our forward contracts (“foreign currency contracts”) and interest rate swaps.
Our foreign currency contracts and interest rate swaps are designated as cash flow hedges and changes
in fair value are recorded in Other Comprehensive (Loss) Income (“OCI”) until the hedge transaction is
settled, at which point amounts are reclassified from Accumulated Other Comprehensive (Loss) Income
(“AOCI”) to our consolidated statements of income. We evaluate our derivatives designated as cash flow
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hedges each quarter to assess hedge effectiveness. Foreign currency derivatives for which we have not
elected hedge accounting consist of certain forward contracts and our cross-currency debt swaps, and
any changes in the fair value of these derivatives are recorded in our consolidated statements of income.
These undesignated derivatives are used to hedge monetary net asset and liability positions. Cash flows
from our foreign currency derivatives and interest rate swaps are classified as cash flows from operating
activities in our consolidated statements of cash flows, which is consistent with the classification of the
cash flows from the underlying hedged item. Accordingly, we present interest paid net of cash flows from
our interest rate swaps as supplemental information to our consolidated statements of cash flows. We do
not enter into any derivatives or similar instruments for trading or other speculative purposes. We also
invest in U.S. Treasury Bills as a component of our capital management strategy, which are recorded at
amortized cost. See Notes 14, 15 and 16 for more information on our fair value measurements,
investments and derivatives.
Income Taxes and Uncertain Tax Positions
The provision for income tax expense is calculated on reported income before income taxes based on
current tax law and includes, in the current period, the cumulative effect of any changes in tax rates from
those used previously in determining deferred tax assets and liabilities. Tax laws may require items to be
included in the determination of taxable income at different times from when the items are reflected in the
financial statements. Deferred tax balances reflect the effects of temporary differences between the
financial statement carrying amounts of assets and liabilities and their tax bases, as well as from net
operating losses and tax credit carryforwards, and are stated at enacted tax rates in effect for the year
taxes are expected to be paid or recovered.
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and
require certain estimates and assumptions to determine whether it is more likely than not that all or a
portion of the benefit will not be realized. The recoverability of these future tax deductions and credits is
determined by assessing the adequacy of future expected taxable income from all sources, including the
future reversal of existing taxable temporary differences, taxable income in carryback years, estimated
future taxable income and available tax planning strategies. Should a change in facts or circumstances
lead to a change in judgment about the ultimate recoverability of a deferred tax asset, we record or adjust
the related valuation allowance in the period that the change in facts and circumstances occurs, along
with a corresponding increase or decrease in income tax expense.
We record tax benefits for uncertain tax positions based upon management’s evaluation of the
information available at the reporting date. To be recognized in the financial statements, the tax position
must meet the more-likely-than-not threshold that the position will be sustained upon examination by the
tax authority based on its technical merits assuming the tax authority has full knowledge of all relevant
information. For positions meeting this recognition threshold, the benefit is measured as the largest
amount that has greater than a 50 percent likelihood of being realized upon ultimate settlement. We
reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled
issues under audit, historical experience with similar tax matters, guidance from our tax advisors, and
new audit activity. For tax positions that do not meet the threshold requirement, we record liabilities for
unrecognized tax benefits as a tax expense or benefit in the period recognized or reversed in our
consolidated financial statements, including related accrued interest and penalties.
Revenue Recognition
Our revenue is primarily generated from the sale of non-customized consumer products to customers.
These products are promised goods that are distinct performance obligations. Revenue is recognized
when control of, and title to, the product sold transfers to the customer in accordance with applicable
shipping terms, which can occur on the date of shipment or the date of receipt by the customer,
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depending on the customer and the agreed upon shipping terms. Payment terms from the sale of our
products are typically due to us in thirty to ninety days after the date of sale.
We measure revenue as the amount of consideration for which we expect to be entitled in exchange for
transferring goods. We allow for sales returns for defects in material and workmanship for periods
ranging from one to five years, which are accounted for as variable consideration. We recognize an
accrual for sales returns to reduce sales to reflect our best estimate of future customer returns,
determined principally based on historical experience and specific allowances for known pending returns.
Certain customers may receive cash incentives such as customer, trade, and advertising discounts as
well as other customer-related programs, which are also accounted for as variable consideration. In
some cases, we apply judgment, such as contractual rates and historical payment trends, when
estimating variable consideration. Most of our variable consideration is classified as a reduction to net
sales. In instances when we purchase a distinct good or service from our customer and fair value can be
reasonably estimated, these amounts are expensed in our consolidated statements of income in SG&A.
The amount of consideration granted to customers recorded in SG&A was $44.7 million, $40.2 million,
and $39.0 million for fiscal 2024, 2023 and 2022, respectively.
Sales taxes and other similar taxes are excluded from revenue. We have elected to account for shipping
and handling activities as a fulfillment cost as permitted by the guidance. We do not have unsatisfied
performance obligations since our performance obligations are satisfied at a single point in time.
Advertising
Advertising costs include cooperative retail advertising with our customers, traditional and digital media
advertising and production expenses, and expenses associated with other promotional product
messaging and consumer awareness programs. Advertising costs are expensed in the period in which
they are incurred and included in our consolidated statements of income in SG&A. We incurred total
advertising costs of $106.8 million, $98.5 million, and $96.4 million during fiscal 2024, 2023 and 2022,
respectively, which is inclusive of the amounts described above for consideration granted to customers.
Research and Development Expense
Research and development expenses consist primarily of salary and employee benefit expenses and
contracted development efforts and expenses associated with development of products. Expenditures for
research activities relating to product design, engineering, development and improvement are generally
charged to expense as incurred and are included in our consolidated statements of income in SG&A. We
incurred total research and development expenses of $56.5 million, $47.8 million, and $54.0 million
during fiscal 2024, 2023 and 2022, respectively.
Shipping and Handling Revenue and Expense
Shipping and handling revenue and expense are included in our consolidated statements of income in
SG&A. This includes distribution facility costs, third-party logistics costs and outbound transportation
costs we incur. Our net expense for shipping and handling was $156.7 million, $162.0 million, and
$173.4 million during fiscal 2024, 2023 and 2022, respectively.
Share-Based Compensation Plans
We grant share-based compensation awards to non-employee directors and certain associates under our
equity plans. We measure the cost of services received in exchange for equity awards, which include
grants of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock awards
(“PSAs”), and performance stock units (“PSUs”), based on the fair value of the awards on the grant date.
These awards may be subject to attainment of certain service conditions, performance conditions and/or
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market conditions. Share-based compensation expense is recognized over the requisite service period
during which the employee is required to provide service in exchange for the award, unless the awards
are subject to performance conditions (“Performance Condition Awards”), in which case we recognize
compensation expense over the requisite service period to the extent performance conditions are
considered probable. Estimating the number of shares of Performance Condition Awards that are
probable of vesting requires judgment, and to the extent actual results or updated estimates differ from
our current estimates, such amounts will be recorded as a cumulative adjustment to share-based
compensation expense in the period estimates are revised. Share-based compensation expense is
recorded ratably for PSAs and PSUs subject to attainment of market conditions (“Market Condition
Awards”) during the requisite service period and is not reversed, except for forfeitures, at the vesting date
regardless of whether the market condition is met. All share-based compensation expense is recorded
net of forfeitures in our consolidated statements of income.
The grant date fair value of RSAs, RSUs, PSAs, and PSUs is determined using the closing price of our
common stock on the date of grant, except for Market Condition Awards, in which case we use a Monte
Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate
the probability that market conditions will be achieved and is applied to the closing price of our common
stock on the date of grant. See Note 8 for further information on our share-based compensation plans.
Note 2 - New Accounting Pronouncements
Adopted
In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic
405-50): Disclosure of Supplier Finance Program Obligations, which requires a buyer in a supplier
finance program to disclose qualitative and quantitative information about its program to allow a user of
the financial statements to understand the program’s nature, activity during the period, changes from
period to period, and potential magnitude. The amendments in ASU 2022-04 are effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2022, with the
exception for the amendment on rollforward information, which is effective for fiscal years beginning after
December 15, 2023. The guidance should be applied retrospectively, except for the amendment on
rollforward information, which should be applied prospectively. This ASU was effective for us in the first
quarter of fiscal 2024, with the exception of the amendment on rollforward information, which will be
effective for us in our Form 10-K for fiscal 2025. We adopted this ASU during the first quarter of fiscal
2024 and the adoption did not have an impact on our consolidated financial statement disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for
Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets
and contract liabilities acquired in a business combination to be recognized and measured by the
acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers.
Prior to the issuance of this guidance, contract assets and contract liabilities were recognized by the
acquirer at fair value on the acquisition date. The amendments in ASU 2021-08 are effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2022, and should be
applied prospectively to acquisitions occurring on or after the effective date. We adopted this ASU during
the first quarter of fiscal 2024 and the adoption did not have an impact on our consolidated financial
statements.
Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures, which provides updates to qualitative and quantitative reportable
segment disclosure requirements, including enhanced disclosures about significant segment expenses
and increased interim disclosure requirements, among others. The amendments in ASU 2023-07 are
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effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years
beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied
retrospectively. This ASU will be effective for our Form 10-K for fiscal 2025 and our Form 10-Q for the
first quarter of fiscal 2026. We are currently evaluating the impact this ASU may have on our
consolidated financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income
Tax Disclosures, which provides qualitative and quantitative updates to the rate reconciliation and income
taxes paid disclosures, among others, to enhance the transparency of income tax disclosures, including
consistent categories and greater disaggregation of information in the rate reconciliation and
disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for
fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should
be applied prospectively; however, retrospective application is also permitted. This ASU will be effective
for our Form 10-K for fiscal 2026. We are currently evaluating the impact this ASU may have on our
consolidated financial statement disclosures.
Note 3 - Leases
We determine if an arrangement is or contains a lease at contract inception and determine its
classification as an operating or finance lease at lease commencement. We primarily have leases for
office space, which are classified as operating leases. Operating leases are included in operating lease
assets, accrued expenses and other current liabilities, and lease liabilities, non-current in our
consolidated balance sheets. Operating lease assets and operating lease liabilities are recognized
based on the present value of the future lease payments over the lease term at commencement date. As
most of our lease contracts do not provide an explicit interest rate, we use an estimated secured
incremental borrowing rate based on the information available at the commencement date in determining
the present value of lease payments.
We include options to extend or terminate the lease in the lease term for accounting considerations, when
it is reasonably certain that we will exercise that option. Our leases have remaining lease terms of less
than 1 year to 9 years. Operating lease expense for lease payments is recognized on a straight-line
basis over the lease term. We do not recognize leases with an initial term of twelve months or less on the
balance sheet and instead recognize the related lease payments as expense in the consolidated
statements of income on a straight-line basis over the lease term. We account for lease and non-lease
components as a single lease component for all asset classes. Our lease agreements do not contain any
material residual value guarantees or material restrictive covenants.
Operating lease expense recognized within SG&A in the consolidated statements of income was $14.8
million, $16.3 million, and $13.3 million for fiscal 2024, 2023, and 2022, respectively and includes short-
term lease expense of $4.6 million, $6.4 million, and $3.7 million for fiscal 2024, 2023 and 2022,
respectively. The non-cash component of lease expense is included as an adjustment to reconcile net
income to net cash provided by operating activities in the consolidated statements of cash flows.
A summary of supplemental lease information was as follows:
February 29, 2024
February 28, 2023
Weighted average remaining lease term (years)
7.5
8.2
Weighted average discount rate
5.66 %
5.62 %
Cash paid for amounts included in the measurement of lease liabilities
$
9,932
$
10,393
Operating lease assets obtained in exchange for operating lease liabilities
$
4,865
$
7,749
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A summary of our estimated lease payments, imputed interest and liabilities was as follows:
(in thousands)
February 29, 2024
Fiscal 2025
$
10,564
Fiscal 2026
6,500
Fiscal 2027
6,540
Fiscal 2028
5,934
Fiscal 2029
5,810
Thereafter
21,108
Total future lease payments
56,456
Less: imputed interest
(10,933)
Present value of lease liability
$
45,523
(in thousands)
February 29, 2024
February 28, 2023
Lease liabilities, current (1)
$
8,261 $
7,120
Lease liabilities, non-current
37,262
42,672
Total lease liability
$
45,523 $
49,792
(1) Included as part of “Accrued expenses and other current liabilities” on the consolidated balance sheet.
Note 4 - Property and Equipment
A summary of property and equipment was as follows:
Estimated Useful
Lives (Years)
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
Land
—
$
16,687 $
20,632
Building and improvements
3
—
40
236,370
132,303
Computer, furniture and other equipment
3
—
20
166,230
101,567
Tooling, molds and other production equipment
3
—
7
77,358
67,184
Construction in progress
—
9,022
209,068
Property and equipment, gross
505,667
530,754
Less: accumulated depreciation
(169,021)
(178,961)
Property and equipment, net
$
336,646 $
351,793
We recorded $33.2 million, $26.4 million and $23.1 million of depreciation expense including $12.6
million, $13.0 million and $10.0 million in cost of goods sold and $20.6 million, $13.4 million and
$13.1 million in SG&A in the consolidated statements of income for fiscal 2024, 2023 and 2022,
respectively. In March 2023, we completed the construction of an additional distribution facility in
Gallaway, Tennessee that became operational during the first quarter of fiscal 2024 and currently services
some of our Home & Outdoor segment.
On September 28, 2023, we completed the sale of our distribution and office facilities in El Paso, Texas,
for a sales price of $50.6 million, less transaction costs of $1.1 million. Concurrently, we entered into an
agreement to leaseback the office facilities for a period of up to 18 months substantially rent free, which
we estimated to have a fair value of approximately $1.9 million. The transaction qualified for sales
recognition under the sale leaseback accounting requirements. Accordingly, we increased the sales price
by the $1.9 million of prepaid rent and recognized a gain on the sale of $34.2 million within SG&A during
fiscal 2024, of which $18.0 million and $16.2 million was recognized by our Beauty & Wellness and Home
& Outdoor segments, respectively. The related property and equipment, totaling $17.2 million net of
accumulated depreciation of $36.8 million, was derecognized from the consolidated balance sheet, and
at lease commencement, we recorded an operating lease asset, which includes the imputed rent
payments described above, and an operating lease liability. See Note 3 for additional information
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regarding our leases. We used the proceeds from the sale to repay amounts outstanding under our long-
term debt agreement.
Note 5 - Accrued Expenses and Other Current Liabilities
A summary of accrued expenses and other current liabilities was as follows:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
Accrued compensation, benefits and payroll taxes
$
36,572
$
17,380
Accrued sales discounts and allowances
37,851
63,881
Accrued sales returns
21,282
28,498
Accrued advertising
29,212
36,931
Other
56,474
54,028
Total accrued expenses and other current liabilities
$
181,391
$
200,718
Note 6 - Acquisitions
Curlsmith
On April 22, 2022, we completed the acquisition of Recipe Products Ltd., a producer of innovative
prestige hair care products for all types of curly and wavy hair under the Curlsmith brand. Curlsmith's
products are a category leader in the prestige market for curly hair and include conditioners, shampoos
and co-washes purposefully designed for the unique joys and challenges of all types of curls and textured
hair. The Curlsmith brand and products were added to the Beauty & Wellness segment. The total
purchase consideration was $147.9 million in cash, net of a final net working capital adjustment of
$2.1 million and cash acquired. The acquisition was funded with cash on hand and borrowings under our
existing revolving credit facility. We incurred pre-tax acquisition-related expenses of $2.7 million during
fiscal 2023, which were recognized in SG&A within our consolidated statement of income.
We accounted for the acquisition as a purchase of a business and recorded the excess of the purchase
price over the estimated fair value of the assets acquired and liabilities assumed as goodwill. The
goodwill recognized is attributable primarily to expected synergies including leveraging our Beauty &
Wellness segment's existing marketing and sales structure, as well as our global sourcing, distribution,
shared services, and international go-to-market capabilities. The goodwill is not expected to be
deductible for income tax purposes. We have determined the appropriate fair values of the acquired
intangible assets and completed our analysis of the economic lives of the assets acquired. We assigned
$21.0 million to trade names and are amortizing over a 20 year expected life. We assigned $12.0 million
to customer relationships and are amortizing over a 19.5 year expected life, based on historical attrition
rates.
During fiscal 2023, we made adjustments to provisional asset and liability balances, which resulted in a
corresponding net increase to goodwill of $0.1 million. We also finalized the net working capital
adjustment during fiscal 2023, which resulted in a $1.8 million reduction to the total purchase
consideration and goodwill. During the first quarter of fiscal 2024, we made final adjustments to
provisional liability balances, which resulted in a corresponding increase to goodwill of $0.3 million.
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The following table presents the estimated fair values of assets acquired and liabilities assumed at the
acquisition date:
(in thousands)
Assets:
Receivables
$
4,211
Inventory
7,890
Prepaid expenses and other current assets
119
Property and equipment
212
Goodwill
117,108
Trade names - definite
21,000
Customer relationships - definite
12,000
Deferred tax assets, net
360
Total assets
162,900
Liabilities:
Accounts payable
1,401
Accrued expenses and other current liabilities
2,813
Income taxes payable
2,572
Deferred tax liabilities, net
8,187
Total liabilities
14,973
Net assets recorded
$
147,927
The impact of the acquisition of Curlsmith on our consolidated statement of income for fiscal 2023 was as
follows:
April 22, 2022 (acquisition date) through February 28, 2023
(in thousands, except earnings per share data)
Fiscal Year Ended
February 28, 2023 (1)
Sales revenue, net
$
35,530
Net income
2,906
EPS:
Basic
$
0.12
Diluted
$
0.12
(1) Represents approximately forty-five weeks of operating results from Curlsmith, acquired April 22, 2022. Net income and
EPS amounts include allocations for corporate expenses, interest expense and income tax expense.
The following supplemental unaudited pro forma information presents our financial results as if the
acquisition of Curlsmith had occurred on March 1, 2021. This supplemental pro forma information has
been prepared for comparative purposes and does not necessarily indicate what may have occurred if
the acquisition had been completed on March 1, 2021, and this information is not intended to be
indicative of future results:
Fiscal Years Ended
Last Day of February,
(in thousands, except earnings per share data)
2023
2022
Sales revenue, net
$
2,079,759 $
2,259,463
Net income
145,186
224,828
EPS:
Basic
$
6.06 $
9.31
Diluted
$
6.03 $
9.21
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These amounts have been calculated after applying our accounting policies and adjusting the results of
Curlsmith to reflect the effect of definite-lived intangible assets recognized as part of the business
combination on amortization expense as if the acquisition had occurred on March 1, 2021.
Osprey
On December 29, 2021, we completed the acquisition of Osprey, a longtime U.S. leader in technical and
everyday packs. Osprey is highly respected in the outdoor industry with a product lineup that includes a
wide range of backpacks and daypacks for hiking, mountaineering, skiing, climbing, mountain biking, trail
running, commuting, and school, as well as rugged adventure travel packs, wheeled luggage, and travel
accessories. The Osprey brand and products were added to the Home & Outdoor segment. The total
purchase consideration, net of cash acquired, was $409.3 million in cash, including the impact of a final
$10.7 million favorable net working capital adjustment. The acquisition was funded with cash on hand
and borrowings under our existing revolving credit facility. We incurred pre-tax acquisition-related
expenses of $0.1 million and $2.4 million during fiscal 2023 and 2022, respectively, which were
recognized in SG&A within our consolidated statements of income.
We accounted for the acquisition as a purchase of a business and recorded the excess of the purchase
price over the estimated fair value of the assets acquired and liabilities assumed as goodwill. The
goodwill recognized is attributable primarily to expected synergies including leveraging our information
systems, shared services capabilities and international footprint. The goodwill is not expected to be
deductible for income tax purposes.
During fiscal 2023, we made final adjustments to provisional asset and liability balances, which resulted
in a corresponding net increase to goodwill of $2.3 million. We also finalized the net working capital
adjustment, which resulted in a $1.6 million reduction to the total purchase consideration and goodwill.
The following table presents the estimated fair values of assets acquired and liabilities assumed at the
acquisition date:
(in thousands)
Assets:
Receivables
$
12,437
Inventory
30,001
Prepaid expenses and other current assets
3,699
Income taxes receivable
4,169
Property and equipment
11,576
Goodwill
209,721
Trade names - indefinite
170,000
Customer relationships - definite
22,000
Operating lease assets
2,155
Total assets
465,758
Liabilities:
Accounts payable
3,780
Accrued expenses and other current liabilities
11,125
Lease liabilities, non-current
1,719
Deferred tax liabilities, net
39,839
Total liabilities
56,463
Net assets recorded
$
409,295
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The impact of the acquisition of Osprey on our consolidated statement of income for fiscal 2022 was as
follows:
December 29, 2021 (acquisition date) through February 28, 2022
(in thousands, except earnings per share data)
Fiscal Year Ended
February 28, 2022 (1)
Sales revenue, net
$
24,373
Net income
696
EPS:
Basic
$
0.03
Diluted
$
0.03
(1) Net income and EPS amounts include allocations for corporate expenses, interest expense and income tax expense.
The following supplemental unaudited pro forma information presents our financial results as if the
acquisition of Osprey had occurred on March 1, 2020. This supplemental pro forma information has been
prepared for comparative purposes and does not necessarily indicate what may have occurred if the
acquisition had been completed on March 1, 2020, and this information is not intended to be indicative of
future results:
(in thousands, except earnings per share data)
Fiscal Year Ended
February 28, 2022
Sales revenue, net
$
2,361,906
Net income
202,507
EPS:
Basic
$
8.39
Diluted
$
8.30
These amounts have been calculated after applying our accounting policies and adjusting the results of
Osprey to reflect the effect of definite-lived intangible assets recognized as part of the business
combination on amortization expense as if the acquisition had occurred on March 1, 2020.
