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What changed in HELEN OF TROY LTD's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HELEN OF TROY LTD's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+503 added−461 removedSource: 10-K (2023-04-27) vs 10-K (2022-04-28)

Top changes in HELEN OF TROY LTD's 2023 10-K

503 paragraphs added · 461 removed · 284 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

52 edited+19 added−12 removed27 unchanged
Biggest changeDrybar is an innovative, trend-setting prestige hair care and styling brand in the multibillion-dollar beauty industry. 4 Table of Contents Our Products The following table summarizes the types of products we sell by business segment: Segment Product Category Primary Products Home & Outdoor Food Preparation and Storage Food preparation tools and gadgets, food storage containers and storage and organization products Coffee and Tea Coffee makers, grinders, manual pour overs and tea kettles Cleaning and Bath Household cleaning products, shower organization and bathroom accessories Infant and Toddler Feeding and drinking products, child seating, cleaning tools and nursery accessories Hot and Cold Beverage Containers and Food Transport and Storage Solutions Insulated hydration bottles, hydration packs, drinkware, mugs, food containers, lunch containers, insulated totes, soft coolers and accessories Backpacks and Gear Technical and outdoor sports packs, hydration packs, travel packs, luggage, daypacks and everyday packs Health & Wellness Healthcare Thermometers, blood pressure monitors, pulse oximeters, nasal aspirators and humidifiers Wellness Faucet mount water filtration systems and pitcher-based water filtration systems, air purifiers, heaters, and fans Beauty Appliances and Accessories Mass, professional and prestige market hair appliances, grooming brushes, tools and decorative hair accessories Personal and Hair Care (1) Prestige market shampoos, liquid hair styling products, treatments and conditioners (1) During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Personal Care business, which included our mass channel liquid, powder and aerosol products.
Biggest changeOur Products The following table summarizes the types of products we sell by business segment: Segment Product Category Primary Products Home & Outdoor Food Preparation, Baking and Storage Food preparation tools and gadgets including serving plates and bowls, utensils, scales, thermometers, measuring cups and spoons, timers, barware, cookware, bakeware, food storage containers and storage and organization products Coffee and Tea Coffee makers, grinders, manual pour overs and tea kettles Cleaning and Bath Household cleaning products, shower organization and bathroom accessories Infant and Toddler Feeding and drinking products, child seating, cleaning tools and nursery accessories Hot and Cold Beverage Containers and Food Transport and Storage Solutions Insulated hydration bottles, hydration packs, drinkware, mugs, food containers, lunch containers, insulated totes, soft coolers and accessories Backpacks, Daypacks, Luggage and Accessories Technical and outdoor sports packs, hydration and travel packs and accessories, bike packs and bags, daypacks and everyday packs, duffel bags and luggage Beauty & Wellness Hair Appliances and Accessories Mass, professional and prestige market hair appliances, grooming brushes, tools and decorative hair accessories Personal and Hair Care (1) Prestige market shampoos, liquid hair styling products, treatments and conditioners Wellness Devices Thermometers, blood pressure monitors, pulse oximeters, nasal aspirators, humidifiers, faucet mount water filtration systems and pitcher-based water filtration systems, air purifiers, heaters, and fans (1) During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Personal Care business, which included our mass channel liquid, powder and aerosol products.
Consistent with our 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 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”).
Consistent with our 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”).
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 Health & Wellness segment that are sold in the U.S. The EPA did not raise any product quality, safety or performance issues.
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.
Additionally, some product lines within our Health & Wellness segment 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.
Additionally, some product lines within our Beauty & Wellness segment 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.
We currently operate in three business segments: • Home & Outdoor: Provides a broad range of innovative consumer products for home activities such as food preparation, cooking, cleaning, and organization; as well as products for outdoor and on the go activities such as hydration, food storage, backpacks, and travel gear.
We currently operate in two business segments: • Home & Outdoor: Provides a broad range of innovative consumer products for home activities such as food preparation, cooking, cleaning, and organization; as well as products for outdoor and on the go activities such as hydration, food storage, backpacks, and travel gear.
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 95 countries throughout the world.
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.
For example, some of our Beauty segment’s customers require that our Beauty appliances comply with various safety certifications, including UL certifications. Similarly, thermometers distributed by our Health & Wellness segment must comply with various regulations governing the production and distribution of medical devices.
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.
With our participation in this coalition, we intend to 9 Table of Contents (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.
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.
Phase II includes continued investment in our 3 Table of Contents 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 are building further shared service capability and operating efficiency, as well as focusing on attracting, retaining, unifying and training the best people.
Phase II includes continued investment 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 are building further shared service capability and operating efficiency, as well as focusing on attracting, retaining, unifying and training the best people.
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 .
Information in our ESG Report 9 Table of Contents 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 .
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 include improved organic sales growth, continued margin expansion, and strategic and effective capital deployment.
Fiscal 3 Table of Contents 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 include improved organic sales growth, continued margin expansion, and strategic and effective capital deployment.