Note 7 - Goodwill and Intangibles
Amortization expense is recorded for intangible assets with definite useful lives and is reported within
SG&A in our consolidated statements of income. Some of our goodwill is held in jurisdictions that allow
deductions for tax purposes; however, in some of those jurisdictions we have no tax basis for the
associated goodwill recorded for book purposes. Accordingly, the majority of our goodwill is not
deductible for tax purposes. We perform annual impairment testing each fiscal year and interim
impairment testing, if necessary. We write down any asset deemed to be impaired to its fair value.
During fiscal years 2024, 2023 and 2022, we did not record any impairment charges related to goodwill or
intangible assets.
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The following table summarizes the changes in our goodwill by segment for fiscal 2024 and 2023:
(in thousands)
Home &
Outdoor
Beauty &
Wellness
Total
Gross carrying amount as of February 28, 2022
$
491,028 $
457,845 $
948,873
Accumulated impairment as of February 28, 2022
—
—
—
Acquisitions (1) (2)
749
116,857
117,606
Gross carrying amount as of February 28, 2023
491,777
574,702
1,066,479
Accumulated impairment as of February 28, 2023
—
—
—
Net carrying amount as of February 28, 2023
$
491,777 $
574,702 $
1,066,479
Acquisitions (2)
—
251
251
Gross carrying amount as of February 29, 2024
491,777
574,953
1,066,730
Accumulated impairment as of February 29, 2024
—
—
—
Net carrying amount as of February 29, 2024
$
491,777 $
574,953 $
1,066,730
(1) Reflects the goodwill recorded in the Home & Outdoor segment in connection with the acquisition of Osprey on December
29, 2021. For additional information see Note 6.
(2) Reflects the goodwill recorded in the Beauty & Wellness segment in connection with the acquisition of Curlsmith on April
22, 2022. For additional information see Note 6.
The following table summarizes the components of our other intangible assets as follows:
February 29, 2024 (1)
February 28, 2023 (1)
(in thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Indefinite-lived:
Trademark licenses
$
7,400 $
— $
7,400 $
7,400 $
— $
7,400
Trade names
358,200
—
358,200
358,200
—
358,200
Definite-lived:
Trademark licenses
74,650
(7,523)
67,127
74,250
(5,429)
68,821
Trade names
51,150
(10,267)
40,883
51,150
(7,212)
43,938
Customer relationships and lists
160,201
(112,194)
48,007
160,201
(103,653)
56,548
Other intangibles
71,977
(56,898)
15,079
71,256
(52,280)
18,976
Total
$
723,578 $
(186,882) $
536,696 $
722,457 $
(168,574) $
553,883
(1) Balances as of February 29, 2024 and February 28, 2023 include intangible assets recorded in connection with the
acquisitions of Curlsmith and Osprey on April 22, 2022, and December 29, 2021, respectively. For additional information
see Note 6.
The following tables summarize amortization expense related to our other intangible assets as follows:
Aggregate Amortization Expense (in thousands)
Fiscal 2024
$
18,326
Fiscal 2023
18,322
Fiscal 2022
12,764
Estimated Amortization Expense (in thousands)
Fiscal 2025
$
17,850
Fiscal 2026
16,044
Fiscal 2027
11,580
Fiscal 2028
8,835
Fiscal 2029
8,799
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Note 8 - Share-Based Compensation Plans
During the fiscal year, we had equity activity under one expired and two active share-based
compensation plans. The expired plan consists of the 2008 Stock Incentive Plan (the “2008 Plan”). The
active plans consist of the 2018 Stock Incentive Plan (the “2018 Plan”) and the 2018 Employee Stock
Purchase Plan (the “2018 ESPP”). The plans are administered by the Compensation Committee of the
Board of Directors, which consists of non-employee directors who are independent under the applicable
listing standards for companies traded on the NASDAQ Stock Market LLC.
2018 Plan
On August 22, 2018, our shareholders approved the 2018 Plan. The 2018 Plan permits the granting of
stock options, stock appreciation rights, RSAs, RSUs, PSAs, PSUs, and other stock-based awards. The
aggregate number of shares for issuance under the 2018 Plan will not exceed 2,000,000 shares and as
of February 29, 2024, 697,829 shares were available for issuance.
2018 ESPP
On August 22, 2018, our shareholders approved the 2018 ESPP. The aggregate number of shares of
common stock that may be purchased under the 2018 ESPP will not exceed 750,000 shares. Under the
terms of the plan, associates may authorize the withholding of up to 15% of their wages or salaries to
purchase our shares of common stock, not to exceed $25,000 of the fair market value of such shares for
any calendar year. The purchase price for shares acquired under the 2018 ESPP is equal to the lower of
85% of the share's fair market value on either the first day of each option period or the last day of each
period. The plan will expire by its terms on September 1, 2028. Shares of common stock purchased
under the 2018 ESPP vest immediately at the time of purchase. During fiscal 2024, there were 41,749
shares purchased under the plan.
Share-Based Compensation Expense
We recorded share-based compensation expense in SG&A as follows:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
Directors stock compensation
$
787
$
788
$
644
Service Condition Awards
12,345
8,663
11,177
Performance Condition Awards
5,746
9,017
17,260
Market Condition Awards
13,790
7,223
4,234
Employee stock purchase plan
1,204
1,062
1,303
Share-based compensation expense
33,872
26,753
34,618
Less: income tax benefits
(2,110)
(1,830)
(2,965)
Share-based compensation expense, net of income tax benefits
$
31,762
$
24,923
$
31,653
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Stock Options
There have been no new grants of options since fiscal 2017 and all options outstanding at February 28,
2023 and February 29, 2024 were exercisable. A summary of stock option activity under our 2008 plan
was as follows:
(in thousands, except contractual term and per share data)
Options
Weighted
Average
Exercise
Price
(per share)
Weighted
Average
Remaining
Contractual
Term
(in years)
Intrinsic
Value
Outstanding at February 28, 2023
16
$
61.77
1.1
$
726
Exercises
(6)
46.00
298
Outstanding at February 29, 2024
10
$
72.46
0.5
$
447
Exercisable at February 29, 2024
10
$
72.46
0.5
$
447
The total intrinsic value of options exercised during fiscal 2024, 2023, and 2022, was $0.3 million,
$1.1 million, and $3.6 million, respectively.
Director Restricted Stock Awards
During fiscal 2024 we issued under the 2018 Plan, 7,256 RSAs to non-employee members of the Board
of Directors with a total grant date fair value of $0.8 million or $108.40 per share. The RSAs vested
immediately, and accordingly, were expensed immediately. The total fair value of RSAs granted to our
non-employee members of the Board of Directors that vested immediately on grant dates in fiscal 2023
and 2022 was $0.8 million and $0.6 million, respectively.
Service Condition Awards
We grant RSAs and RSUs to associates, which primarily vest ratably over three or four years or have
specified graded vesting terms over 3 years, “Service Condition Awards”. A summary of Service
Condition Awards activity during fiscal 2024 follows:
(in thousands, except per share data)
Number of
Service Condition
Awards
Weighted Average
Grant Date Fair Value
(per share)
Outstanding at February 28, 2023
111 $
199.29
Granted
147
109.97
Vested
(58)
181.44
Forfeited
(20)
147.14
Outstanding at February 29, 2024
180 $
138.06
The total fair value of Service Condition Awards that vested in fiscal 2024, 2023, and 2022 was
$6.2 million, $10.2 million, and $14.3 million, respectively. The weighted average grant date fair value of
Service Condition Awards granted during fiscal 2024, 2023 and 2022 was $109.97, $195.90, and
$218.35, respectively.
Performance Condition Awards
We grant Performance Condition Awards to certain officers and associates, which cliff vest after three
years. The vesting of these awards is contingent upon meeting one or more defined operational
performance metrics over a three year performance period. The quantity of shares ultimately awarded
can range from 0% to 200% of “Target”, as defined in the award agreement as 100%, based on the level
of achievement against the defined operational performance metrics. A summary of Performance
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Condition Awards activity during fiscal 2024 follows and reflects all PSAs granted and outstanding at
maximum achievement of 200% of Target:
(in thousands, except per share data)
Number of
Performance
Condition Awards
Weighted Average
Grant Date Fair Value
(per share)
Outstanding at February 28, 2023
294 $
189.21
Granted
135
110.83
Vested
(77)
170.27
Forfeited (1)
(93)
168.81
Outstanding at February 29, 2024
259 $
161.23
(1) Includes an additional 74 thousand shares, which resulted from the performance of the fiscal 2021 awards not achieving
maximum 200% of Target.
The total fair value of Performance Condition Awards that vested in fiscal 2024, 2023, and 2022 was
$7.5 million, $37.8 million, and $29.9 million, respectively. The weighted average grant date fair value of
Performance Condition Awards granted during fiscal 2024, 2023 and 2022 was $110.83, $204.20 and
$216.20, respectively.
Market Condition Awards
We grant Market Condition Awards to certain officers and associates, which cliff vest after three years.
The vesting of these awards is contingent upon meeting specified stock price return targets compared to
a predetermined peer group over a three year period. The quantity of shares ultimately awarded can
range from 0% to 200% of “Target”, as defined in the award agreement as 100%, based on the level of
achievement against the defined targets. A summary of Market Condition Awards activity during fiscal
2024 follows and reflects all PSAs granted and outstanding at maximum achievement of 200% of Target:
(in thousands, except per share data)
Number of Market
Condition Awards
Weighted Average
Grant Date Fair Value
(per share)
Outstanding at February 28, 2023
142 $
154.32
Granted
135
80.49
Vested
—
—
Forfeited
(18)
118.43
Outstanding at February 29, 2024
259 $
118.09
The weighted average grant date fair value of Market Condition Awards granted during fiscal 2024, 2023
and 2022 was $80.49, $152.91 and $156.08, respectively.
The fair value of our Market Condition Awards are estimated using a Monte Carlo simulation valuation
model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that
market conditions will be achieved and is applied to the closing price of our common stock on the date of
grant. The input variables utilized are included in the table below:
Fiscal Years Ended Last Day of February,
2024
2023
2022
Expected term in years
3
3
3
Risk free interest rate
4.6 %
1.5 %
0.3 %
Expected volatility
46.0 %
38.8 %
38.9 %
Expected dividend yield (1)
— %
— %
— %
(1) The Monte Carlo method assumes a reinvestment of dividends.
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The expected term is consistent with the explicit service period and the risk free interest rate is based on
U.S. Treasury securities with maturities equal to the expected term of the awards. Expected volatility is
based equally on the historical volatility of our stock prices over the expected term of the awards and at-
the-money call options traded on or near the grant date of the awards.
Unrecognized Share-Based Compensation Expense
As of February 29, 2024, our total unrecognized share-based compensation for all awards was
$17.1 million, which will be recognized over a weighted average amortization period of 2.0 years. The
total unrecognized share-based compensation reflects an estimate of Target achievement for
Performance Condition Awards granted during fiscal 2024 and an estimate of zero percent of Target
achievement for Performance Condition Awards granted during fiscal 2023 and fiscal 2022.
Note 9 - Defined Contribution Plans
We sponsor defined contribution savings plans in the U.S. and other countries where we have
associates. Total company matching contributions made to these plans for fiscal 2024, 2023 and 2022
were $6.0 million, $5.9 million and $5.6 million, respectively.
Note 10 - Repurchases of Common Stock
In August 2021, our Board of Directors authorized the repurchase of up to $500 million of our outstanding
common stock. The authorization became effective August 25, 2021, for a period of three years, and
replaced our former repurchase authorization, of which approximately $79.5 million remained. These
repurchases may include open market purchases, privately negotiated transactions, block trades,
accelerated stock repurchase transactions, or any combination of such methods. As of February 29,
2024, our repurchase authorization allowed for the purchase of $348.4 million of common stock.
Our current equity-based compensation plans include provisions that allow for the “net exercise” of share-
settled awards by all plan participants. In a net exercise, any required payroll taxes, federal withholding
taxes and exercise price of the shares due from the option or other share-based award holders are
settled by having the holder tender back to us a number of shares at fair value equal to the amounts due.
Net exercises are treated as purchases and retirements of shares.
The following table summarizes our share repurchase activity for the periods shown:
Fiscal Years Ended Last Day of February,
(in thousands, except share and per share data)
2024
2023
2022
Common stock repurchased on the open market:
Number of shares
381,200
—
776,601
Aggregate value of shares
$
50,006
$
—
$
170,712
Average price per share
$
131.18
$
—
$
219.82
Common stock received in connection with share-based compensation:
Number of shares
51,332
90,462
78,358
Aggregate value of shares
$
5,216
$
18,365
$
17,492
Average price per share
$
101.60
$
203.02
$
223.23
Note 11 - Restructuring Plan
As part of our global restructuring plan, Project Pegasus, we incur severance and employee related
costs, professional fees, contract termination costs and other exit and disposal costs which are recorded
as “Restructuring charges” in the consolidated statements of income. Severance and employee related
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costs consist primarily of salary continuation benefits, prorated annual incentive compensation (based on
eligibility), outplacement services and continuation of health benefits. Severance and employee related
benefits are pursuant to our severance plan and are accounted for in accordance with ASC 712,
Compensation - Nonretirement Postemployment Benefits, based upon the characteristics of the
termination benefits pursuant to our severance plan. Severance and employee related costs are
recognized when the benefits are determined to be probable of being paid and reasonably estimable.
Professional fees, contract termination costs and other exit and disposal costs are accounted for in
accordance with ASC 420, Exit or Disposal Cost Obligations and are recognized as incurred.
Restructuring accruals are based upon management estimates at the time and are subject to change
depending upon changes in facts and circumstances subsequent to the date the original liability was
recorded.
During fiscal 2023, we initiated Project Pegasus, a global restructuring plan intended to expand operating
margins through initiatives designed to improve efficiency and effectiveness and reduce costs. Project
Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the
organization, accelerate cost of goods savings projects, enhance the efficiency of our supply chain
network, optimize our indirect spending and improve our cash flow and working capital, as well as other
activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to
fund future growth investments.
During the fourth quarter of fiscal 2023, we made changes to the structure of our organization, which
resulted in our previous Health & Wellness and Beauty operating segments being combined into a single
reportable segment. As part of our initiative focused on streamlining and simplifying the organization, we
made further changes to the structure of our organization, which included the creation of a North America
Regional Market Organization (“RMO”) responsible for sales and go-to-market strategies for all
categories and channels in the U.S. and Canada, and further centralization of certain functions under
shared services, particularly in operations and finance to better support our business segments and
RMOs. This new structure reduced the size of our global workforce by approximately 10%. We believe
that these changes better focus business segment resources on brand development, consumer-centric
innovation and marketing, the RMOs on sales and go-to-market strategies, and shared services on their
respective areas of expertise while also creating a more efficient and effective organizational structure.
During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S.
Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our
Wellness business in the Boston, Massachusetts area. This geographic consolidation and relocation is
the next step in our initiative to streamline and simplify the organization and is expected to be completed
during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and
enhance collaboration and innovation within the Beauty & Wellness segment.
We have updated our expectations regarding Project Pegasus charges and savings. We have lowered
our total estimate of one-time pre-tax restructuring charges to approximately $50 million to $55 million
over the duration of the plan. We continue to expect these charges to be completed during fiscal 2025.
We previously estimated total pre-tax restructuring charges of approximately $60 million to $65 million. In
addition, we now have the following expectations regarding Project Pegasus charges:
•
Pre-tax restructuring charges to be comprised of approximately $15 million to $19 million of
severance and employee related costs, $28 million of professional fees, $3 million to $4 million of
contract termination costs, and $4 million of other exit and disposal costs.
•
All of our operating segments and shared services will be impacted by the plan and pre-tax
restructuring charges include approximately $16 million to $17 million in Home & Outdoor and
$34 million to $38 million in Beauty & Wellness.
•
Pre-tax restructuring charges represent primarily cash expenditures, which we continue to expect
to be substantially paid by the end of fiscal 2025.
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We have the following expectations regarding Project Pegasus savings:
•
We continue to expect targeted annualized pre-tax operating profit improvements of
approximately $75 million to $85 million, which began in fiscal 2024 and which we now expect to
be substantially achieved by the end of fiscal 2027.
•
We have updated our expectations regarding the estimated cadence of the recognition of the
savings to be approximately 25% in fiscal 2024, which was achieved, approximately 35% in fiscal
2025, approximately 25% in fiscal 2026, and approximately 15% in fiscal 2027. We previously
estimated recognition of the savings to be approximately 25% in fiscal 2024, approximately 50%
in fiscal 2025 and approximately 25% in 2026.
•
We continue to expect total profit improvements to be realized approximately 60% through
reduced cost of goods sold and 40% through lower SG&A.
During fiscal 2024 and 2023, we incurred $18.7 million and $27.4 million, respectively, of pre-tax
restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges”
in the consolidated statements of income. We recognized $0.4 million of pre-tax restructuring costs
during fiscal 2022 under a prior restructuring plan referred to as Project Refuel, which was completed
during the fourth quarter of fiscal 2022.
The following tables summarize restructuring charges recorded as a result of Project Pegasus for the
periods presented:
Fiscal Year Ended February 29, 2024
Total
Incurred Since
Inception
(in thousands)
Home &
Outdoor
Beauty &
Wellness
Total
Severance and employee related costs
$
1,046 $
4,777 $
5,823 $
15,276
Professional fees
4,049
6,079
10,128
26,877
Contract termination
—
796
796
1,331
Other (1)
49
1,916
1,965
2,590
Total restructuring charges
$
5,144 $
13,568 $
18,712 $
46,074
(1) Includes a $1.8 million charge to write-off inventory, tooling and other production equipment as a result of abandoning a
new product prior to its initial launch.
Fiscal Year Ended February 28, 2023
(in thousands)
Home &
Outdoor
Beauty &
Wellness
Total
Severance and employee related costs
$
1,984 $
7,469 $
9,453
Professional fees
6,674
10,075
16,749
Contract termination
—
535
535
Other
31
594
625
Total restructuring charges
$
8,689 $
18,673 $
27,362
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The tables below present a rollforward of our accruals related to Project Pegasus, which are included in
accounts payable and accrued expenses and other current liabilities:
(in thousands)
Balance at
February 28, 2023
Charges
Payments
Balance at
February 29, 2024
Severance and employee related costs
$
3,173 $
5,823 $
(4,503) $
4,493
Professional fees
3,201
10,128
(13,057)
272
Contract termination
160
796
(956)
—
Other
34
194
(228)
—
Total
$
6,568 $
16,941 $
(18,744) $
4,765
(in thousands)
Balance at
February 28, 2022
Charges
Payments
Balance at
February 28, 2023
Severance and employee related costs
$
— $
9,453 $
(6,280) $
3,173
Professional fees
—
16,749
(13,548)
3,201
Contract termination
—
535
(375)
160
Other
—
625
(591)
34
Total
$
— $
27,362 $
(20,794) $
6,568
Note 12 - Commitments and Contingencies
Indemnity Agreements
Under agreements with customers, licensors and parties from whom we have acquired assets or entered
into business combinations, we indemnify these parties against liability associated with our products.
Additionally, we are party to a number of agreements under leases where we indemnify the lessor for
liabilities attributable to our actions or conduct. The indemnity agreements to which we are a party do
not, in general, increase our liability for claims related to our products or actions and have not materially
affected our consolidated financial statements.
Legal Matters
We are involved in various other legal claims and proceedings in the normal course of operations. We
believe the outcome of these matters will not have a material adverse effect on our consolidated financial
position, results of operations or liquidity, except as described below.
On December 23, 2021, Brita LP filed a complaint against Kaz USA, Inc. and Helen of Troy Limited in the
United States District Court for the Western District of Texas (the “Patent Litigation”), alleging patent
infringement by the Company relating to its PUR gravity-fed water filtration systems. In the Patent
Litigation, Brita LP seeks monetary damages and injunctive relief relating to the alleged infringement.
Brita LP simultaneously filed a complaint with the United States International Trade Commission (“ITC”)
against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration
systems (the “ITC Action”). The complaint in the ITC Action also alleged patent infringement by the
Company with respect to a limited set of PUR gravity-fed water filtration systems. In the ITC Action, Brita
LP requested the ITC to initiate an unfair import investigation relating to such filtration systems. This
action sought injunctive relief to prevent entry of certain accused PUR products (and certain other
products) into the U.S. and cessation of marketing and sales of existing inventory that is already in the
U.S. On January 25, 2022, the ITC instituted the investigation requested by the ITC Action. Discovery
closed in the ITC Action in May 2022, and approximately half of the originally identified PUR gravity-fed
water filters were removed from the case and are no longer included in the ITC Action. In August 2022,
the parties participated in the evidentiary hearing, with additional supplemental hearings in October 2022.
On February 28, 2023, the ITC issued an Initial Determination in the ITC Action, tentatively ruling against
the Company and the other unrelated respondents. The ITC has a guaranteed review process, and thus
all respondents, including the Company, filed a petition with the ITC for a full review of the Initial
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Determination. On September 19, 2023, the ITC issued its Final Determination in the Company’s favor.
The ITC determined there was no violation by the Company and terminated the investigation. Brita LP is
appealing the ITC's decision to the Federal Circuit (“CAFC Appeal”) and filed its Notice of Appeal on
October 24, 2023. The Company intervened in the CAFC Appeal, but as of the filing date of this Form
10-K, no hearings have been scheduled. The Patent Litigation remains stayed for the time being. We
cannot predict the outcome of these legal proceedings, the amount or range of any potential loss, when
the proceedings will be resolved, or customer acceptance of any replacement water filter. Litigation is
inherently unpredictable, and the resolution or disposition of these proceedings could, if adversely
determined, have a material and adverse impact on our financial position and results of operations.
Regulatory Matters
Our operations are subject to national, state, local, and provincial jurisdictions’ environmental, health and
safety laws and regulations and industry-specific product certifications. Many of the products we sell are
subject to product safety laws and regulations in various jurisdictions. These laws and regulations specify
the maximum allowable levels of certain materials that may be contained in our products, provide
statutory prohibitions against misbranded and adulterated products, establish ingredients and
manufacturing procedures for certain products, specify product safety testing requirements, and set
product identification, labeling and claim requirements. Some of our product lines are subject to product
identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies,
such as the U.S. Environmental Protection Agency (the “EPA”), U.S. Customs and Border Protection, the
U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.
During fiscal 2022, we were in discussions with the EPA regarding the compliance of packaging claims on
certain of our products in the air and water filtration categories and a limited subset of humidifier products
within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product
quality, safety or performance issues. As a result of these packaging compliance discussions, we
voluntarily implemented a temporary stop shipment action on the impacted products as we worked with
the EPA towards an expedient resolution. Our fiscal 2022 consolidated, and Beauty & Wellness
segment’s, net sales revenue, gross profit, and operating income were materially and adversely impacted
by the stop shipment actions and the time needed to execute repackaging and relabeling plans. We
resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the
repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally,
as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on
certain additional humidifier products and certain additional air filtration products, which were also
completed during fiscal 2023. Although we have not been notified of any fines or penalties imposed
against us by the EPA related to this matter, there can be no assurances that such fines or penalties will
not be imposed in the future.
We recorded charges to cost of goods sold to write-off obsolete packaging for the affected products in our
inventory on-hand and in-transit. We have also incurred additional compliance costs comprised of
obsolete packaging, storage and other charges from vendors, which were recognized in cost of goods
sold and incremental warehouse storage costs and legal fees, which were recognized in SG&A. We refer
to these charges as “EPA compliance costs.”
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The following table provides a summary of EPA compliance costs incurred during the periods presented:
Fiscal Years Ended Last Day of February
(in thousands)
2024
2023
2022
Cost of goods sold
$
—
$
16,928 1
$
17,728 2
SG&A
—
6,645
14,626
Total EPA compliance costs
$
—
$
23,573
$
32,354
(1) Includes a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and
affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal
2023.
(2) Includes a $13.1 million charge to cost of goods sold to write-off the obsolete packaging for the affected air filtration, water
filtration and humidifier products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022.
In addition, we incurred and capitalized into inventory costs to repackage a portion of our existing
inventory of the affected products beginning in the second quarter of fiscal 2022 through completion of
the repackaging in the third quarter of fiscal 2023.
For additional information refer to Item 1A., “Risk Factors,” and to Item 7., “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” including “EPA Compliance Costs” included
within this Annual Report.
Weather-Related Incident
On March 30, 2022, a third-party facility that we utilized for inventory storage incurred severe damage
from a weather-related incident. The inventory that was stored at this facility primarily related to our
Beauty & Wellness segment. While the inventory was insured, some seasonal inventory and inventory
designated for specific customer promotions was not accessible and subsequently determined to be
damaged, and as a result, unfavorably impacted our net sales revenue during the first quarter of fiscal
2023. As a result of the damages to the inventory stored at the facility, we recorded a charge to write-off
the damaged inventory totaling $34.4 million during fiscal 2023. These charges were fully offset by
probable insurance recoveries of $34.4 million also recorded during fiscal 2023, which represented
anticipated insurance proceeds, not to exceed the amount of the associated losses, for which receipt was
deemed probable. The charges for the damaged inventory and the expected insurance recoveries were
included in cost of goods sold in our consolidated statement of income for the fiscal year ended February
28, 2023. During fiscal 2023, we received proceeds of $46.0 million from our insurance carriers related
to this incident which are included in cash flows from operating activities in our consolidated statement of
cash flows for the fiscal year ended February 28, 2023. As a result, during fiscal 2023, the Company
recorded a gain of $9.7 million, net of costs incurred to dispose of the inventory, as a reduction of SG&A
expense in our consolidated statement of income.
Commitments
We sell certain of our products under trademarks licensed from third parties. Some of these trademark
license agreements require us to pay minimum royalties. As of February 29, 2024, we estimate future
minimum annual royalty payments over the noncancellable term of these arrangements to be
approximately $6.3 million, $6.0 million, $6.0 million, $5.5 million, and $2.8 million per year, during the
next five fiscal years, respectively.
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Note 13 - Long-Term Debt
A summary of our long-term debt follows:
(in thousands)
February 29, 2024
February 28, 2023
Credit Agreement (1):
Revolving loans
$
421,950 $
690,000
Term loans
250,000
246,875
Total borrowings under Credit Agreement (1)
671,950
936,875
Unamortized prepaid financing fees
(6,279)
(2,463)
Total long-term debt
665,671
934,412
Less: current maturities of long-term debt
(6,250)
(6,064)
Long-term debt, excluding current maturities
$
659,421 $
928,348
(1) Borrowings outstanding as of February 29, 2024 and February 28, 2023 are under the Credit Agreement and the Prior
Credit Agreement, respectively.
Aggregate annual maturities of our long-term debt as of February 29, 2024 were as follows:
(in thousands)
Fiscal 2025
$
6,250
Fiscal 2026
9,375
Fiscal 2027
12,500
Fiscal 2028
12,500
Fiscal 2029
631,325
Thereafter
—
Total
$
671,950
Credit Agreement and Prior Credit Agreement
On February 15, 2024, we entered into a credit agreement (the “Credit Agreement”) with Bank of
America, N.A., as administrative agent, and other lenders. The Credit Agreement replaces our prior
credit agreement (the “Prior Credit Agreement”), which terminated on February 15, 2024 and is further
described below. We utilized the proceeds from the refinancing to repay all principal, interest, and fees
outstanding under the Prior Credit Agreement without penalty. As a result, we recognized a loss on
extinguishment of debt within interest expense of $0.5 million during fiscal 2024, which consisted of a
write-off of $0.4 million of unamortized prepaid financing fees related to the Prior Credit Agreement and
$0.1 million of lender fees related to debt under the Credit Agreement treated as an extinguishment.
Additionally, we expensed $0.3 million of third-party fees in fiscal 2024 related to debt under the Credit
Agreement treated as a modification, which was recognized within interest expense. We capitalized
$4.0 million of lender fees and $2.2 million of third-party fees incurred in connection with the Credit
Agreement, which were recorded as prepaid financing fees in long-term debt and prepaid expenses and
other current assets in the amounts of $5.4 million and $0.8 million, respectively.
The Credit Agreement provides for aggregate commitments of $1.5 billion, which are available through (i)
a $1.0 billion revolving credit facility, which includes a $50 million sublimit for the issuance of letters of
credit, (ii) a $250 million term loan facility, and (iii) a committed $250 million delayed draw term loan
facility, which may be borrowed in multiple drawdowns until August 15, 2025. Proceeds can be used for
working capital and other general corporate purposes, including funding permitted acquisitions. At the
closing date of the Credit Agreement, we borrowed $457.5 million under the revolving credit facility and
$250.0 million under the term loan facility and utilized the proceeds to repay all debt outstanding under
the Prior Credit Agreement. The Credit Agreement matures on February 15, 2029. The Credit
Agreement includes an accordion feature, which permits the Company to request to increase its
borrowing capacity by an additional $300 million plus an unlimited amount when the Leverage Ratio (as
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defined in the Credit Agreement) on a pro-forma basis is less than 3.25 to 1.00. The Company’s exercise
of the accordion is subject to certain conditions being met, including lender approval.
Outstanding letters of credit reduce the borrowing availability under the Credit Agreement on a dollar-for-
dollar basis. We are able to repay amounts borrowed at any time without penalty. Borrowings accrue
interest under one of two alternative methods pursuant to the Credit Agreement as described below. With
each borrowing against our credit line, we can elect the interest rate method based on our funding needs
at the time. We also incur loan commitment and letter of credit fees under the Credit Agreement. The
term loans are payable at the end of each fiscal quarter in equal installments of 0.625% through February
28, 2025, 0.9375% through February 28, 2026, and 1.25% thereafter of the original principal balance of
the term loans, beginning in the first quarter of fiscal 2025, with the remaining balance due at the maturity
date. Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term
SOFR (as defined in the Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined
in the Credit Agreement) of 0% to 1.125% and 1.0% to 2.125% for Base Rate and Term SOFR
borrowings, respectively.
Our Prior Credit Agreement with Bank of America, N.A., as administrative agent, and other lenders,
provided for an unsecured total revolving commitment of $1.25 billion and a $300 million accordion, which
could be used for term loan commitments. In June 2022, we exercised the accordion under the Prior
Credit Agreement and borrowed $250 million as term loans. The proceeds from the term loans were
used to repay revolving loans under the Prior Credit Agreement. The maturity date of the term loans and
the revolving loans under the Prior Credit Agreement was March 13, 2025. Borrowings under the Prior
Credit Agreement bore floating interest at either the Base Rate or Term SOFR (as defined in the Prior
Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Prior Credit
Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively.
The floating interest rates on our borrowings under the Credit Agreement and Prior Credit Agreement are
hedged with interest rate swaps to effectively fix interest rates on $500 million and $425 million of the
outstanding principal balance under the revolving loans as of February 29, 2024 and February 28, 2023,
respectively. See Notes 14, 15, and 16 for additional information regarding our interest rate swaps.
As of February 29, 2024, the balance of outstanding letters of credit was $15.5 million and the amount
available for revolving loans under the Credit Agreement was $562.6 million. Covenants in the Credit
Agreement limit the amount of total indebtedness we can incur. As of February 29, 2024, these
covenants effectively limited our ability to incur more than $474.6 million of additional debt from all
sources, including the Credit Agreement, or $562.6 million in the event a qualified acquisition is
consummated.
Other Debt Agreements
On February 28, 2023, we paid the remaining balance of $15.1 million, including principal and interest,
outstanding under our unsecured loan agreement (the “MBFC Loan”) with the Mississippi Business
Finance Corporation (the “MBFC”) without penalty. As a result, as of February 28, 2023, we no longer
had outstanding debt related to the MBFC Loan and the MBFC Loan terminated pursuant to its terms.
The loan agreement was entered into in connection with the issuance by MBFC of taxable industrial
development revenue bonds. Borrowings under the MBFC Loan bore interest at either the Base Rate or
Term SOFR (both as defined in the loan agreement), plus a margin based on the Net Leverage Ratio (as
defined in the loan agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR
borrowings, respectively. The borrowings were used to fund construction of our Olive Branch, Mississippi
distribution facility. The maturity date of the MBFC Loan was March 1, 2023.
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100
Debt Covenants
Our debt under our Credit Agreement is unconditionally guaranteed, on a joint and several basis, by the
Company and certain of its subsidiaries. Our Credit Agreement requires the maintenance of certain key
financial covenants defined in the accompanying Management's Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources - Credit
Agreement and Other Debt Agreements. Our Credit Agreement also contains other customary
covenants, including, among other things, covenants restricting or limiting us, except under certain
conditions set forth therein, from (1) incurring liens on our properties, (2) making certain types of
investments, (3) incurring additional debt, and (4) assigning or transferring certain licenses. Our Credit
Agreement also contains customary events of default, including failure to pay principal or interest when
due, among others. Upon an event of default under our Credit Agreement, the lenders may, among other
things, accelerate the maturity of any amounts outstanding. The commitments of the lenders to make
loans to us under the Credit Agreement are several and not joint. Accordingly, if any lender fails to make
loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such
lender’s commitments under the Credit Agreement.
As of February 29, 2024, we were in compliance with all covenants as defined under the terms of the
Credit Agreement.
Interest and Capitalized Interest
During fiscal 2024 and 2023, we incurred interest costs totaling $53.9 million and $46.2 million,
respectively, of which we capitalized $0.9 million and $5.5 million, respectively, as part of property and
equipment in connection with the construction of a new distribution facility. During fiscal 2022, we
incurred interest costs totaling $12.8 million, none of which was capitalized.
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The following table contains information about interest rates and the related weighted average
borrowings outstanding under our Credit Agreement, including under the Prior Credit Agreement, and the
MBFC Loan for the periods presented below:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
Credit Agreement:
Average borrowings outstanding (1)
$
806,415
$
1,011,263
$
503,900
Average effective interest rate (2)
6.4 %
4.4 %
2.3 %
Interest rate range (3)
6.5% - 9.3%
1.1% - 8.6%
1.1% - 3.3%
Weighted average interest rate on borrowings outstanding at year end (4)
6.0 %
6.3 %
1.6 %
MBFC Loan:
Average borrowings outstanding (1)
(5)
$
12,226
$
17,087
Average effective interest rate (2)
(5)
5.0 %
1.1 %
Interest rate range
(5)
1.2% - 5.9%
1.1% - 1.2%
Weighted average interest rate on borrowings outstanding at year end
(5)
(5)
1.2 %
(1) Average borrowings outstanding is computed as the average of the current and four prior quarters ending balances
outstanding.
(2) The average effective interest rate during each year is computed by dividing the total interest expense associated with the
borrowing for a fiscal year by the average borrowings outstanding for the same fiscal year. Beginning in fiscal 2024, we
included the impact of our interest rate swaps and commitment fees incurred under the Credit Agreement and Prior Credit
Agreement in computing total interest expense. Accordingly, we have recast the prior periods presented to conform.
(3) Interest rate range reflects the interest rates on the borrowings under the Credit Agreement and Prior Credit Agreement
pursuant to the respective agreements and excludes the impact of our interest rate swaps.
(4) Beginning in the fourth quarter of fiscal 2024, the weighted average interest rate on borrowings outstanding at year end
under the Credit Agreement is computed inclusive of the impact of our interest rate swaps. Accordingly, we have recast
the prior periods presented to conform.
(5) As of February 29, 2024 and February 28, 2023, we no longer had any outstanding borrowings on the MBFC Loan as the
MBFC Loan terminated pursuant to its terms on February 28, 2023.
Note 14 - Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Valuation techniques under
the accounting guidance related to fair value measurements are based on observable and unobservable
inputs. These inputs are classified into the following hierarchy:
Level 1:
Quoted prices for identical assets or liabilities in active markets;
Level 2:
Observable inputs other than quoted prices that are directly or indirectly observable for the
asset or liability, including quoted prices for similar assets or liabilities in active markets;
quoted prices for similar or identical assets or liabilities in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant value drivers
are observable; and
Level 3:
Unobservable inputs that reflect the reporting entity’s own assumptions.
When circumstances dictate the transfer of an asset or liability to a different level, we report the transfer
at the beginning of the reporting period in which the facts and circumstances resulting in the transfer
occurred. There were no transfers between the fair value hierarchy levels during the periods presented.
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All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills, are classified as
Level 2 because their valuation is dependent on observable inputs and other quoted prices for similar
assets or liabilities, or model-derived valuations whose significant value drivers are observable. Our
investments in U.S. Treasury Bills are classified as Level 1 because their value is based on quoted prices
in active markets for identical assets. The following table presents the fair value of our financial assets
and liabilities:
Fair Value
(in thousands)
February 29, 2024
February 28, 2023
Assets:
Cash equivalents (money market accounts)
$
462 $
381
U.S. Treasury Bills
8,948
—
Interest rate swaps
2,504
5,746
Foreign currency derivatives
592
1,423
Total assets
$
12,506 $
7,550
Liabilities:
Foreign currency derivatives
386
711
Total liabilities
$
386 $
711
All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills, are measured
and recorded at fair value on a recurring basis. Our investments in U.S. Treasury Bills are recorded at
amortized cost. As of February 29, 2024, the current and non-current carrying amounts of our U.S.
Treasury Bills were $2.5 million and $6.6 million, respectively, and were included within Prepaid expenses
and other current assets and Other assets, respectively in our consolidated balance sheet.
The carrying amounts of cash, accounts payable, accrued expenses and other current liabilities and
income taxes payable approximate fair value because of the short maturity of these items. The carrying
amounts of receivables approximate fair value due to the effect of the related allowance for credit losses.
The carrying amount of our floating rate long-term debt approximates its fair value.
Our investments in U.S. Treasury Bills are classified as held-to-maturity because we have the positive
intent and ability to hold the securities to maturity. We invest in U.S. Treasury Bills with maturities ranging
from less than one to five years. Gross unrealized gains and losses are not material for any period
presented. During fiscal 2024, we recognized interest income on these investments of $0.3 million, which
is included in “Non-operating income, net” in our consolidated statement of income.
We use derivatives to manage our exposure to changes in foreign currency exchange rates, which
include foreign currency forward contracts and cross-currency debt swaps. In addition, we use interest
rate swaps to manage our exposure to changes in interest rates. All of our derivative assets and
liabilities are recorded at fair value. See Notes 1, 15 and 16 for more information on our derivatives.
We did not remeasure any assets to fair value on a non-recurring basis during fiscal 2024 or 2023.
Note 15 - Financial Instruments and Risk Management
Foreign Currency Risk
The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the
reporting currency for the Company. By operating internationally, we are subject to foreign currency risk
from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such
transactions include sales and operating expenses. As a result of such transactions, portions of our
cash, accounts receivable and accounts payable are denominated in foreign currencies. Approximately
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103
14%, 13%, and 10% of our net sales revenue was denominated in foreign currencies during fiscal 2024,
2023 and 2022, respectively. These sales were primarily denominated in Euros, British Pounds and
Canadian Dollars. We make most of our inventory purchases from manufacturers in Asia and primarily
use the U.S. Dollar for such purchases.
In our consolidated statements of income, foreign currency exchange rate gains and losses resulting from
the remeasurement of foreign income taxes receivables and payables, and deferred income tax assets
and liabilities are recognized in income tax expense, and all other foreign currency exchange rate gains
and losses are recognized in SG&A. We recorded in income tax expense foreign currency exchange rate
net gains of $0.3 million during fiscal 2024 and net losses of $0.4 million and $0.5 million during fiscal
2023 and 2022, respectively. We recorded in SG&A foreign currency exchange rate net losses of $0.5
million, $1.7 million and $0.2 million during fiscal 2024, 2023 and 2022, respectively. We mitigate certain
foreign currency exchange rate risk by using forward contracts and cross-currency debt swaps to protect
against the foreign currency exchange rate risk inherent in our transactions denominated in foreign
currencies. We do not enter into any derivatives or similar instruments for trading or other speculative
purposes. Certain of our forward contracts are designated as cash flow hedges (“foreign currency
contracts”). Foreign currency derivatives for which we have not elected hedge accounting consist of
certain forward contracts and our cross-currency debt swaps. These undesignated derivatives are used
to hedge monetary net asset and liability positions. We evaluate our derivatives designated as cash flow
hedges each quarter to assess hedge effectiveness. For additional information on our accounting for
derivatives see Note 1.
Interest Rate Risk
Interest on our outstanding debt as of February 29, 2024 is based on floating interest rates. If short-term
interest rates increase, we will incur higher interest expense on any future outstanding balances of
floating rate debt. Floating interest rates are hedged with interest rate swaps to effectively fix interest
rates on a portion of our outstanding principal balance under the Credit Agreement and Prior Credit
Agreement, which totaled $672.0 million and $936.9 million as of February 29, 2024 and February 28,
2023, respectively. As of February 29, 2024 and February 28, 2023, $500 million and $425 million of the
outstanding principal balance under the Credit Agreement and Prior Credit Agreement, respectively, was
hedged with interest rate swaps to fix the interest rate we pay. Our interest rate swaps are designated as
cash flow hedges, and we evaluate our derivatives designated as cash flow hedges each quarter to
assess hedge effectiveness. For additional information on our accounting for derivatives see Note 1.
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104
The following tables summarize the fair values of our derivative instruments at the end of fiscal 2024 and
2023:
(in thousands)
February 29, 2024
Derivatives designated as hedging instruments
Hedge
Type
Final
Settlement
Date
Notional
Amount
Prepaid
Expenses
and Other
Current
Assets
Other
Assets
Accrued
Expenses
and Other
Current
Liabilities
Other
Liabilities
Non-current
Forward contracts - sell Euro
Cash flow
2/2025
€36,500
$
377
$
—
$
90
$
—
Forward contracts - sell Canadian Dollars
Cash flow
2/2025
$20,750
151
—
57
—
Forward contracts - sell Pounds
Cash flow
2/2025
£20,250
59
—
234
—
Forward contracts - sell Norwegian Kroner
Cash flow
8/2024
kr 5,000
5
—
—
—
Interest rate swaps
Cash flow
2/2026
$500,000
1,314
1,190
—
—
Subtotal
1,906
1,190
381
—
Derivatives not designated under hedge accounting
Forward contracts - sell Euro
(1)
3/2024
€430
—
—
3
—
Forward contracts - sell Pounds
(1)
3/2024
£735
—
—
2
—
Subtotal
—
—
5
—
Total fair value
$
1,906
$ 1,190
$
386
$
—
(in thousands)
February 28, 2023
Derivatives designated as hedging instruments
Hedge
Type
Final
Settlement
Date
Notional
Amount
Prepaid
Expenses
and Other
Current
Assets
Other
Assets
Accrued
Expenses
and Other
Current
Liabilities
Other
Liabilities
Non-current
Forward contracts - sell Euro
Cash flow
2/2024
€29,310
$
257
$
—
$
—
$
—
Forward contracts - sell Canadian Dollars
Cash flow
2/2024
$30,000
962
11
—
—
Forward contracts - sell Pounds
Cash flow
1/2024
£19,400
—
—
711
—
Forward contracts - sell Norwegian Kroner
Cash flow
2/2024
kr 40,000
185
—
—
—
Interest rate swaps
Cash flow
2/2026
$425,000
3,941
1,805
—
—
Subtotal
5,345
1,816
711
—
Derivatives not designated under hedge accounting
Forward contracts - buy Euro
(1)
3/2023
€500
6
—
—
—
Forward contracts - buy Pounds
(1)
3/2023
£400
2
—
—
—
Subtotal
8
—
—
—
Total fair value
$
5,353
$ 1,816
$
711
$
—
(1) These forward contracts, for which we have not elected hedge accounting, hedge monetary net asset and liability
positions for the notional amounts reported, creating an economic hedge against currency movements.
The pre-tax effects of derivative instruments designated as cash flow hedges for fiscal 2024 and 2023
were as follows:
Fiscal Years Ended Last Day of February,
Gain (Loss)
Recognized in AOCI
Gain (Loss) Reclassified
from AOCI into Income
(in thousands)
2024
2023
Location
2024
2023
Foreign currency contracts - cash flow hedges $
(502) $
8,289 Sales revenue, net
$
(9) $
10,390
Interest rate swaps - cash flow hedges
4,373
8,382 Interest expense
7,615
(145)
Total
$
3,871 $
16,671
$
7,606 $
10,245
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The pre-tax effects of derivative instruments not designated under hedge accounting for fiscal 2024 and
2023 were as follows:
Fiscal Years Ended Last Day of February,
Gain (Loss)
Recognized in Income
(in thousands)
Location
2024
2023
Forward contracts
SG&A
$
(280) $
(281)
Cross-currency debt swaps - principal
SG&A
—
875
Total
$
(280) $
594
We expect a net gain of $1.5 million associated with foreign currency contracts and interest rate swaps
currently recorded in AOCI to be reclassified into income over the next twelve months. The amount
ultimately realized, however, will differ as exchange rates and interest rates change and the underlying
contracts settle. See Notes 1, 14 and 16 for more information.
Counterparty Credit Risk
Financial instruments, including foreign currency contracts, forward contracts, cross-currency debt swaps
and interest rate swaps, expose us to counterparty credit risk for non-performance. We manage our
exposure to counterparty credit risk by only dealing with counterparties who are substantial international
financial institutions with significant experience using such derivative instruments. We believe that the
risk of incurring credit losses is remote.
Note 16 - Accumulated Other Comprehensive Income (Loss)
The changes in AOCI by component and related tax effects for fiscal 2024 and 2023 were as follows:
(in thousands)
Interest
Rate Swaps
Foreign
Currency
Contracts
Total
Balance at February 28, 2022
$
(2,126) $
2,328
$
202
Other comprehensive income before reclassification
8,382
8,289
16,671
Amounts reclassified out of AOCI
145
(10,390)
(10,245)
Tax effects
(2,007)
326
(1,681)
Other comprehensive income (loss)
6,520
(1,775)
4,745
Balance at February 28, 2023
$
4,394
$
553
$
4,947
Other comprehensive income (loss) before reclassification
4,373
(502)
3,871
Amounts reclassified out of AOCI
(7,615)
9
(7,606)
Tax effects
765
122
887
Other comprehensive loss
(2,477)
(371)
(2,848)
Balance at February 29, 2024
$
1,917
$
182
$
2,099
See Notes 1, 14 and 15 for additional information regarding our cash flow hedges.
Note 17 - Segment and Geographic Information
Segment Information
We currently operate in two segments consisting of Home & Outdoor and Beauty & Wellness. The
Curlsmith and Osprey brands and products were added to the Beauty & Wellness and Home & Outdoor
segments, respectively, upon the completion of the acquisitions of Curlsmith and Osprey.
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The following tables summarize segment information for the periods presented:
Fiscal Year Ended February 29, 2024
(in thousands)
Home & Outdoor (1)
Beauty & Wellness (2)
Total
Sales revenue, net
$
916,381 $
1,088,669 $
2,005,050
Restructuring charges
5,144
13,568
18,712
Operating income
142,732
117,857
260,589
Capital and intangible asset expenditures
28,012
8,632
36,644
Depreciation and amortization
24,595
26,904
51,499
Fiscal Year Ended February 28, 2023
(in thousands)
Home & Outdoor (1)
Beauty & Wellness (2)
Total
Sales revenue, net
$
915,685 $
1,156,982 $
2,072,667
Restructuring charges
8,689
18,673
27,362
Operating income
134,053
77,738
211,791
Capital and intangible asset expenditures
159,183
15,681
174,864
Depreciation and amortization
18,364
26,319
44,683
Fiscal Year Ended February 28, 2022
(in thousands)
Home & Outdoor (1)
Beauty & Wellness
Total
Sales revenue, net
$
865,844 $
1,357,511 $
2,223,355
Restructuring charges
369
11
380
Operating income
134,925
137,625
272,550
Capital and intangible asset expenditures
67,732
10,307
78,039
Depreciation and amortization
12,112
23,717
35,829
(1) Fiscal 2024 and 2023 include a full year of operating results from Osprey, acquired on December 29, 2021, compared to
approximately nine weeks of operating results in fiscal 2022. For additional information see Note 6.
(2) Fiscal 2024 includes a full year of operating results from Curlsmith, acquired on April 22, 2022, compared to approximately
forty-five weeks of operating results in fiscal 2023. For additional information see Note 6.
We compute segment operating income based on net sales revenue, less cost of goods sold, SG&A, and
restructuring charges. The SG&A used to compute each segment’s operating income is directly
associated with the segment, plus shared services and corporate overhead expenses that are allocable
to the segment. We do not allocate non-operating income and expense, including interest or income
taxes, to operating segments. Our chief operating decision maker reviews balance sheet information at a
consolidated level.
Geographic Information
The following table presents net sales revenue by geographic region, in U.S. Dollars. Net sales are
attributed to countries based on the customer's location.
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
U.S.
$ 1,478,134
73.7 % $ 1,538,852
74.2 % $ 1,738,099
78.2 %
Canada
82,122
4.1 %
108,416
5.2 %
101,617
4.6 %
EMEA
284,434
14.2 %
268,153
13.0 %
214,583
9.6 %
Asia Pacific
116,157
5.8 %
115,626
5.6 %
109,750
4.9 %
Latin America
44,203
2.2 %
41,620
2.0 %
59,306
2.7 %
Total sales revenue, net
$ 2,005,050 100.0 % $ 2,072,667 100.0 % $ 2,223,355 100.0 %
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Worldwide sales to our largest customer, Amazon.com Inc., accounted for approximately 21%, 17% and
19% of our consolidated net sales revenue in fiscal 2024, 2023 and 2022, respectively. Sales to our
second largest customer, Target Corporation, accounted for approximately 10% in both fiscal 2024 and
2023 and 11% in fiscal 2022 of our consolidated net sales revenue. Sales to our third largest customer,
Walmart, Inc., including its worldwide affiliates, accounted for approximately 9%, 10% and 11% of our
consolidated net sales revenue in fiscal 2024, 2023, and 2022, respectively. Sales to these largest
customers include sales across both of our business segments. No other customers accounted for 10%
or more of consolidated net sales revenue during these fiscal years. Sales to our top five customers
accounted for approximately 47%, 43% and 49% of our consolidated net sales revenue in fiscal 2024,
2023 and 2022, respectively.
Our U.S. and international long-lived assets were as follows:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
U.S.
$
344,361
$
357,577
$
213,505
International
28,247
32,967
29,632
Total
$
372,608
$
390,544
$
243,137
The table above classifies assets based upon the country where they are physically located. Long-lived
assets included in the table above include property and equipment and operating lease assets.
Note 18 - Income Taxes
We reorganized the Company in Bermuda in 1994 and many of our foreign subsidiaries are not directly or
indirectly owned by a U.S. parent. As such, a large portion of our foreign income is not subject to U.S.
taxation on a permanent basis under current law. Additionally, our intellectual property is largely owned
by foreign subsidiaries, resulting in proportionally higher earnings in jurisdictions with lower statutory tax
rates, which decreases our overall effective tax rate. The taxable income earned in each jurisdiction,
whether U.S. or foreign, is determined by the subsidiary's operating results and transfer pricing and tax
regulations in the related jurisdictions.
The Organisation for Economic Co-operation and Development has introduced a framework to implement
a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Many aspects of Pillar Two
are effective for tax years beginning after January 1, 2024, with certain remaining aspects to be effective
for tax years beginning January 1, 2025 or later. Certain countries have adopted legislation to implement
Pillar Two, and other countries are in the process of introducing legislation to implement Pillar Two.
Based on the countries in which we operate and those that have adopted legislation that is already
effective (or with effective dates during our fiscal 2025), we currently do not expect the global minimum
tax rules will have a material impact to our global effective tax rate in fiscal 2025. We will continue to
assess the impact of Pillar Two and monitor developments in legislation, regulation, and interpretive
guidance.
In response to Pillar Two, on December 27, 2023, Bermuda enacted a corporate income tax effective for
fiscal years beginning on or after January 1, 2025. The 15% corporate income tax regime applies to
Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million
or more and is effective for us in fiscal 2026. The Bermuda corporate income tax allows for a beginning
net operating loss balance related to the five years preceding the effective date. Accordingly, during fiscal
2024, we recorded a deferred tax asset of $9.3 million for the Bermuda net operating losses generated
from fiscal 2021 through 2024 with an offsetting valuation allowance of $9.3 million. Although we
currently do not expect the tax regime to have a material impact to our consolidated financial statements,
we will continue to monitor and evaluate impact as further regulatory guidance becomes available.
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108
On August 16, 2022, the Inflation Reduction Act (the “Act”) was enacted and signed into law. The Act is a
budget reconciliation package that includes significant law changes relating to tax, climate change,
energy, and health care. The tax provisions include, among other items, a corporate alternative minimum
tax of 15%, an excise tax of 1% on corporate stock buy-backs, energy-related tax credits, and additional
IRS funding. We do not expect these tax provisions to have a material impact to our consolidated
financial statements.
On March 11, 2021, the American Rescue Plan Act (the “ARP”) was enacted and signed into law. The
ARP is an economic stimulus package in response to the COVID-19 outbreak, which contains tax
provisions that did not have a material impact to our consolidated financial statements.
The Company continues to elect to account for U.S. tax on global intangible low-taxed income (“GILTI”)
as a period cost and therefore has not recorded deferred taxes related to GILTI on its foreign
subsidiaries.
While U.S. federal tax expense has been recognized on the undistributed earnings of our U.S. owned
foreign subsidiaries, no deferred tax liabilities with respect to items such as certain foreign exchange
gains or losses, foreign withholding taxes or state taxes have been recognized. No deferred taxes have
been provided on the undistributed earnings of our foreign-owned subsidiaries as these earnings will
continue to be permanently reinvested. Due to the number of legal entities and jurisdictions involved, our
legal entity structure, and the tax laws in the relevant jurisdictions, we believe it is not practicable to
estimate the amount of additional taxes which may be payable upon distribution of these undistributed
earnings.
Our components of income before income tax expense are as follows:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
U.S.
$
68,957 $
41,738 $
63,653
Non-U.S.
140,085
129,551
196,313
Total
$
209,042 $
171,289 $
259,966
Our components of income tax expense (benefit) are as follows:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
Current:
U.S. federal
$
9,259 $
13,472 $
20,907
State
2,704
3,417
6,283
Non-U.S.
15,275
13,369
17,883
27,238
30,258
45,073
Deferred:
U.S. federal
9,449
(3,337)
(5,269)
State
3,252
(1,815)
(1,766)
Non-U.S.
509
2,910
(1,836)
13,210
(2,242)
(8,871)
Total
$
40,448 $
28,016 $
36,202
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109
Our total income tax expense differs from the amounts computed by applying the U.S. statutory tax rate
to income before income taxes. An income tax rate reconciliation of these differences are as follows:
Fiscal Years Ended Last Day of February,
2024
2023
2022
Effective income tax rate at the U.S. statutory rate
21.0 %
21.0 %
21.0 %
Impact of U.S. state income taxes
2.2 %
0.3 %
1.4 %
Effect of statutory tax rate in Macau
(4.0) %
(5.4) %
0.1 %
Effect of statutory tax rate in Barbados
(2.4) %
(3.3) %
(11.0) %
Effect of statutory tax rate in Switzerland
(1.8) %
(2.0) %
(1.2) %
Effect of income from other non-U.S. operations subject to varying rates
2.3 %
2.1 %
1.2 %
Effect of foreign exchange fluctuations
(0.3) %
2.5 %
0.5 %
Effect of stock compensation
1.2 %
— %
— %
Effect of uncertain tax positions
0.4 %
0.2 %
0.6 %
Effect of non-deductible executive compensation
1.9 %
1.2 %
1.1 %
Effect of changes in valuation allowance
3.9 %
(0.5) %
0.5 %
Effect of changes in tax rates
(4.4) %
(0.4) %
(0.1) %
Other items
(0.7) %
0.7 %
(0.2) %
Effective income tax rate
19.3 %
16.4 %
13.9 %
Each year there are significant transactions or events that are incidental to our core businesses and that
by a combination of their nature and jurisdiction, can have a disproportionate impact on our reported
effective tax rates. Without these transactions or events, the trend in our effective tax rates would follow
a more normalized pattern.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets
and liabilities are as follows:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
Deferred tax assets, gross:
Operating loss carryforwards and tax credits
$
19,345 $
10,882
Accounts receivable
6,877
9,674
Inventories
26,498
20,541
Operating lease liabilities
10,329
11,658
Research and development expenditures
2,847
5,722
Interest limitation
7,561
1,932
Accrued expenses and other
5,953
4,676
Total gross deferred tax assets
79,410
65,085
Valuation allowance
(19,044)
(10,706)
Deferred tax liabilities:
Operating lease assets
(8,119)
(8,997)
Depreciation
(28,433)
(9,397)
Amortization
(61,405)
(61,252)
Total deferred tax liabilities, net
$
(37,591) $
(25,267)
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. We consider the scheduled reversal of
deferred tax liabilities, expected future taxable income and tax planning strategies in assessing the
ultimate realization of deferred tax assets. If recovery is not likely, we must increase our provision for
taxes by recording a valuation allowance against the deferred tax assets that we estimate will not be
recoverable. In fiscal 2024, the $8.3 million net increase in our valuation allowance was principally due to
net operating loss carryforwards recorded in fiscal 2024 as a result of the Bermuda corporate income tax
enactment that are not expected to be recoverable.
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110
The composition of our operating loss carryforwards and tax credits at the end of fiscal 2024 is as follows:
February 29, 2024
(in thousands)
Tax Year
Expiration
Date Range
Deferred
Tax
Assets
Operating
Loss
Carryforward
U.S. state operating loss carryforwards
2032-2038
$
414 $
9,489
Non-U.S. operating loss carryforwards with definite carryover periods
2024-2041
4,210
16,874
Non-U.S. operating loss carryforwards with indefinite carryover periods
Indefinite
14,721
79,224
Subtotal
19,345 $
105,587
Less portion of valuation allowance established for operating loss
carryforwards
(18,931)
Total operating loss carryforwards, net of valuation allowance
$
414
Any future amount of deferred tax asset considered realizable could be reduced in the near term if
estimates of future taxable income during any carryforward periods are reduced.
During fiscal 2024 and 2023, changes in the total amount of unrecognized tax benefits (excluding interest
and penalties) were as follows:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
Total unrecognized tax benefits, beginning balance
$
6,018 $
5,623
Tax positions taken during the current period
806
644
Changes in tax positions taken during a prior period
—
(249)
Total unrecognized tax benefits, ending balance
6,824
6,018
Less current unrecognized tax benefits
—
—
Non-current unrecognized tax benefits
$
6,824 $
6,018
If we are able to sustain our positions with the relevant taxing authorities, approximately $6.8 million
(excluding interest and penalties) of uncertain tax position liabilities as of February 29, 2024 would
favorably impact our effective tax rate in future periods. We do not expect any significant changes to our
existing unrecognized tax benefits during the next twelve months resulting from any issues currently
pending with tax authorities.
We classify interest and penalties on uncertain tax positions as income tax expense. At the end of fiscal
2024 and 2023, the liability for tax-related interest and penalties associated with unrecognized tax
benefits was $3.2 million and $3.1 million, respectively. Additionally, during fiscal 2024 and 2023, we
recognized a de minimus amount of tax expense and tax benefits of $0.1 million, respectively, from tax-
related interest and penalties in the consolidated statements of income.
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111
We file income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions.
As of February 29, 2024, tax years under examination or still subject to examination by material tax
jurisdictions are as follows:
Jurisdiction
Tax Years Under Examination
Open Tax Years
Barbados
- None -
2019
—
2024
China
2009-2018
2009
—
2024
Germany
2014-2021
2014
—
2024
Hong Kong
2014-2018
2014
—
2024
Macao
- None -
2021
—
2024
Switzerland
- None -
2017
—
2024
United Kingdom
- None -
2022
—
2024
U.S.
2021
2020
—
2024
Note 19 - Earnings Per Share
We compute basic earnings per share using the weighted average number of shares of common stock
outstanding during the period. We compute diluted earnings per share using the weighted average
number of shares of common stock outstanding plus the effect of dilutive securities. Dilutive securities at
any given point in time may consist of outstanding options to purchase common stock and issued and
contingently issuable unvested RSUs, PSUs, RSAs, PSAs and other stock-based awards (see Note 8).
Anti-dilutive securities are not included in the computation of diluted earnings per share under the
treasury stock method.
The following table presents our weighted average basic and diluted shares outstanding for the periods
shown:
Fiscal Years Ended Last Day of February,
(in thousands)
2024
2023
2022
Weighted average shares outstanding, basic
23,865
23,955
24,142
Incremental shares from share-based compensation arrangements
105
135
268
Weighted average shares outstanding, diluted
23,970
24,090
24,410
Anti-dilutive securities
44
46
17
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112
HELEN OF TROY LIMITED AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
(in thousands)
Beginning Balance
Additions (1)
Deductions (2)
Ending Balance
Allowance for credit losses:
Year Ended February 29, 2024
$
1,678 $
6,103 $
300 $
7,481
Year Ended February 28, 2023
$
843 $
1,798 $
963 $
1,678
Year Ended February 28, 2022
$
998 $
312 $
467 $
843
Deferred tax asset valuation allowance:
Year Ended February 29, 2024
$
10,706 $
8,338 $
— $
19,044
Year Ended February 28, 2023
$
11,673 $
— $
967 $
10,706
Year Ended February 28, 2022
$
15,021 $
— $
3,348 $
11,673
(1) Additions to the allowance for credit losses represent periodic net charges to the provision for doubtful receivables,
inclusive of any recoveries of receivables previously written off. The addition to the allowance for credit losses in fiscal
2024, includes a charge for uncollectible receivables due to the bankruptcy of Bed, Bath & Beyond. In fiscal 2024, the
addition to the deferred tax asset valuation allowance was primarily due to net operating loss carryforwards recorded in
fiscal 2024 as a result of the Bermuda corporate income tax enactment that are not expected to be recoverable partially
offset by changes in estimates of the recoverability of deferred tax assets.
(2) Deductions to the allowance for credit losses represent uncollectible balances written off. Deductions to the deferred
tax asset valuation allowance in fiscal 2023 and fiscal 2022 were primarily due to changes in deferred tax assets that
are not expected to be recoverable.
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113
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Based on their evaluation, as of the end of the period covered by this Annual Report on Form 10-K, our
Company’s Chief Executive Officer and Chief Financial Officer have concluded that our Company’s
disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934) are effective at the reasonable assurance level. During our fiscal quarter ended February 29,
2024, there were no changes in our internal control over financial reporting that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report and Attestation Report on Internal Control Over Financial Reporting
Management’s report on internal control over financial reporting and the attestation report on internal
control over financial reporting of the independent registered public accounting firm required by this item
are set forth under Item 8., “Financial Statements and Supplementary Data” of this Annual Report and are
incorporated herein by reference.
Item 9B. Other Information
Rule 10b5-1 Trading Plans
During the fiscal quarter ended February 29, 2024, none of our officers or directors adopted or terminated
any contract, instruction or written plan for the purchase or sale of our securities that was intended to
satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading
arrangement.”
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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114
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information in our definitive Proxy Statement for the 2024 Annual General Meeting of Shareholders (the
“Proxy Statement”) is incorporated by reference in response to this Item 10, as noted below:
•
information about our Directors who are standing for re-election is set forth under “Proposal 1:
Election of Directors”;
•
information about our executive officers is set forth under “Fiscal Year 2024 Executive Officers”;
•
information about our Audit Committee, including members of the committee, and our
designated “audit committee financial experts” is set forth under “Board Committees and
Meetings - Audit Committee”;
•
information about Section 16(a) beneficial ownership reporting compliance is set forth under
“Delinquent Section 16(a) Reports” (if any to disclose); and
•
information about any material changes to procedures for recommending nominees to the board
of directors is set forth under “Board Composition and Structure” and “Shareholder Proposals.”
We have adopted a Code of Ethics governing our Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer, and finance department members. The full text of our Code of Ethics is
published on our website, at www.helenoftroy.com, under the “Investor Relations-Governance” caption.
The information on our website is not part of this Annual Report. We intend to disclose future
amendments to, or waivers from, certain provisions of this Code of Ethics on our website or in a current
report on Form 8-K.
Item 11. Executive Compensation
Information set forth under the captions “Director Compensation”; “Executive Compensation Tables”;
“Compensation Discussion & Analysis”; “CEO Pay Ratio for Fiscal Year 2024”; “Compensation
Committee Interlocks and Insider Participation”; and “Compensation Committee Report” in our Proxy
Statement is incorporated by reference in response to this Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Information set forth under the captions “Equity Compensation Plan Information” and “Security Ownership
of Certain Beneficial Owners and Management” in our Proxy Statement is incorporated by reference in
response to this Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information set forth under the captions “Certain Relationships - Related Person Transactions” and
“Board Independence” in our Proxy Statement is incorporated by reference in response to this Item 13.
Item 14. Principal Accountant Fees and Services
Information set forth under the caption “Audit and Other Fees Paid to our Independent Registered Public
Accounting Firm” and “Pre-Approval Policies and Procedures” in our Proxy Statement is incorporated by
reference in response to this Item 14.
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115
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a)
1. Financial Statements: See “Index to Consolidated Financial Statements” under Item 8 in this
Annual Report.
2. Financial Statement Schedule: See “Schedule II” in this Annual Report.
3. Exhibits
The exhibit numbers succeeded by an asterisk (*) indicate exhibits filed herewith. The exhibit numbers
succeeded by two asterisks (**) indicate exhibits furnished herewith that are not deemed filed for
purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
All other exhibit numbers indicate exhibits filed by incorporation by reference. Exhibit numbers
succeeded by a cross (†) are management contracts or compensatory plans or arrangements.
2.1
Agreement and Plan of Merger dated as of December 8, 2010, among Helen of Troy Texas
Corporation, KI Acquisition Corp., Kaz, Inc., the Company, and the Kaz, Inc. shareholders
party thereto (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on
Form 8-K, filed with the Securities and Exchange Commission on December 9, 2010).
3.1
Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4, File No. 33-73594, filed with the Securities and
Exchange Commission on December 30, 1993).
3.2
Amended and Restated Bye-Laws (incorporated by reference to Appendix A to the
Company's Definitive Proxy Statement on Schedule 14A, File No. 001-14669, filed with the
Securities and Exchange Commission on June 27, 2016).
4.1
Description of the Company's Securities registered pursuant to Section 12 of the Securities
and Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 of the Company’s
Annual Report on Form 10-K for the fiscal year ended February 29, 2020, filed with the
Securities and Exchange Commission on April 29, 2020).
10.1†
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2014, filed
with the Securities and Exchange Commission on April 29, 2014).
10.2†
Helen of Troy Limited Amended and Restated 2008 Stock Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the
Securities and Exchange Commission on August 25, 2015).
10.3†
Amended and Restated Helen of Troy Limited 2011 Annual Incentive Plan (incorporated by
reference to Exhibit 10.1 of the Company’s Quarterly Report on 10-Q, filed with the
Securities and Exchange Commission on October 11, 2016).
10.4†
Helen of Troy Limited 2018 Stock Incentive Plan (incorporated by reference to Annex B of
the Company's Definitive Proxy Statement on Schedule 14A, filed with the Securities and
Exchange Commission on June 28, 2018 (the “2018 Proxy”)).
10.5†
Helen of Troy Limited 2018 Employee Stock Purchase Plan (incorporated by reference to
Annex C of the 2018 Proxy).
10.6†
Severance Agreement between Helen of Troy Nevada Corporation and Brian Grass, dated
September 25, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed with the Securities and Exchange Commission on October 4,
2023).
10.7†
Amended and Restated Employment Agreement among Helen of Troy Nevada Corporation,
Helen of Troy Limited, a Bermuda company, Helen of Troy Limited, a Barbados company,
and Julien Mininberg, effective March 1, 2021 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 10, 2020 (the “December 2020 8-K”)).
10.8†*
Amended and Restated Severance Agreement between Helen of Troy Nevada Corporation
and Tessa Judge, dated March 1, 2024.
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116
10.9†
Employment Agreement among Helen of Troy Nevada Corporation and Noel Geoffroy,
dated April 25, 2023 (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2023).
10.10
Credit Agreement dated February 15, 2024, by and among Helen of Troy Texas
Corporation, Helen of Troy Limited, Bank of America, N.A., as administrative agent, and the
other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed with the Securities and Exchange Commission on
February 20, 2024 (the “February 2024 8-K”)).
10.11
Guaranty dated February 15, 2024, made by Helen of Troy Limited and certain of its
subsidiaries in favor of Bank of America, N.A. and other lenders (incorporated by reference
to Exhibit 10.2 of the Company’s February 2024 8-K).
10.12†*
First Amendment to the Helen of Troy Limited 2018 Stock Incentive Plan dated February 28,
2024
21*
Subsidiaries of the Registrant.
23.1*
Consent of Independent Registered Public Accounting Firm, Grant Thornton LLP.
31.1*
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a)
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a)
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**
Joint certification of the Chief Executive Officer and the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
97*
Policy Relating to Recovery of Erroneously Awarded Compensation.
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Taxonomy Extension Schema.
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase.
104
Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.
Item 16. Form 10-K Summary
None.
Table of Contents
117
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused
this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
HELEN OF TROY LIMITED
By: /s/ Noel M. Geoffroy
Noel M. Geoffroy
Chief Executive Officer and Director
April 24, 2024
Pursuant to the requirements of the Exchange Act, this Annual Report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Noel M. Geoffroy
/s/ Brian L. Grass
Noel M. Geoffroy
Chief Executive Officer, Director and Principal
Executive Officer
April 24, 2024
Brian L. Grass
Chief Financial Officer, Principal Financial Officer
and Principal Accounting Officer
April 24, 2024
/s/ Timothy F. Meeker
/s/ Tabata L. Gomez
Timothy F. Meeker
Director, Chairman of the Board
April 24, 2024
Tabata L. Gomez
Director
April 24, 2024
/s/ Beryl B. Raff
/s/ Krista L. Berry
Beryl B. Raff
Director
April 24, 2024
Krista L. Berry
Director
April 24, 2024
/s/ Darren G. Woody
/s/ Thurman K. Case
Darren G. Woody
Director
April 24, 2024
Thurman K. Case
Director
April 24, 2024
/s/ Vincent D. Carson
/s/ Elena B. Otero
Vincent D. Carson
Director
April 24, 2024
Elena B. Otero
Director
April 24, 2024
Table of Contents
118
AMENDED AND RESTATED
SEVERANCE AGREEMENT
March 1, 2024
Helen of Troy Nevada Corporation
l Helen of Troy Plaza
El Paso, Texas 79912
Attn: Board of Directors
1.
Employment Relationship. Tessa Judge (“Employee”) is currently employed by Helen
of Troy Nevada Corporation, a Nevada corporation (the “Company”) as Chief Legal Officer. Employee
and the Company acknowledge that either party may terminate Employee’s employment relationship with
the Company and any of its affiliates at any time and for any or no reason, provided that each party complies
with the terms of this Amended and Restated Severance Agreement (this “Agreement”). Capitalized terms
used but not otherwise defined in this Agreement are defined in Section 5 below.
2.
Release of Claims. In consideration for and as a condition precedent to receiving the
severance benefits outlined in this Agreement, Employee agrees to execute a Release of Claims in the form
attached as Exhibit A (“Release of Claims”). Employee promises to execute and deliver the Release of
Claims to the Company within 21 days (or, if required by applicable law, 45 days) from the last day of
Employee’s active employment. Employee shall forfeit the severance benefits outlined in this Agreement
in the event that Employee fails to execute and deliver the Release of Claims to the Company in accordance
with the timing and other provisions of the preceding sentence or revokes such Release of Claims prior to
the “Effective Date” (as such term is defined in the Release of Claims) of the Release of Claims.
3.
Additional Compensation Upon Certain Termination Events.
3.1
Termination of Employee’s Employment (Not in Connection with a Change
of Control or Retirement Termination of Employment). In the event of a Termination of Employee’s
Employment and contingent upon the Employee’s execution of the Release of Claims without revocation
within the time period described in Section 2 above and in compliance with Section 8 and Section 9 of this
Agreement, Employee shall be entitled to the following benefits:
(a)
an amount equal to (i) twelve (12) months of Employee’s annual base pay at the
rate in effect immediately prior to the date of Termination of Employee’s Employment plus (ii) 100% of
the target annual incentive for the performance period during which Employee’s employment was
terminated, which incentive payment would have been awarded to Employee under the Helen of Troy
Limited 2011 Annual Incentive Plan and any successor annual incentive plan or arrangement in which
executive officers and employees of Helen of Troy Limited, a Bermuda company (“Helen of Troy”), and
its subsidiaries are eligible to participate (as amended, restated or modified from time to time, the “Annual
Incentive Plan”);
(b)
an amount equal to the pro rata portion (as defined below) of the annual incentive
payable under the Annual Incentive Plan for the performance period during which Employee’s employment
was terminated had Employee’s employment not been terminated, based upon the actual performance of
Helen of Troy at the end of such performance period and payable at the same time that such payment would
be made during Employee’s regular employment with the Company. For purposes of this Section 3.1(b),
the term “pro rata portion” shall mean a percentage, when expressed as a fraction, the numerator of which
Exhibit 10.8
is the number of days during the applicable performance period in which the Employee was an employee
of the Company, and the denominator of which is the number of days in such performance period;
(c)
the vesting of the pro rata portion (as defined below) of any performance-based
compensation that would be vested or otherwise payable to Employee under the Helen of Troy Limited
Amended and Restated 2008 Stock Incentive Plan, the Helen of Troy Limited 2018 Stock Incentive Plan
and any successor stock or long-term incentive plan in which executive officers and employees of Helen of
Troy and its subsidiaries are eligible to participate (as amended, restated or modified from time to time, the
“Stock Incentive Plan”) for the performance period(s) during which Employee’s employment with the
Company was terminated if Employee’s employment had not been terminated, based upon the actual
performance of Helen of Troy at the end of such performance period(s) and payable at the same time that
such payment would be made during Employee’s regular employment with the Company. For purposes of
this Section 3.1(c), the term “pro rata portion” shall mean a percentage, when expressed as a fraction, the
numerator of which is the number of days during the applicable performance period(s) in which the
Employee was an employee of the Company, and the denominator of which is the number of days in such
performance period(s); and
(d)
the immediate vesting of a pro rata portion (as defined below) of any installment
of time-vested restricted stock units (“RSUs”), time-vested restricted stock awards (“RSAs”) and time-
vested options granted under the Stock Incentive Plan that would have vested as of the anniversary of the
date that begins the vesting period applicable to such installment of RSUs, RSAs or options that
immediately follows the date of Termination of Employee’s Employment. For purposes of this
Section 3.1(d), the term “pro rata portion” shall mean, with respect to any award of time-vested RSUs, time-
vested RSAs or time-vested options, a percentage, when expressed as a fraction, the numerator of which is
the number of days from and after the date that begins the vesting period applicable to such installment of
RSUs, RSAs or options during which Employee was an employee of the Company, and the denominator
of which is the total number of days in the vesting period(s) applicable to such installment of RSUs, RSAs
or options assuming Employee had been an employee throughout such vesting period and no event or other
matter occurred that would accelerate the vesting of such award. Any options that vest pursuant to this
Section 3.1(d) shall remain exercisable through the post-termination exercise period set forth in or
contemplated by the agreement evidencing the option.
Notwithstanding anything to the contrary in this Agreement, if any payments, awards or benefits
are owed or required to be settled or delivered to Employee under Section 3.3 hereof, then Employee shall
not be entitled to any payment or benefit under this Section 3.1. Notwithstanding anything to the contrary
in this Agreement, if any payments, awards or benefits are owed or required to be settled or delivered to
Employee under Section 3.1(c) and (d) and Employee has attained Retirement Eligibility, then Employee
shall be entitled to the greater of the payment or benefit under Section 3.1(c) and (d), determined on an
aggregate basis with respect to the Eligible RSAs, on the one hand, or Section 3.2, determined on an
aggregate basis with respect to the Eligible RSAs, on the other hand. Solely for purposes of this paragraph,
the determination of the Eligible RSAs shall assume that the date of Retirement Termination of
Employment shall be deemed to have occurred as of the date of the termination of his or her employment
regardless of whether such termination occurred due to a Termination of Employee’s Employment or a
Retirement Termination of Employment.
3.2
Retirement Termination of Employment. In the event of a Retirement
Termination of Employment and contingent upon Employee’s execution of the Release of Claims without
revocation within the time period described in Section 2 above and in compliance with Section 8 and
Section 9 of this Agreement, Employee shall be entitled to the following benefits:
(a)
the vesting of any performance-based Eligible RSAs at the same time that such
Eligible RSAs would otherwise become eligible to vest if the Compensation Committee of the Board (the
“Compensation Committee”), in its reasonable discretion, determines the Eligible RSAs would be vested
under the Stock Incentive Plan for the performance period(s) during which Employee’s employment with
the Company was terminated had Employee’s employment not been terminated, based upon the actual
performance of Helen of Troy at the end of such performance period(s); and
(b)
the continued vesting following the date of the Retirement Termination of
Employment of all time-vested Eligible RSAs in accordance with the terms and conditions of the applicable
award agreement and the Stock Incentive Plan; provided that the number of shares that shall be eligible to
continue to vest as of each vesting date of such Eligible RSAs following such date of Retirement
Termination of Employment shall be equal to the pro rata portion (as defined below) of any Unvested
Tranche applicable to such vesting date assuming no event or other matter occurred that would accelerate
the vesting of such award. For purposes of this Section 3.2(b), the term “pro rata portion” shall mean, with
respect to each Unvested Tranche of Eligible RSAs, a number of shares equal to the product of (i) a
percentage, when expressed as a fraction, which has a numerator equal to the number of days from and
including the Grant Date of such Eligible RSAs through and including the date of Retirement Termination
of Employment and a denominator equal to the number of days from and including the Grant Date of such
Eligible RSAs through and including the vesting date for such Unvested Tranche, multiplied by (ii) the
number of shares of the Eligible RSAs subject to such Unvested Tranche. The remaining shares in any
Unvested Tranche of time-vested RSAs under the Stock Incentive Plan will be forfeited upon the
Retirement Termination of Employment.
3.3
Termination of Employee’s Employment in Connection with a Change of
Control. If there is a Change of Control, and if within six months prior to, on, or within eighteen months
following the effective date of such Change of Control, there occurs a Termination of Employee’s
Employment and contingent upon the Employee’s execution of the Release of Claims without revocation
within the time period described in Section 2 above and in compliance with Section 8 and Section 9 of this
Agreement, Employee shall be entitled to the following benefits (without duplicating any payment already
owed under Section 3.1 or Section 3.2):
(a)
an amount equal to (i) eighteen (18) months of Employee’s annual base pay at the
rate in effect immediately prior to the date of Termination of Employee’s Employment plus (ii) 150% of
the target annual incentive under the Annual Incentive Plan for the performance period during which
Employee’s employment was terminated;
(b)
the pro rata portion (as defined in Section 3.1(b)) of the target amount of any annual
incentive compensation under the Annual Incentive Plan for the performance period during which
Employee’s employment with the Company terminated;
(c)
immediate vesting of all unvested, time-vested RSUs and unvested, time-vested
RSAs granted pursuant to the Stock Incentive Plan that are outstanding as of immediately prior to the date
of Termination of Employee’s Employment;
(d)
immediate vesting of all unvested, time-vested options granted pursuant to the
Stock Incentive Plan that are outstanding as of immediately prior to the date of Termination of Employee’s
Employment and an extended exercisability period for options that vest pursuant to this Section 3.3(d)
ending on the later of the last date of the post-termination exercise period set forth in the agreement
evidencing the option and ninety (90) days following the date of a Change of Control, provided that no
option shall be exercisable beyond the original term of the option; provided that the exercise of such options
shall otherwise be subject to the terms and conditions of the Stock Incentive Plan and the award agreement
relating to such option; and
(e)
immediate vesting based on assumed performance attainment at target levels of all
unvested performance-based RSUs and unvested performance-based RSAs issued pursuant to the Stock
Incentive Plan that are outstanding as of immediately prior to the date of Termination of Employee’s
Employment.
Notwithstanding anything to the contrary in this Agreement, if any payments, awards or benefits
are owed or required to be settled or delivered to Employee under Section 3.3(c), (d) and (e) and Employee
has attained Retirement Eligibility, then Employee shall be awarded the payment or benefit under Section
3.3(c), (d) and (e), and Employee shall not be entitled to any payment or benefit under Section 3.2, except
as provided in the immediately following sentence. If, following the end of the relevant performance
period(s) for the performance-based RSAs the Employee received under Section 3.3(e), the number of
Eligible RSAs that would have vested under Section 3.2(a) is, on an aggregate basis, greater than the number
of RSAs that vested under Section 3.3(e) on an aggregate basis, then Employee will also be entitled to the
vesting of the number of performance-based Eligible RSAs equivalent to the positive difference thereof, at
the time required under Section 3.2(a). Solely for purposes of this paragraph, the determination of the
Eligible RSAs shall assume that the date of Retirement Termination of Employment shall be deemed to
have occurred as of the date of the termination of his or her employment regardless of whether such
termination occurred due to a Termination of Employee’s Employment in connection with a Change of
Control or a Retirement Termination of Employment.
3.4
The Company shall pay Employee any unpaid base salary or other benefit earned
by her up to and including the date of Termination of Employee’s Employment or the date of Retirement
Termination of Employment, as applicable (including any unpaid cash or equity incentive payment earned
under the Annual Incentive Plan or the Stock Incentive Plan and vested prior to the effective date of such
termination to the extent such payment would not violate Section 409A of the Code (“Section 409A”)). For
purposes of this Agreement and any award or award agreement granted under any stock or other incentive
plan of Helen of Troy and its subsidiaries, Employee shall not be deemed to be eligible for or to have
“earned” any performance-based award under such plan or such award agreement unless the applicable
performance period has been fully completed and the applicable performance goals have been achieved.
Subject to compliance with Section 13, the amounts described in this Section 3.4, if any, shall be paid on
the date Employee would otherwise have received each such payment if his employment had not been
terminated, subject to certification of the attainment of any performance goals by the Compensation
Committee to the extent required by the Code or any stock or other incentive plan of Helen of Troy and its
subsidiaries or any related award agreement.
3.5
In the event of a Termination of Employee’s Employment under Section 3.1, a
Retirement Termination of Employment under Section 3.2 or a Termination of Employee’s Employment
under Section 3.3, the Company shall provide, to the extent permitted by benefit plans of Helen of Troy
and its subsidiaries, and applicable law, the continuation (by way of Company payment for the entire
coverage under COBRA) of health insurance benefits for Employee and his eligible dependents for a
maximum of (a) twelve (12) months, in the event of a Termination of Employee’s Employment under
Section 3.1, or until Employee is covered by another health insurance policy or is eligible for coverage
under an employer-sponsored group health plan, if that occurs earlier than twelve months following the
Termination of Employee’s Employment under Section 3.1 or (b) eighteen (18) months, in the event of a
Retirement Termination of Employment under Section 3.2 or a Termination of Employee’s Employment
under Section 3.3, or until Employee is covered by another health insurance policy or is eligible for
coverage under an employer-sponsored group health plan, if that occurs earlier than eighteen months
following a Retirement Termination of Employment under Section 3.2 or the Termination of Employee’s
Employment under Section 3.3, as applicable. The Company shall pay the Company’s COBRA
administrator directly on behalf of Employee. Employee acknowledges that the Company’s payment for
coverage under COBRA may be a taxable benefit to Employee. Accordingly, in order to comply with
applicable tax rules and to the extent required, the Company will impute the amount of the premium to
Employee as income and report it on Form W-2. Employee and the Company agree that if the COBRA
continuation payments provided for in this Section 3.5 are determined to be discriminatory under the
Affordable Care Act nondiscrimination provisions applicable to insured group health plans, the parties will
renegotiate Section 3.5, as applicable, in good faith to avoid the imposition of any excise tax on Employee
or the Company.
3.6
Timing of Payment. Notwithstanding anything to the contrary herein, all
payments, awards and benefits due or required to be delivered to Employee under Sections 3.1, 3.2 and 3.3
that are not otherwise required by any rule or regulation issued by any state or federal governmental agency
shall be contingent upon execution by Employee of the Release of Claims without revocation within the
time period described in Section 2 above. Subject to Employee’s compliance with Section 13, and
Employee’s continuing compliance with Section 9:
(a)
The amount, if any, to be paid under Section 3.1(a) shall be payable in twenty-four
(24) equal, semi-monthly installments, commencing on the second payroll date following the date that the
Release of Claims becomes effective and that is at least 60 but not more than 75 days after the date of
Termination of Employee’s Employment and continuing on a semi-monthly basis thereafter on the
Company’s regular payroll dates of each ensuing calendar month.
(b)
The amounts, if any, to be paid or required to be delivered under Section 3.1(b)
and Section 3.1(c) shall be payable in accordance with the terms and conditions set forth in Section 3.1(b)
and Section 3.1(c), respectively, and in any event within two and one-half months following the last day of
the Company’s fiscal year containing the last day of the applicable performance period.
(c)
Payments and benefits owed, if any, under Section 3.1(d) hereof shall be settled or
provided within 60 days following the date of Termination of Employee’s Employment.
(d)
The amount, if any, to be paid under Section 3.3(a) shall be payable in a lump sum
cash payment on the second payroll date following the date that the Release of Claims becomes effective
and that is at least 60 but not more than 75 days after the later of the date of Termination of Employee’s
Employment and the date of the Change of Control; provided, however, that if the amounts constitute non-
qualified deferred compensation subject to Section 409A and the Change of Control does not constitute a
“change in control event” within the meaning of the Treasury Regulations of Section 409A, then the portion
of such amount that is equal to the amount that would have been paid under Section 3.1(a) had the
termination not been in connection with a Change of Control, and that would have been subject to
Section 409A, shall be paid in installments pursuant to the same schedule set forth in Section 3.6(a), and
the amount equal to the difference between the amount payable under Section 3.3(a) and the aggregate
amount payable under Section 3.1(a) and that is subject to Section 409A shall be paid in a lump sum at the
same time that the seventh semi-monthly installment is paid. Payments and benefits owed, if any, under
Sections 3.3(b), (c), (d) or (e) hereof shall be paid or provided within 60 days following the later of the date
of Termination of Employee’s Employment or the occurrence of the event constituting a Change of Control.
Notwithstanding the foregoing, the timing of any amounts, awards or benefits to be paid, provided,
delivered or settled under this Section 3.6 is subject to compliance with Section 409A to the extent any of
the payments or benefits are considered non-qualified deferred compensation under Section 409A.
3.7
Parachute Payments. In the event that any benefits payable to Employee
pursuant to this Agreement, either alone or in conjunction with other compensatory payments, (a) constitute
“parachute payments” within the meaning of Section 280G of the Code and (b) but for this Section 3.7
would be subject to the excise tax imposed by Section 4999 of the Code or any comparable successor
provisions (the “Excise Tax”), then Employee’s benefits payable hereunder shall be either (x) provided to
Employee in full, or (y) provided to Employee to such lesser extent as would result in no portion of such
benefits being subject to the Excise Tax, whichever of the foregoing results in the receipt by Employee, on
an after-Excise Tax basis, of the larger economic benefit, notwithstanding that all or some portion of such
benefits may be taxable under the Excise Tax, in each case, as calculated in the Company’s reasonable
judgment. In no event shall the foregoing be interpreted or administered so as to result in an acceleration
of payment or further deferral of payment of any amounts (whether under this Agreement or any other
arrangement) in violation of Sections 409A. Subject to the immediately preceding sentence, any reduction
pursuant to clause (y) shall be made by first reducing any cash payments, next by reducing any non-cash
benefits, next by reducing any accelerated performance-based equity grants, and finally by reducing any
time-vested equity grants, in each case in the reverse order of payment.
4.
Withholding; Subsequent Employment.
4.1
Withholding. All payments and benefits provided for in this Agreement are
subject to applicable withholding obligations imposed by federal, state and local laws and regulations.
4.2
Offset. The amount of any payment provided for in this Agreement shall not be
reduced, offset or subject to recovery by the Company by reason of any compensation earned by Employee
as the result of employment by another employer after Termination of Employee’s Employment or
Retirement Termination of Employment.
4.3
No Further Compensation. Notwithstanding any other provision of this
Agreement, the Annual Incentive Plan, the Stock Incentive Plan, any severance plan, policy, practice, or
arrangement or any other benefit plan, agreement or arrangement of or maintained by Helen of Troy or any
its subsidiaries, the provisions of this Agreement exclusively shall govern Employee’s rights to severance
benefits upon termination of employment with the Company and its affiliates, and except as expressly set
forth in this Agreement, Employee shall have no further right to any compensation or other benefits
pertaining to severance. Under no circumstances will any rights or awards of Employee under the Annual
Incentive Plan or the Stock Incentive Plan accelerate and vest upon the Termination of Employee’s
Employment or Retirement Termination of Employment, except as otherwise provided in this Agreement.
5.
Definitions.
5.1
Beneficial Owner or Beneficially Owned has the meaning of such term in
Rule 13d-3 under the Exchange Act (or any successor rule thereto).
5.2
Board. “Board” shall mean the Board of Directors of Helen of Troy.
5.3
Cause. “Cause” shall mean:
(a)
Employee’s commission of an act of fraud, embezzlement or similar action;
Employee’s conviction of, or plea of guilty or no contest to, (i) any felony, (ii) any crime involving fraud
or embezzlement or (iii) any defalcation or any crime involving moral turpitude;
(b)
Employee’s material breach of any written policy of the Company or Helen of
Troy, including but not limited to the Code of Ethics for the Chief Executive Officer and Senior Financial
Officers of Helen of Troy, which, if in the determination of the Board is capable of being cured or corrected,
such breach is not cured or corrected by the Employee within thirty (30) days of receiving written notice
thereof from the Company;
(c)
Employee’s commission of any act of dishonesty which is injurious to the business
reputation of the Company or Employee’s violation of the Company’s insider trading policy;
(d)
Employee’s failure to perform his material duties, including without limitation, the
failure to follow the directions of the Board or the Chief Executive Officer of Helen of Troy; or
(e)
the breach of any fiduciary duty owed to the Company, Helen of Troy and/or its
shareholders, which is deemed to be material in the reasonable judgment of the Board.
5.4
Change of Control. “Change of Control” means the occurrence of any of the
following events:
(a)
any “person” (as such term is used for purposes of Section 13(d)(3) or 14(d)(2) of
the Exchange Act or any successor section thereto) becomes the Beneficial Owner, directly or indirectly,
of more than forty percent (40%) of the combined voting power of the Outstanding Helen of Troy Voting
Securities; provided, however, that the following acquisitions shall not constitute a Change of Control: (i)
any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Helen of Troy
or any corporation controlled by Helen of Troy, or (ii) any acquisition by an entity pursuant to a
reorganization, merger, amalgamation or consolidation, unless such reorganization, merger, amalgamation
or consolidation constitutes a Change of Control under clause (b) of this Section 5.4;
(b)
the consummation of a reorganization, merger, amalgamation or consolidation,
unless following such reorganization, merger, amalgamation or consolidation sixty percent (60%) or more
of the combined voting power of the then issued and outstanding voting securities of the entity resulting
from such reorganization, merger, amalgamation or consolidation entitled to vote generally in the election
of directors is then Beneficially Owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the Beneficial Owners, respectively, of the Outstanding Helen of Troy Voting
Securities immediately prior to such reorganization, merger, amalgamation or consolidation;
(c)
the (i) approval by the shareholders of Helen of Troy of a complete liquidation or
dissolution of Helen of Troy or (ii) sale or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of Helen of Troy and its “subsidiaries” (as defined in
Section 424(f) of the Code), unless the successor entity existing immediately after such sale or disposition
is then Beneficially Owned, directly or indirectly, by all or substantially all of the individuals and entities
who were the Beneficial Owners, respectively, of the Outstanding Helen of Troy Voting Securities
immediately prior to such sale or disposition; or
(d)
during any period of twenty-four months (not including any period prior to the
effective date of the Helen of Troy Limited 2018 Stock Incentive Plan), individuals who at the beginning
of such period constitute the Board, and any new director (other than (i) a director nominated by a Person
who has entered into an agreement with Helen of Troy to effect a transaction described in Sections 5.4(a),
(b) or (c) hereof, (ii) a director whose initial assumption of office occurs as a result of either an actual or
threatened election contest subject to Rule 14a-11 of Regulation 14A promulgated under the Exchange Act
or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the
Board or (iii) a director designated by any Person who is the Beneficial Owner, directly or indirectly, of
securities of Helen of Troy representing 10% or more of the Outstanding Helen of Troy Voting Securities)
whose election by the Board or nomination for election by Helen of Troy’s shareholders was approved in
advance by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.
Notwithstanding the foregoing, to the extent that an option, RSA or RSU is subject to the terms of
the Stock Incentive Plan and the Stock Incentive Plan would not permit the use of the definition of
Change of Control set forth herein for the determination, vesting, or any other benefit hereunder, then
each reference to a Change of Control herein shall be deemed to be the definition of “Change of Control”
(or analogous term) defined in the Stock Incentive Plan applicable to such option, RSA or RSU with
respect to such determination, vesting, or any other benefit.
5.5
Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
5.6
Disability. “Disability” shall mean that Employee would qualify to receive benefit
payments under the long-term disability plan or policy, as it may be amended from time to time, of the
Company or the affiliate or subsidiary of the Company to which Employee provides services regardless of
whether Employee is covered by such plan or policy. If the Company or the affiliate or subsidiary of the
Company to which Employee provides services does not have a long-term disability policy, “Disability”
shall mean that Employee is unable to carry out the responsibilities and functions of the position held by
Employee by reason of any medically determined physical or mental impairment for a period of not less
than ninety (90) consecutive days or one-hundred eighty (180) non-consecutive days in any twelve month
period. An Employee shall not be considered to have incurred a Disability unless he or she furnishes proof
of such impairment sufficient to satisfy the Compensation Committee of the Board (or any successor thereto
or other committee designated by the Board to assume the obligations of the Compensation Committee of
the Board under the terms of the Stock Incentive Plan, or if no committee shall be designated or in office,
the Board) in its sole discretion.
5.7
Eligible RSAs. “Eligible RSAs” shall mean, with respect to each award of RSAs
granted under the terms and conditions of the Stock Incentive Plan that is not fully vested, each unvested
RSA that has a Grant Date that is at least six months (measured from and including the Grant Date) before
the date of the Retirement Termination of Employment; provided that Eligible RSAs shall not include RSAs
for which, under the terms of the applicable award agreement, the vesting of the RSAs shall not accelerate
or be eligible for acceleration under any agreements, plans, policies, arrangements or programs by reason
of Employee’s termination of service with the Company or its affiliates due to retirement, age and/or total
years of service with the Company or its affiliates (or any combination thereof).
5.8
Exchange Act. “Exchange Act” means the Securities Exchange Act of 1934, as
amended, or any successor thereto.
5.9
Good Reason. “Good Reason” shall mean any of the following if such event
occurs without the consent of the Employee:
(a)
Employee shall fail to be vested by the Company or Helen of Troy with the powers
and authority of the Chief Legal Officer or a significant change by the Company or Helen of Troy in
Employee’s functions, duties or responsibilities which would cause Employee’s position with the Company
or Helen of Troy to become of less responsibility or scope from the position and attributes thereof described
in Section 1 above;
(b)
a material reduction by the Company in Employee’s base salary;
(c)
the Company requires Employee to move his residence more than fifty miles from
El Paso, Texas; or
(d)
the refusal of any successor to assume this Agreement in accordance with the terms
and conditions of Section 6.
Notwithstanding anything to the contrary contained herein, no termination for Good Reason shall occur
unless (i) Employee delivers written notice to the Company of the occurrence of the event described in this
Section 5.9 that constitutes Good Reason within ninety (90) days of Employee learning of the initial
existence of the event, (ii) the Company or Helen of Troy, as applicable, fails to remedy the event within
thirty (30) days of the delivery of such notice and (iii) Employee terminates his employment no later than
thirty (30) days following the end of such cure period.
5.10
Grant Date. “Grant Date” means (a) with respect to any option, RSA or RSU, the
date expressly stated as the “Grant Date” or “Date of Grant” or analogous term in the applicable award
agreement or (b) if no such date is specified in the applicable award agreement, the date on which the
Compensation Committee resolves to grant an option, RSA or RSU, as the case may be.
5.11
Outstanding Helen of Troy Voting Securities. “Outstanding Helen of Troy
Voting Securities” means the then issued and outstanding voting securities of Helen of Troy entitled to vote
generally in the election of directors.
5.12
Retirement Eligibility. “Retirement Eligibility” means any time after the date (a)
the sum of the Employee’s age and number of years of service of employment with the Company or any of
its affiliates or subsidiaries is sixty-five (65) and (b) the Employee attains ten (10) consecutive years of
employment with the Company or any of its affiliates or subsidiaries.
5.13
Retirement Termination of Employment. “Retirement Termination of
Employment” means that Employee, by written notice to the Company, has voluntarily terminated his
employment with the Company (including any affiliate or subsidiary of the Company) for any reason other
than for Cause, death or Good Reason on or after the date Employee attains Retirement Eligibility.
5.14
Termination of Employee’s Employment. “Termination of Employee’s
Employment” means that (a) the Company has terminated Employee’s employment with the Company
(including any affiliate or subsidiary of the Company) other than for Cause, death, Disability or a
Retirement Termination of Employment, or (b) Employee, by written notice to the Company, has
terminated his employment with the Company (including any affiliate or subsidiary of the Company) for
Good Reason other than due to a Retirement Termination of Employment. A Termination of Employee’s
Employment is intended to mean a termination of employment which constitutes a “separation from
service” under the Code for purposes of non-qualified deferred compensation payable hereunder on or by
reference to the Employee’s separation from service.
5.15
Unvested Tranche. “Unvested Tranche” means, for any applicable period of
determination, the period (a) between the Grant Date and the first vesting date of such Eligible RSA, if no
portion of the Eligible RSA has vested as of such determination, and (b) between each vesting date under
any Eligible RSA.
6.
Successors; Binding Agreement. The rights and obligations of the Company under this
Agreement shall inure to the benefit of, and shall be binding on, the Company and its successors and assigns,
and the rights and obligations of Employee under this Agreement shall inure to the benefit of, and shall be
binding upon, Employee and (other than obligations to perform services and to refrain from disparagement)
his heirs, personal representatives and assigns; provided that Employee may not assign any of his rights,
interests or obligations hereunder without the prior written consent of the Company or Helen of Troy. The
Company will require, and will cause Helen of Troy to require, any successor (whether direct or indirect,
by purchase, merger, acquisition of assets, consolidation or otherwise) to all or substantially all of the
business and/or assets of Helen of Troy to assume and agree to perform the duties and obligations of Helen
of Troy and the Company, as the case may be, under this Agreement in the same manner and to the same
extent that Helen of Troy and the Company would be required to perform if no such succession had taken
place.
7.
Entire Agreement; Conflicts with Other Agreements. With respect to the matters
covered by this Agreement, this Agreement contains the entire understanding relating to the subject matter
hereof and supersedes, amends and restates any prior written or oral agreements, representations, and
understandings, whether written or not, if any, between the Company or any predecessor of the Company
and Employee with respect to the subject matter hereto, including that certain Severance Agreement dated
March 1, 2023 between Employee and the Company (“Prior Agreement”). As of the date hereof, this
Agreement supersedes and replaces any and all severance pay plans, policies, practices, arrangements or
programs, written or unwritten, that Helen of Troy or any its subsidiaries may have had in effect for
Employee from time to time prior to the date hereof including the Prior Agreement. In the event of any
conflict or inconsistency between the terms of any other agreement between the Company, Helen of Troy,
or any of their respective subsidiaries and Employee or any plan of Helen of Troy or its subsidiaries and
the terms hereof, the terms of this Agreement shall govern.
8.
Resignation of Corporate Offices. Employee will resign Employee’s office, if any, as a
director, officer, trustee or other position of the Company, its subsidiaries or affiliates and of any other
corporation, partnership, trust or other entity of which Employee serves as such at the request of the
Company or its affiliates, effective as of the date of Termination of Employee’s Employment or the date of
the Retirement Termination of Employment, as applicable. Employee agrees to provide the Company such
written resignation(s) upon request and that no severance pay or other benefits will be paid until after such
resignation(s) are provided. Employee agrees to execute all documents and take such further steps as may
be required to effectuate such resignation(s).
9.
No Disparagement.
(a)
Employee agrees, other than with regard to employees in the good faith
performance of Employee’s duties with the Company while employed by the Company, both during the
term of Employee’s employment and after Employee’s employment with the Company terminates, not to
knowingly disparage the Company or its officers, directors, employees or agents in any manner likely to be
harmful to it or them or its or their business, business reputation or personal reputation. This Section 9(a)
shall not be violated by statements from Employee which are truthful, complete and made in good faith in
required response to legal process or governmental inquiry.
(b)
Employee agrees that any breach of this Section 9 by Employee shall be deemed a
material breach of this Agreement. Employee agrees and understands that the remedy at law for any breach
by her of this Section 9 would be inadequate and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, it is acknowledged that, upon Employee’s
violation of this Section 9, Helen of Troy or its subsidiaries may be entitled to immediate injunctive relief
and may obtain temporary orders or other injunctive or provisional relief restraining any further breach in
a court of competent jurisdiction. Nothing in this Section 9 shall be deemed to limit the Company, Helen
of Troy or any of its subsidiaries’ remedies at law or in equity for any breach by Employee of any of the
provisions of this Section 9 which may be pursued or availed of by the Company, Helen of Troy or any of
its subsidiaries.
10.
Governing Law and Venue. This Agreement, including all matters related to its validity,
enforceability, construction, interpretation and performance, all aspects of the relationship between the
parties contemplated hereby and any disputes or controversies arising therefrom or related thereto, will be
governed by, construed and enforced in accordance with the laws of the State of Texas (without regard to
its conflicts-of-law provisions or principles). The Company and Employee hereby irrevocably and
unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement
shall be brought only in the state and federal courts of El Paso County, Texas (the “Texas Court”), and not
in any other state or federal court in the United States of America or any court in any other country, (b)
consent to submit to the exclusive jurisdiction of the Texas Court for purposes of any action or proceeding
arising out of or in connection with this Agreement, (c) waive any objection to the laying of venue of any
such action or proceeding in the Texas Court, and (d) waive, and agree not to plead or to make, any claim
that any such action or proceeding brought in the Texas Court has been brought in an improper or
inconvenient forum.
11.
Amendment. No provision of this Agreement may be modified unless such modification
is agreed to in writing signed by Employee and the Company.
12.
Severability. If any of the provisions or terms of this Agreement shall for any reason be
held invalid or unenforceable, such invalidity or unenforceability shall not affect any other terms of this
Agreement, and this Agreement shall be construed as if such unenforceable term had never been contained
in this Agreement.
13.
Deferred Compensation.
(a)
It is the intention that no payment or entitlement pursuant to this Agreement will
give rise to any adverse tax consequences under Section 409A or Section 457A of the Code (“Section
457A”) and that such payments or entitlements to which Employee is or could become entitled to under
this Agreement are intended to be exempt from or comply with Section 409A and exempt from Section
457A, with the payments intended to be exempt under the “short-term deferral” and “separation pay”
exceptions to the maximum extent permitted under Section 409A, and this Agreement shall be interpreted
and administered in a manner consistent with such intent. Further, no effect shall be given to any provision
herein in a manner that reasonably could be expected to give rise to adverse tax consequences under Section
409A or Section 457A. The Company and Employee agree to work together in good faith to consider
amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or
desirable to avoid imposition of any additional tax or income recognition prior to actual payment to
Employee under Section 409A or Section 457A. If Employee or the Company believes, at any time, that
any benefit or right provided by this Agreement does not comply with Section 409A or Section 457A, it
shall promptly advise the other and shall negotiate reasonably and in good faith to amend the terms of such
benefits and rights such that they comply with Section 409A and Section 457A (with the most limited
possible economic effect on Employee and on the Company). For purposes of Section 409A, each
installment payment provided under this Agreement shall be treated as a separate and distinct payment.
Nothing in this Agreement shall provide a basis for any person to take action against the Company or any
affiliate thereof based on matters covered by Section 409A or Section 457A, including the tax treatment of
any amount paid under this Agreement, and neither the Company nor any of its affiliates shall under any
circumstances have any liability to Employee or his estate or any other party for any taxes, penalties or
interest due on amounts paid or payable under this Agreement, including taxes, penalties or interest imposed
under Section 409A.
(b)
Without limiting the generality of the foregoing and anything in this Agreement to
the contrary notwithstanding, if amounts or benefits payable by reference to the timing of Employee’s
termination of employment constitute non-qualified deferred compensation subject to Section 409A, as
determined in the Company’s sole discretion, (i) such amounts or benefits shall not be paid unless Employee
experiences a “separation from service” (within the meaning of Section 409A), (ii) to the extent that any
payment period conditioned on Employee’s execution of a release commences in one calendar year and
ends in the subsequent calendar year, such amounts or benefits shall be paid in the second calendar year;
and (iii) if Employee is a “specified employee” (within the meaning of Section 409A) as of the date of
Employee’s separation from service, such amounts or benefits shall not be paid until the date that is six
months and one day following the date of Employee’s separation from service, or if earlier, the date of
Employee’s death.
14.
Notices. All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for
by the party to whom said notice or other communication shall have been directed, (b) mailed by certified
or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c)
mailed by reputable overnight courier and receipted for by the party to whom said notice or other
communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral
confirmation that such transmission has been received:
(i)
If to Employee, at such address as Employee shall provide to the Company.
(ii)
If to the Company to:
Helen of Troy Nevada Corporation
l Helen of Troy Plaza
El Paso, Texas 79912
Attn: Board of Directors
With a copy to:
Office of General Counsel
1 Helen of Troy Plaza
El Paso, Texas 79912
or to any other address as may have been furnished to Employee by the Company.
15.
Clawback Policy. Notwithstanding any other provision of this Agreement or any other
agreement between Employee, on the one hand, and the Company, Helen of Troy, or the respective
affiliates, on the other hand (including any award or similar agreement granted to Employee under the
Annual Incentive Plan or the Stock Incentive Plan) (collectively, the “Other Employee Agreements”), to
the contrary, any compensation pursuant to this Agreement and/or the other Employee Agreements
(including any common shares issued thereunder, and/or any amount received with respect to any sale of
any such common shares), shall be subject to potential cancellation, recoupment, rescission, payback or
other action in accordance with (a) Section 304 of the Sarbanes Oxley Act of 2002, (b) Rule 10D-1 of the
Exchange Act and any rules and/or regulations issued pursuant to the Dodd-Frank Act of 2010, and (c)
any clawback policy in effect, adopted or implemented by the Company on or after the date hereof with
respect to or pursuant to Sarbanes Oxley Act of 2002, the Exchange Act, Dodd-Frank Act of 2010, in each
case as amended, any rules and/or regulations issued pursuant to or promulgated thereunder and any rules,
standards or regulations of any stock exchange or market or quotation system on which the common shares of
Helen of Troy are traded or applicable Helen of Troy (as such policy may be amended from time to time, the
“Policy”). The Employee agrees and consents to the Company’s and its affiliates application,
implementation and enforcement of (a) the Policy or any similar policy established by the Company or its
affiliates that may apply to the Employee and (b) any provision of applicable law relating to cancellation,
rescission, payback or recoupment of compensation, and expressly agrees that the Company and its
affiliates may take such actions as are necessary to effectuate the Policy, any similar policy (as applicable
to the Employee) or applicable law without further consent or action being required by the Employee.
[Signature page follows.]
IN WITNESS WHEREOF, this Agreement has been executed on the date and year first written
above.
HELEN OF TROY NEVADA CORPORATION
By:
/s/ Brian L. Grass
Name: Brian L. Grass
Title: Chief Financial Officer
EMPLOYEE:
/s/ Tessa Judge
Tessa Judge
The obligations of Helen of Troy Nevada Corporation to Employee hereunder are hereby
guaranteed by Helen of Troy Limited, a Bermuda company.
HELEN OF TROY LIMITED,
a Bermuda company
By: /s/ Noel M. Geoffroy
Name: Noel M. Geoffroy
Title: Chief Executive Officer
A-1
EXHIBIT A
RELEASE OF CLAIMS
1.
Parties.
The parties to Release of Claims (hereinafter “Release”) are Tessa Judge and Helen of Troy Nevada
Corporation, a Nevada corporation, as hereinafter defined.
1.1
Employee and Releasing Parties.
For the purposes of this Release, “Employee” means Tessa Judge, and “Releasing Parties”
means Employee and his attorneys, heirs, legatees, personal representatives, executors, administrators,
assigns, and spouse.
1.2
The Company and the Released Parties.
For the purposes of this Release, the “Company” means Helen of Troy Nevada
Corporation, a Nevada corporation, and “Released Parties” means the Company and its predecessors and
successors, affiliates, and all of each such entity’s officers, directors, employees, insurers, agents, attorneys
or assigns, in their individual and representative capacities.
2.
Background and Purpose.
Employee was employed by the Company. Employee’s employment is ending effective
________________ under the conditions described in Section 3.1,3.2 or 3.3, as applicable, of the Severance
Agreement (“Agreement”) by and between Employee and the Company dated [__________ __, ____].
The purpose of this Release is to settle, and the parties hereby settle, fully and finally, any and all
claims the Releasing Parties may have against the Released Parties, whether asserted or not, known or
unknown, including, but not limited to, claims arising out of or related to Employee’s employment,
separation of employment, any claim for reemployment, or any other claims whether asserted or not, known
or unknown, past or future, that relate to Employee’s employment, separation of employment,
reemployment, or application for reemployment (in each case except as set forth below).
3.
Release.
In consideration for the payments and benefits set forth in Section 3 of the Agreement and other
promises by the Company all of which constitute good and sufficient consideration, Employee, for and on
behalf of the Releasing Parties, waives, acquits and forever discharges the Released Parties from any
obligations the Released Parties have and all claims the Releasing Parties may have as of the Effective Date
(as defined in Section 4 below) of this Release, including but not limited to, obligations and/or claims
arising from the Agreement (other than any claim Employee may have against the Company after the date
hereof with respect to nonperformance of the payment obligations of the Company set forth in Section 3 of
the Agreement) or any other document or oral agreement relating to employment, separation of
employment, compensation, benefits, severance or post-employment issues. Employee, for and on behalf
of the Releasing Parties, hereby releases the Released Parties from any and all claims, demands, actions, or
causes of action, in law or equity, whether known or unknown, arising from or related in any way to any
employment of or past failure or refusal to employ Employee by the Company, or any other past claim that
relates in any way to Employee’s employment, separation of employment, compensation, benefits,
A-2
reemployment, or application for employment, with the exception of any claim Employee may have against
the Company for enforcement of the Agreement. The matters released include, but are not limited to, any
claims under federal, state or local laws, including the Age Discrimination in Employment Act (“ADEA”)
as amended by the Older Workers’ Benefit Protection Act (“OWBPA”), any common law tort, contract or
statutory claims, and any claims for liquidated damages, compensatory or putative damages and for
attorneys’ fees and costs. Further, Employee, for and on behalf of the Releasing Parties, waives and releases
the Released Parties from any claims that this Release was procured by fraud or signed under duress or
coercion so as to make the Release not binding. Employee is not relying upon any representations by the
Company’s legal counsel in deciding to enter into this Release. Employee understands and agrees that
by signing this Release, Employee, for and on behalf of the Releasing Parties, is giving up the right to
pursue any legal claims that Employee or the Releasing Parties may have against the Released Parties
with respect to the claims released hereby. Provided, nothing in this provision of this Release shall be
construed to prohibit Employee from challenging the validity of the ADEA release in this Section of the
Release or from filing a charge or complaint with the Equal Employment Opportunity Commission or any
state agency or from participating in any investigation or proceeding conducted by the Equal Employment
Opportunity Commission or state agency. However, the Released Parties will assert all such claims have
been released in a final binding settlement.
Employee should consult with an attorney regarding the terms of this Release before signing the
Release. Employee understands and agrees that this Release extinguishes all released claims, whether
known or unknown, foreseen or unforeseen. Employee fully understands that, if any fact with respect to
any matter covered by this Release is found hereafter to be other than or different from the facts now
believed by Employee to be true, Employee expressly accepts and assumes that this Release shall be and
remain effective, notwithstanding such difference in the facts.
3.1
IMPORTANT
INFORMATION
REGARDING
RELEASE
OF
AGE
DISCRIMINATION CLAIMS.
Employee understands and agrees that:
a.
Also included among the claims knowingly and voluntarily waived and released by
Employee in Section 3 are any age discrimination, retaliation, harassment, or related
claims under the Age Discrimination in Employment Act (“ADEA”), the Texas
Commission on Human Rights Act, the Older Workers Benefit Protection Act
(“OWBPA”), or any other federal, state, or local law;
b.
this Release is worded in an understandable way;
c.
claims under ADEA that may arise after the date Employee signs this Release are not
waived;
d.
the rights and claims waived in this Release are in exchange for additional consideration
over and above any consideration to which Employee was already undisputedly entitled;
e.
Employee has been advised to consult with an attorney prior to executing this Release and
has had sufficient time and opportunity to do so;
f.
Employee has been given a period of time of 21 days (or, if required by applicable law,
45 days) (the “Statutory Period”), if desired, to consider this Release before signing it,
and that if Employee signs this Release in less time than the full Statutory Period, then by
doing so she voluntarily agreed to waive his right to the full Statutory Period;
A-3
g.
Employee may revoke his waiver and release of any ADEA claims covered by this
Release within seven (7) days from the date Employee executes this Release. Notice of
revocation must be in writing and received by _________________ Attention:
_____________ within seven (7) days after Employee signs this Release; and
h.
any changes made to this Release, whether material or immaterial, will not restart the
running of the Statutory Period.
3.2
Reservations of Rights.
This Release shall not affect any rights which Employee may have under any medical insurance,
disability plan, workers’ compensation, unemployment compensation, indemnifications, applicable
company stock incentive plan(s) that survive termination of employment, or the 401(k) plan maintained by
the Company, or any other entitlement to benefits in which Employee already is vested.
3.3
No Admission of Liability.
It is understood and agreed that the acts done and evidenced hereby and the release granted
hereunder is not an admission of liability on the part of Employee or the Company or the Released Parties,
by whom liability has been and is expressly denied.
4.
Effective Date.
The “Effective Date” of this Release shall be the eighth calendar day after it is signed and not
revoked by Employee.
5.
Confidentiality, Proprietary, Trade Secret and Related Information
(a)
Employee acknowledges the duty and agrees not to make unauthorized use or disclosure
of any confidential, proprietary or trade secret information learned as an employee about the Company, its
products, customers and suppliers, and covenants not to breach that duty. This provision is in addition to,
and not in lieu of: (a) the protections afforded trade secrets and confidential information under applicable
law; and (b) notwithstanding the restrictions on use or disclosure of trade secrets, confidential information,
or proprietary information under any other confidentiality agreement between the Company and Employee.
Moreover, Employee acknowledges that, subject to the enforcement limitations of applicable law, the
Company reserves the right to enforce the terms of any offer letter, employment agreement, confidentially
agreement, or any other agreement between Employee and the Company and any section(s) therein. Should
Employee, Employee’s attorney or agents be requested in any judicial, administrative, or other proceeding
to disclose confidential, proprietary or trade secret information Employee learned as an employee of the
Company, Employee shall promptly notify the Company of such request by the most expeditious means in
order to enable the Company to take any reasonable and appropriate action to limit such disclosure.
(b)
For the avoidance of doubt, nothing in this Agreement (including this Section 5) is intended
to impede, prohibit or restrict Employee (or an attorney acting on Employee’s behalf) from filing a charge or
complaint, initiating communications directly with, or responding to any inquiry from, or providing
testimony before, or otherwise participating or cooperating with any investigation or proceeding with the
U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, Financial Industry
Regulatory Authority (FINRA), or any other state or federal regulatory authority or self-regulatory
organization regarding this Agreement or its underlying facts or circumstances, or about a possible violation
of securities laws (or recovering any remuneration for doing so), the Commodities Exchange Act, or
employment laws, or exercising rights under the federal Defend Trade Secrets Act (“DTSA”) which DTSA
A-4
provides that an individual shall not be held criminally or civilly liable for the disclosure of a trade secret
that is made (i) in confidence to a government official or to an attorney and solely for the purpose of
reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a
lawsuit or other proceeding, if such filing is made under seal. Employee may provide confidential
information in accordance with the immediately preceding sentence of this Section 5(a) without the risk of financial
penalties to the Employee. This Section 5(b) does not, however, authorize Employee to disclose information
Employee obtains through a communication that is subject to the attorney-client privilege or the work
product doctrine.
6.
Scope of Release.
The provisions of this Release shall be deemed to obligate, extend to, and inure to the benefit of
the parties; the Company’s parents, subsidiaries, affiliates, successors, predecessors, assigns, directors,
officers, and employees; and each party’s insurers, transferees, grantees, legatees, agents, personal
representatives and heirs, including those who may assume any and all of the above-described capacities
subsequent to the execution and Effective Date of this Release.
7.
Entire Release.
This Release and the Agreement signed by Employee contain the entire agreement and
understanding between the parties with respect to the subject matter hereto and, except as reserved in
Sections 3 and 5 of this Release, supersede and replace all prior agreements, written or oral, prior
negotiations and proposed agreements, written or oral. Employee and the Company acknowledge that no
other party, nor agent nor attorney of any other party, has made any promise, representation, or warranty,
express or implied, not contained in this Release concerning the subject matter of this Release to induce
this Release, and Employee and the Company acknowledge that they have not executed this Release in
reliance upon any such promise, representation, or warranty not contained in this Release.
8.
Severability.
Every provision of this Release is intended to be severable. In the event any term or provision of
this Release is declared to be illegal or invalid for any reason whatsoever by a court of competent
jurisdiction or by final and unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and provisions of this Release, which terms
and provisions shall remain binding and enforceable.
9.
Mutual Drafting.
The parties each acknowledge that each party has reviewed and revised this Agreement and that
the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement. The language of this Agreement shall,
in all cases, be construed as a whole, according to its fair meaning, and not strictly for, or against, either of
the parties.
10.
References.
The Company agrees to follow the applicable policies regarding release of employment reference
information.
11.
Parties May Enforce Release.
A-5
Nothing in this Release shall operate to release or discharge any parties to this Release or their
successors, assigns, legatees, heirs, or personal representatives from any rights, claims, or causes of action
arising out of, relating to, or connected with a breach of any obligation of any party contained in this
Release.
12.
Governing Law and Venue.
This Release, including all matters related to its validity, enforceability, construction, interpretation
and performance, all aspects of the relationship between the parties contemplated hereby and any disputes
or controversies arising therefrom or related thereto, will be governed by, construed and enforced in
accordance with the laws of the State of Texas (without regard to its conflicts-of-law provisions or
principles). The Company and Employee hereby irrevocably and unconditionally (a) agree that any action
or proceeding arising out of or in connection with this Release shall be brought only in the state and federal
courts of El Paso County, Texas (the “Texas Court”), and not in any other state or federal court in the United
States of America or any court in any other country, (b) consent to submit to the exclusive jurisdiction of
the Texas Court for purposes of any action or proceeding arising out of or in connection with this Release,
(c) waive any objection to the laying of venue of any such action or proceeding in the Texas Court, and (d)
waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Texas
Court has been brought in an improper or inconvenient forum.
13.
Acknowledgments.
Employee acknowledges that the Company is not undertaking to advise Employee with respect to
any tax or other consequences of this Release and that Employee is solely responsible for determining those
consequences. Employee has read this Release and understands its terms. Employee has been provided
with a full and fair opportunity to consult with an attorney of his choosing and to obtain any and all advice
deemed appropriate with respect to this Release. Employee acknowledges that nothing in this Release shall
limit Employee’s ability to confer with legal counsel, to testify truthfully under subpoena or court order, or
to initiate, provide truthful information for, or cooperate with an investigation by a municipal, state, or
federal agency for enforcement of laws. This Release has been entered into with the understanding that
there are no unresolved claims of any nature that Employee has against the Company. Employee
acknowledges and agrees that except for the payment and benefits set forth in Section 3 of the Agreement,
all compensation, benefits, and other obligations due Employee by the Company, whether by contract or
by law, have been paid or satisfied in full. Employee further agrees that the representations and
understandings set forth in this paragraph have been relied on by the Company and constitute consideration
for the Company’s execution of this Release. In light of the foregoing, Employee is satisfied with the terms
of this Release and agrees that its terms are binding on her.
Dated:
,
Tessa Judge
STATE OF
)
)
County of
)
Personally appeared the above named Tessa Judge and acknowledged the foregoing instrument to
be his voluntary act and deed.
A-6
Before me:
NOTARY PUBLIC -
My commission expires:
HELEN OF TROY NEVADA CORPORATION
By:
Name:
Title:
Dated:
1
AMENDMENT NO. 1
TO THE
HELEN OF TROY LIMITED AMENDED AND RESTATED
2018 STOCK INCENTIVE PLAN
WHEREAS, Helen of Troy Limited (“Company”) maintains the Helen of Troy Limited
Amended and Restated 2018 Stock Incentive Plan (the “Plan”);
WHEREAS, pursuant to Section 15 of the Plan, the Company may amend the Plan; and
WHEREAS, the Company wishes to amend the Plan, effective as of February 28, 2024 as
specified herein;
NOW, THEREFORE, the Plan is hereby amended as follows:
1.
Section 11 of the Plan is hereby amended by deleting such Section in its entirety and
substituting the following in lieu thereof:
“11.
Confidentiality and Non-Competition
By accepting an Award under the Plan and as a condition to the exercise or settlement of
Options, Stock Appreciation Rights or Restricted Stock Units and the enjoyment of any of the
benefits of the Plan and the applicable Award Agreement, each Participant agrees as follows:
(a)
Confidentiality. During the period that each Participant provides Services for the
Company or any Subsidiary or Affiliate and thereafter, for a period of eighteen (18) months (the
“Restricted Period”), such Participant shall treat and safeguard as confidential and secret all
Confidential Information received by such Participant at any time. Without the prior written
consent of the Company, except as required by law, such Participant will not disclose or reveal any
Confidential Information to any third party whatsoever or use the same in any manner except in
connection with the businesses of the Company and its Affiliates or Subsidiaries. In the event that
a Participant is requested or required (by oral questions, interrogatories, requests for information
or documents, subpoena, civil investigative demand or other process) to disclose (i) any
Confidential Information or (ii) any information relating to his opinion, judgment or
recommendations concerning the Company or its Affiliates or Subsidiaries as developed from the
Confidential Information, each Participant will provide the Company with prompt written notice
of any such request or requirement so that the Company may seek an appropriate protective order
or waive compliance with the provisions contained herein. If, failing the entry of a protective order
or the receipt of a waiver hereunder, such Participant is, in the reasonable opinion of his or her
counsel, compelled to disclose Confidential Information, such Participant shall disclose only that
portion and will exercise best efforts to obtain assurances that confidential treatment will be
accorded such Confidential Information. For the avoidance of doubt, nothing herein is intended to
impede, prohibit or restrict a Participant (or an attorney acting on a Participant’s behalf) from
initiating communications directly with, or responding to any inquiry from, or providing
testimony before, the U.S. Securities and Exchange Commission, Commodity Futures Trading
Commission, FINRA, or any other state or federal regulatory authority or self-regulatory
organization regarding this agreement or its underlying facts or circumstances, or about a possible
violation of securities laws (or recovering any remuneration for doing so), the Commodities
Exchange Act, or employment laws, or exercising rights under the federal Defend Trade Secrets Act
which provides that an individual shall not be held criminally or civilly liable for the disclosure of
a trade secret that is made (A) in confidence to a government official or to an attorney and solely
Exhibit 10.12
2
for the purpose of reporting or investigating a suspected violation of law; or (B) in a complaint
or other document filed in a lawsuit or other proceeding, if such filing is made under seal. This
Section 11(a) does not, however, authorize a Participant to disclose information such Participant
obtains through a communication that is subject to the attorney-client privilege or the work product
doctrine.
(b)
Non-Competition.
(i)
During the Restricted Period , each Participant shall not, without prior
written consent of the Committee, do, directly or indirectly, any of the following:
(A) be engaged by or employed with, in a position involving functionally or
substantially the same duties such Participant performed for the Company or any of its
Affiliates or Subsidiaries at the time of Participant’s separation from employment from
the Company, or own, manage or control, any other corporation, partnership,
proprietorship, firm, association or other business entity, which competes with the
business of the Company or any of its Affiliates or Subsidiaries (as such business
is conducted during the term such Participant provides Services to the Company
or Affiliates or its Subsidiaries) anywhere in the geographic regions or countries
in which such Participant provides Services to or supports the Company or any of
its Affiliates or Subsidiaries; provided, however, that the ownership of a maximum
of one percent of the outstanding stock of any publicly traded corporation shall not
violate this covenant. To the extent such Participant’s job duties, at the time of such
Participant’s separation from employment with the Company, was substantially
focused on a particular brand or product line of the Company or its Affiliates or
Subsidiaries, the restrictions in this Section 11(b)(i)(A) shall apply only to a business that
competes with the business of the Company or its Affiliates or Subsidiaries in the particular
brand or product line in which such Participant provides Services to or is supported by such
Participant at the time of such Participant’s separation from employment. Such Participant
recognizes and acknowledges that the business of the Company and its Affiliates and
Subsidiaries is worldwide in scope and that such Participant’s job duties may involve
global and/or national operations, marketing, or other functions of the Company or its
Affiliates or Subsidiaries. For this reason, such Participant agrees and acknowledges that
the geographic restrictions in this Section 11(b)(i)(A) are reasonable and necessary to
protect the legitimate business interests of the Company or its Affiliates and Subsidiaries.
The Company and such Participant agree that the restrictions set forth in this Section
11(b)(i)(A) do not apply as to such Participant’s employment in California, or any other
State or jurisdiction in which such restrictions are prohibited by law at the time of such
Participant’s separation from employment;
(B)
solicit, or attempt to solicit, on behalf of any corporation, partnership,
proprietorship, firm, association or other business entity which competes with
the business of the Company or any of its Affiliates or Subsidiaries , any customer,
supplier, licensee, or business relation of the Company or its Affiliates or
Subsidiaries, or in any way interfere with the relationship between any customer,
supplier, licensee or business relation of the Company or its Affiliates or
Subsidiaries; or
(C) employ, solicit for employment or assist in employing or soliciting for
employment any present, former or future employee, officer or agent of the
Company or any of its Affiliates or Subsidiaries.
3
(ii)
In the event any court of competent jurisdictions should determine that the
foregoing covenant of non-competition is not enforceable because of the extent of the
geographical area or the duration thereof, then the Company and the affected Participant
hereby petition such court to modify the foregoing covenant to the extent, but only to the
extent, necessary to create a covenant which is enforceable in the opinion of such court,
with the intention of the parties that the Company shall be afforded the maximum
enforceable covenant of non-competition which may be available under the circumstances
and applicable law.
(c)
Failure to Comply. Each Participant acknowledges that remedies at law for any
breach by him of this Section 11 may be inadequate and that the damages resulting from any such
breach are not readily susceptible to being measured in monetary terms. Accordingly, subject to
the terms of Section 11(a), each Participant acknowledges that upon his or her violation of any
provision of this Section 11, the Company will be entitled to immediate injunctive relief and may
obtain an order restraining any threatened or future breach. Each Participant further agrees, subject
to the proviso at the end of this sentence, that if he or she violates any provisions of this Section 11,
such Participant shall immediately forfeit any rights and benefits under the Plan and shall return to
the Company any unexercised Options and forfeit the rights under any other Awards and shall
return any Shares held by such Participant received upon exercise of any Option or the vesting of
Shares underlying an Award granted hereunder, together with any proceeds from sales of any
Shares received upon exercise of such Options or the vesting of Shares underlying an Award;
provided, however, that upon violation of subsection (b) of this Section 11, the forfeiture,
repurchase and return provisions contained in this sentence shall apply only to (i) the Award if the
Shares have not yet become exercisable or vested or that become vested during the two-year period
immediately prior to such Participant’s Termination of Service, and in any such case the gross
proceeds from sales of the Award or underlying Shares, and (ii) without duplication of the amounts
described in clause (i) above, any gross proceeds of sales from the sale of the Award or underlying
Shares, during the two year period immediately prior to such Participant’s Termination of Service.
Nothing in this Section 11 will be deemed to limit, in any way, the remedies at law or in equity of
the Company, for a breach by a Participant of any of the provisions of this Section 11.
(d)
Notice. Each Participant agrees to provide written notice of the provisions of this
Section 11 to any future employer of such Participant, and the Company expressly reserves the
right to provide such notice to such Participant’s future employer(s).
(e)
Severability. If any provisions or part of any provision of this Section 11 is held
for any reason to be unenforceable, (i) the remainder of this Section 11 shall nevertheless remain
in full force and effect and (ii) such provision or part shall be deemed to be amended in such manner
as to render such provision enforceable.
2.
Section 15 of the Plan is hereby amended by deleting such Section in its entirety and
substituting the following in lieu thereof:
15.
Amendments or Termination
(a)
The Board or the Committee may terminate or discontinue the Plan at any time.
The Board or the Committee may amend, modify or alter the Plan at any time, but no amendment,
modification or alteration shall be made which, (i) without the approval of the shareholders of the
Company, would (except as is provided in Section 10 of the Plan), increase the total number of
4
Shares reserved for the purposes of the Plan, change the maximum number of Shares for which
Awards may be granted to any Participant or modify the Plan in any other way to the extent
shareholder approval is required by the rules of any stock exchange or market or quotation system
on which the Shares are traded, listed or quoted, (ii) without the consent of a Participant, except to
the extent as may be required by or desirable to facilitate compliance with Applicable Laws, as
determined in the sole discretion of the Committee, would impair any of the rights or obligations
under any Award theretofore granted to such Participant under the Plan or affect adversely, in any
material way, any Award previously granted pursuant to the Plan, or (iii) for which shareholder
approval is required in order for the Plan and Awards awarded under the Plan to continue to comply
with Sections 421 and 422 of the Code. Notwithstanding anything to the contrary herein, neither
the Committee nor the Board may amend, alter or discontinue the provisions relating to
Section 10(b) of the Plan after the occurrence of a Change of Control.
(b)
Except as provided in Section 10 of the Plan or expressly provided under the Plan,
any amendment, modification, termination or discontinuance of the Plan shall not affect Awards
previously granted, and such Awards shall remain in full force and effect as if the Plan had not
been amended, modified, terminated or discontinued, unless such amendment, modification,
termination or discontinuance (i) may be required or desirable to facilitate compliance with
Applicable Laws, as determined in the sole discretion of the Committee, (ii) would not impair any
of the rights or obligations under any Award theretofore granted to such Participant under the Plan,
(iii) would not affect, in any material respect, any of the rights or obligations under any Award or
(iv) unless mutually agreed otherwise between the Participant and the Company, which agreement
shall be in writing and signed by the Participant and the Company.
IN ALL RESPECTS NOT AMENDED HEREIN, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, THIS AMENDMENT is executed and effective of this 28 day of
February 2024 and as otherwise specified herein.
HELEN OF TROY LIMITED
By: /s/ Tessa Judge
Name: Tessa Judge
Title: CLO
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following subsidiaries of Helen of Troy Limited are as of February 29, 2024 and are all, directly or
indirectly, wholly-owned by Helen of Troy Limited.
Name
Incorporation
Doing Business as
B&W Enterprises Limited
British Virgin Islands
Same Name
Drybar Products LLC
Delaware
Same Name
Helen of Troy Canada, Inc.
Nevada
Same Name
Helen of Troy (Cayman) Limited
Cayman Islands
Same Name
Helen of Troy Chile S.A.
Chile
Same Name
Helen of Troy Consulting (Shenzhen) Company Limited
China
Same Name
Helen of Troy Consulting Vietnam
Vietnam
Same Name
Helen of Troy de Mexico S. de R.L. de C.V.
Mexico
Same Name
Helen of Troy Holding B.V.
Netherlands
Same Name
Helen of Troy Insurance Limited
Cayman Islands
Same Name
Helen of Troy Limited
Barbados
Same Name
Helen of Troy L.P.
Texas
Same Name and Belson Products
Helen of Troy Macao Limited
Macau
Same Name
Helen of Troy Middle East Services FZ – LLC
Dubai
Same Name
Helen of Troy Nevada Corporation
Nevada
Same Name
Helen of Troy Services Limited
Hong Kong
Same Name
Helen of Troy Texas Corporation
Texas
Same Name
H.O.T. Cayman Holding
Cayman Islands
Same Name
HOT (Jamaica) Limited
Jamaica
Same Name
HOT Latin America, LLC
Nevada
Same Name
HOT Nevada, Inc.
Nevada
Same Name
HOT Switzerland Services Sarl
Switzerland
Same Name
HOT (UK) Limited
England & Wales
Same Name
Idelle Labs, Ltd.
Texas
Same Name
Kaz Canada, Inc.
Massachusetts
Same Name
Kaz Europe Sarl
Switzerland
Same Name
Kaz (Far East) Limited
Hong Kong
Same Name
Kaz France SAS
France
Same Name
Kaz Hausgeraete GesmbH
Austria
Same Name
Kaz Hausgeraete GmbH
Germany
Same Name
Kaz Home Appliance Technology (Shenzhen) Co., Ltd.
China
Same Name
Kaz, Inc.
New York
Same Name
Kaz USA, Inc.
Massachusetts
Same Name
Osprey Child Safety Products, LLC
Colorado
Same Name
Osprey Europe B.V.
Netherlands
Same Name
Osprey Europe Limited
England and Wales
Same Name
Osprey Packs, Inc.
Colorado
Same Name
Osprey Packs Vietnam Company Limited
Vietnam
Same Name
Osprey Properties, LLC
Colorado
Same Name
Osprey Properties II, LLC
Colorado
Same Name
OXO International, Inc.
Nevada
Same Name
OXO International, Ltd.
Texas
Same Name
Pur Water Purification Products, Inc.
Nevada
Same Name
Recipe Products Ltd
England and Wales
Same Name and Curlsmith
Recipe Products Ltd USA
Delaware
Same Name
Steel Technology, LLC
Oregon
Same Name and Hydro Flask
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated April 24, 2024, with respect to the consolidated financial statements,
schedule, and internal control over financial reporting included in the Annual Report of Helen of Troy
Limited on Form 10-K for the year ended February 29, 2024. We consent to the incorporation by
reference of said reports in the Registration Statements of Helen of Troy Limited on Forms S-8 (File No.
333-154526; File No. 333-178217; File No. 333-227074; and File No. 333-227075).
/s/ GRANT THORNTON LLP
Dallas, Texas
April 24, 2024
EXHIBIT 31.1
CERTIFICATION
I, Noel M. Geoffroy, certify that:
1.
I have reviewed this annual report on Form 10-K of Helen of Troy Limited;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects, the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: April 24, 2024
/s/ Noel M. Geoffroy
Noel M. Geoffroy
Chief Executive Officer,
Director and Principal Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Brian L. Grass, certify that:
1.
I have reviewed this annual report on Form 10-K of Helen of Troy Limited;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects, the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: April 24, 2024
/s/ Brian L. Grass
Brian L. Grass
Chief Financial Officer,
Principal Financial Officer and
Principal Accounting Officer
EXHIBIT 32
CERTIFICATION
In connection with the Annual Report of Helen of Troy Limited (the “Company”) on Form 10-K for the
fiscal year ended February 29, 2024, as filed with the Securities and Exchange Commission (the
“Report”), and pursuant to 18 U.S.C., Chapter 63, Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, each of the undersigned, the Chief Executive Officer and Chief Financial
Officer of the Company, hereby certifies that to the best of their knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: April 24, 2024
/s/ Noel M. Geoffroy
Noel M. Geoffroy
Chief Executive Officer,
Director and Principal Executive Officer
/s/ Brian L. Grass
Brian L. Grass
Chief Financial Officer,
Principal Financial Officer and
Principal Accounting Officer
This certification is not deemed to be “filed” for purposes of section 18 of the Securities Exchange Act, or
otherwise subject to the liability of that section. This certification is not deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates it by reference.
1
POLICY FOR
RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
TO EXECUTIVE OFFICERS
Purpose
The Board of Directors (the “Board”) of Helen of Troy Limited, a Bermuda company (the “Company”),
has adopted this policy (this “Policy”) which requires the recovery of certain executive compensation in
the event that the Company is required to prepare an Accounting Restatement. References herein to the
Company also include all of its consolidated direct and indirect subsidiaries. This Policy is designed to
comply with Section 10D of the Exchange Act, Rule 10D-1 thereunder and Nasdaq Listing Rule 5608
(“Rule 5608”) and will be interpreted and applied accordingly. All capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the last section of this Policy.
Covered Persons
This Policy applies to the Company’s current and former executive officers, as determined pursuant to Rule
16a-1(f) promulgated under the Exchange Act and including executive officers identified under Item 401(b)
of Regulation S-K (“Executive Officers,” and together with any former Executive Officer, the “Covered
Persons”). If directed by the Board or the Compensation Committee of the Board (the “Compensation
Committee”), each Executive Officer shall be required to sign and return to the Company the
Acknowledgement Form attached hereto as Exhibit A pursuant to which such Executive Officer will agree
to be bound by the terms and comply with this Policy.
Recoupment of Erroneously Awarded Compensation upon an Accounting
Restatement
If the Company is required to prepare an Accounting Restatement, the Company will recover reasonably
promptly all Erroneously Awarded Compensation from each Covered Person, unless the Compensation
Committee determines in accordance with the terms of this Policy that such recovery is impracticable.
Recoupment of Erroneously Awarded Compensation pursuant to this Policy is made on a “no fault” basis,
without regard to whether any misconduct occurred or whether any Covered Person has responsibility for
the noncompliance that resulted in the Accounting Restatement.
Method of Recoupment
The Compensation Committee will determine, in its sole discretion, the method for recouping Erroneously
Awarded Compensation hereunder, which may include any of the following:
•
Requiring reimbursement of cash Incentive Compensation previously paid;
•
Seeking recovery of any gain realized on or since the vesting, exercise, settlement, sale, transfer,
or other disposition of any equity-based awards;
•
Offsetting the recouped amount from any compensation otherwise owed by the Company to the
Covered Person (including any severance otherwise payable by the Company to the Covered
Person);
•
Making a deduction from the Covered Person’s salary;
Exhibit 97
2
•
Requiring the Covered Person to transfer back to the Company any shares he or she received
pursuant to an equity award;
•
Surrendering to the Company any shares being held pursuant to stock ownership guidelines;
•
Cancelling, or reducing the number of shares subject to, or the value of, outstanding vested or
unvested equity awards; and/or
•
Taking any other remedial and recovery action permitted by law, as determined by the
Compensation Committee.
The Compensation Committee will consider Section 409A of the U.S. Internal Revenue Code of 1986, as
amended, prior to offsetting recouped amounts against future payments of deferred compensation. In
addition, the Compensation Committee may, in its sole discretion, determine whether and to what extent
additional action is appropriate to address the circumstances surrounding the noncompliance so as to
minimize the likelihood of any recurrence.
Impracticability
The Compensation Committee will recover any Erroneously Awarded Compensation in accordance with
this Policy unless the Compensation Committee determines that such recovery would be impracticable
because:
•
The direct expense paid to a third party to assist in enforcing the Policy would exceed the amount
to be recovered;
•
Recovery would violate an applicable home country law adopted prior to November 28, 2022; or
•
Recovery would likely cause an otherwise tax-qualified, broad-based retirement plan of the
Company to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and
regulations thereunder.
Before concluding that it would be impracticable to recover any Erroneously Awarded Compensation based
on the expense of enforcement, the Company shall make a reasonable attempt to recover such Erroneously
Awarded Compensation, and the Company Secretary or such other officer designated by the Compensation
Committee, on behalf of the Compensation Committee, shall document such reasonable attempt(s) to
recover and provide that documentation to Nasdaq when required. Before concluding that it would be
impracticable to recover any amount of Erroneously Awarded Compensation based on violation of law, the
Compensation Committee shall, to the extent required by the SEC rules and regulations and Rule 5608,
engage legal counsel experienced and qualified to practice law in the applicable jurisdiction (if such counsel
is acceptable to Nasdaq) to render an opinion that recovery would result in a violation of law and shall
provide such opinion to Nasdaq. The Company shall provide funding for the fees and expenses of such
legal counsel as approved by the Compensation Committee.
Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of the law. Any right of recoupment
under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may
be available to the Company (i) under applicable law, regulation or rule, (ii) pursuant to the terms of any
similar policy or recoupment provision in any employment agreement, severance agreement, equity award
agreement, compensation plan, bonus plan, stock incentive plan or similar agreement or plan or any other
program or agreement under which any compensation has been granted, awarded, earned or paid or similar
agreement or plan, and (iii) any other legal remedies available to the Company. Further, the provisions of
this Policy are in addition to (and not in lieu of) any rights to repayment the Company may have under
Section 304 of the Sarbanes-Oxley Act of 2002.
3
No Indemnification or Insurance
Neither the Company nor any of its subsidiaries or affiliates shall indemnify any Covered Person against
the loss of any Erroneously Awarded Compensation. Further, neither the Company nor any of its
subsidiaries or affiliates shall pay or reimburse any Covered Person for any insurance policy entered into
by a Covered Person that provides for full or partial coverage of any recoupment obligation under this
Policy.
Successors
This Policy shall be binding and enforceable against all Covered Persons and their beneficiaries, heirs,
executors, administrators, or other legal or personal representatives.
Disclosure
The Company shall file all disclosures with respect to this Policy required by applicable SEC rules and
regulations and by Nasdaq.
Change of Listing
In the event that the Company lists its securities on any national securities exchange or national securities
association other than Nasdaq, all references to Nasdaq in this Policy shall mean each national securities
exchange or national securities association upon which the Company has a class of securities then listed.
Administration
The Compensation Committee will be responsible for monitoring the application of this Policy. The
Compensation Committee is authorized to interpret and construe this Policy and to make all determinations
necessary, appropriate, or advisable for the administration of this Policy. Any determinations made by the
Compensation Committee will be final and binding on all affected individuals and need not be uniform
with respect to each individual covered by the Policy. In the administration of this Policy, the Compensation
Committee is authorized and directed to consult with the full Board or such other committees of the Board
as may be necessary or appropriate as to matters within the scope of such other committee’s responsibility and
authority. Subject to any limitation at applicable law, the Compensation Committee may authorize and
empower any officer or employee of the Company to take any and all actions necessary or appropriate to
carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy
involving such officer or employee).
Amendment
This Policy may be amended upon the approval of the Board or the Compensation Committee of the Board
in its discretion in any manner consistent with applicable law and regulation. The Board or Compensation
Committee may terminate this Policy at any time when the Company does not have a class of securities
listed on a national securities exchange or a national securities association.
4
Construction
Unless the express context otherwise requires: (i) all pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require; (ii) all terms defined in this
Policy in their singular or plural forms have correlative meanings when used herein in their plural or
singular forms respectively; (iii) unless otherwise expressly provided, the words “include,” “includes” and
“including” do not limit the preceding words or terms and shall be deemed to be followed by the words
“without limitation”; (iv) the words ”hereof,” “herein,” and “hereunder” and words of similar import, when
used in this Policy, shall refer to this Policy as a whole and not to any particular provision of this Policy;
(v) references herein to any person shall include such person’s successors and assigns, beneficiaries, heirs,
executors, administrators, or other legal or personal representatives; and (vi) references herein to any law,
rule or regulation mean such law, rule or regulation as amended, modified, codified, reenacted,
supplemented or superseded in whole or in part, and in effect from time to time, and all rules and regulations
promulgated thereunder, unless the context requires otherwise. In the event of any inconsistency or conflict
between this Policy and the terms of any employment agreement, severance agreement, equity award
agreement or similar agreement to which a Covered Person is a party, or the terms of any compensation
plan, bonus plan, stock incentive plan or similar agreement or plan or any other program or agreement under
which any compensation has been granted, awarded, earned or paid or similar agreement or plan, the terms
of this Policy shall govern.
Definitions
For purposes of this Policy, the following capitalized terms shall have the meanings set forth below:
•
“Accounting Restatement” means an accounting restatement of any of the Company's financial
statements due to the Company's material noncompliance with any financial reporting requirement
under the securities laws, including any required accounting restatement to correct an error in
previously issued financial statements that is material to the previously issued financial statements,
or to correct an error that is not material to previously issued financial statements, but would result
in a material misstatement if the error were corrected in the current period or left uncorrected in the
current period, within the meaning of Rule 10D-1 and Rule 5608. For the avoidance of doubt, an
Accounting Restatement will not be deemed to occur in the event of a restatement of the Company’s
financial statements due to an out-of-period adjustment or due to a retrospective (i) application of
a change in accounting principles; (ii) revision to reportable segment information due to a change
in the structure of the Company’s internal organization; (iii) reclassification due to a discontinued
operation; (iv) application of a change in reporting entity, such as from a reorganization of entities
under common control; or (v) revision for stock splits, reverse stock splits, stock dividends, or other
changes in capital structure.
•
“Covered Incentive Compensation” means Incentive Compensation Received on or after October
2, 2023 by a person: (i) after beginning service as an Executive Officer, (ii) who served as an
Executive Officer at any time during the performance period for that Incentive Compensation, and
(iii) while the Company has a class of securities listed on a national securities exchange or a national
securities association, and (iv) during the three completed fiscal years immediately preceding the
date that the Company is required to prepare the Accounting Restatement (or such longer period as
required under Rule 5608 in the event the Company changes its fiscal year). The date that the
Company is required to prepare the Accounting Restatement will be the earlier of (x) the date the
Board concluded or reasonably should have concluded that the Accounting Restatement is required,
and (y) the date a court, regulator or other authorized body directs the Company to prepare the
Accounting Restatement.
5
•
“Erroneously Awarded Compensation” means the amount of Covered Incentive Compensation
that was Received by each Covered Person in excess of the Covered Incentive Compensation that
would have been Received by the Covered Person had such Covered Incentive Compensation been
determined based on the restated Financial Reporting Measure following an Accounting
Restatement, computed without regard to taxes paid. For this purpose, if the amount of Covered
Incentive Compensation that is Received by a Covered Person was based on the Company's stock
price or total shareholder return and is not subject to mathematical recalculation directly from the
Accounting Restatement, the amount to be recovered as Erroneously Awarded Compensation shall
be based on a reasonable estimate of the effect of the Accounting Restatement on the Financial
Reporting Measure upon which the Covered Incentive Compensation was Received. The
Company's Corporate Secretary shall, on behalf of the Compensation Committee, obtain and
maintain all documentation of the determination of any such reasonable estimate and provide such
documentation to Nasdaq when required.
•
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
•
“Financial Reporting Measure” means (i) any measure that is determined and presented in
accordance with the accounting principles used in preparing the Company’s financial statements
and any measure that is derived wholly or in part from any such measure, and (ii) the Company’s
stock price and the total stockholder return of the Company. A measure, however, need not be
presented within the financial statements or included in a filing with the SEC to constitute a
Financial Reporting Measure.
•
“Incentive Compensation” means any compensation that is granted, earned, or vested based
wholly or in part upon the attainment of a Financial Reporting Measure. For the avoidance of
doubt, Incentive Compensation shall also be deemed to include any amounts which were
determined based on (or were otherwise calculated by reference to) Incentive Compensation
(including any amounts under any long-term disability, life insurance or supplemental retirement
plan or any notional account that is based on Incentive Compensation, as well as any earnings
accrued thereon).
•
“Nasdaq” means Nasdaq Stock Market.
•
“Received” - Incentive Compensation is deemed “Received” in the Company's fiscal period during
which the Financial Reporting Measure specified in such Incentive Compensation is attained.
•
“SEC” means the U.S. Securities and Exchange Commission.
Adopted: November 8, 2023
6
Exhibit A
Helen of Troy Limited
Policy for Recovery of Erroneously Awarded Compensation to Executive Officers
Acknowledgment Form
By signing below, the undersigned acknowledges and confirms that the undersigned has received and
reviewed a copy of the Helen of Troy Limited Policy for Recovery of Erroneously Awarded Compensation
to Executive Officers (the “Policy”). Capitalized terms used but not otherwise defined in this
Acknowledgement Form (this “Acknowledgement Form”) shall have the meanings ascribed to such terms
in the Policy. By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the
undersigned is and will continue to be subject to the Policy and that the Policy will apply both during and
after the undersigned’s employment with the Company. Further, by signing below, the undersigned agrees
to abide by the terms of the Policy, including, without limitation, by returning any Erroneously Awarded
Compensation to the Company to the extent required by, and in a manner permitted by, the Policy. In the
event of any inconsistency or conflict between the Policy and the terms of any employment agreement,
severance agreement, equity award agreement or similar agreement to which I am a party, or the terms of
any compensation plan, bonus plan, stock incentive plan or similar agreement or plan or any other program
or agreement under which any compensation has been granted, awarded, earned or paid or similar
agreement or plan, the terms of the Policy shall govern.
________________________________
Signature
________________________________
Print Name
________________________________
Date