We will also continue to advance our DE&I 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 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 are working to implement a system to minimize negative impacts of our practices on the environment and continue to work on initiatives to reduce emissions in our supply chain and product use.
We are implementing a system to minimize negative impacts of our practices on the environment and continue to work on initiatives to reduce emissions in our supply chain and product use.
We are continuing to enhance and consolidate our ESG efforts and accelerate programs related to DE&I to support our Phase II transformation. The Corporate Governance Committee of our Board of Directors has oversight of ESG-related matters, including climate change risks and opportunities.
We are continuing to enhance and consolidate our ESG efforts and accelerate programs related to DEI&B to support our Phase II transformation. The Corporate Governance Committee of our Board of Directors has oversight of ESG-related matters, including climate change risks and opportunities.
Our Associates As of February 28, 2022, we employed approximately 2,146 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.
Our Associates As of February 28, 2023, we employed approximately 1,903 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.
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 2022 2021 2020 May 24.3 % 20.0 % 22.0 % August 21.4 % 25.3 % 24.2 % November 28.1 % 30.4 % 27.8 % February 26.2 % 24.3 % 26.0 % Our sales are seasonal due to different calendar events, holidays and seasonal weather patterns.
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 2023 2022 2021 May 24.5 % 24.3 % 20.0 % August 25.2 % 21.4 % 25.3 % November 26.9 % 28.1 % 30.4 % February 23.4 % 26.2 % 24.3 % Our sales are seasonal due to different calendar events, holidays and seasonal weather patterns.
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.
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.
We have never experienced a work stoppage, and we believe that we have satisfactory working relations with our associates. DE&I 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 have never experienced a work stoppage, and we believe that we have satisfactory working relations with our associates. 10 Table of Contents 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.
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 and Health & Wellness segments rely on the continued use of trademarks licensed under various agreements for a substantial portion of their net sales revenue.
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.
In June 2021, we published our first 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, DE&I and human capital, and environmental and natural capital management.
In June 2022, we published our second 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 and human capital, and environmental and natural capital management.
Our consolidated and Health & Wellness segment’s net sales revenue, gross profit and operating income during fiscal 2022 was materially and adversely impacted by the stop shipment actions and the time needed to execute repackaging plans after changes were approved by the EPA.
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.
During fiscal 2022, we recorded a $13.1 million charge to cost of goods sold to write-off the obsolete packaging for the affected products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022.
(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.
Subsequent to our fiscal 2022 year end, on March 25, 2022, we sold our Brut trademark in connection with the sale of our Latin America and Caribbean Personal Care businesses. 5 Table of Contents The following table lists our key trademarks by segment: Segment Owned Licensed Home & Outdoor OXO, Good Grips, Hydro Flask, Soft Works, OXO tot, OXO Brew, OXO Strive, OXO Outdoor, Osprey Health & Wellness PUR Honeywell, Braun, Vicks Beauty Drybar, Hot Tools Revlon, Bed Head Patents and Other Intellectual Property We maintain utility and design patents in the U.S. and several foreign countries.
During fiscal 2022, we sold our Pert, Sure and Infusium trademarks in connection with the sale of our North America Personal Care business. 5 Table of Contents The following table lists our key trademarks by segment: Segment Owned Licensed Home & Outdoor OXO, Good Grips, Hydro Flask, Soft Works, OXO tot, OXO Brew, OXO Strive, OXO Outdoor, 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.
For additional information see Note 4 to the accompanying consolidated financial statements. 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.
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.
Additionally, we are continuing to enhance and consolidate our Environmental, Social and Governance (“ESG”) efforts and accelerate programs related to Diversity, Equity, and Inclusion (“DE&I”) to support our Phase II transformation. See further discussion below of our initiatives in these areas.
Additionally, we are continuing 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. See “ESG Initiatives” and “Human Capital - DEI&B” for further discussion below of our initiatives in these areas.
As a result of these packaging compliance discussions, we voluntarily implemented a temporary stop shipment action across this line of products in the U.S. as we worked with the EPA towards an expedient resolution.
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.
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. During fiscal 2022, we sold our Pert, Sure and Infusium trademarks in connection with the sale of our North America Personal Care business.
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. At the beginning of fiscal 2023, we sold our Brut trademark in connection with the sale of our Latin America and Caribbean Personal Care business.
We are advancing short- and long-term initiatives which include: leadership coaching and training to build awareness and sponsorship, recruitment actions to increase diversity of new hires, associate learning programs to develop skills that foster inclusion, business resource groups to further support inclusion, ongoing dialogue sessions with our associates and charitable donations to non-profit organizations whose mission and values align with our culture. 10 Table of Contents 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.
We are advancing short- and long-term initiatives which include: leadership coaching and training to build awareness and sponsorship, recruitment actions to increase diversity of new hires, associate learning programs to develop skills that foster inclusion, business resource groups to further support inclusion, ongoing dialogue sessions with our associates and charitable donations to non-profit organizations whose mission and values align with our culture.
During fiscal 2022, we incurred additional compliance costs of $19.3 million, comprised of $14.6 million of incremental warehouse storage costs and legal fees, which were recognized in SG&A, and $4.7 million of storage, obsolete packaging and other charges from vendors, which were recognized in cost of goods sold.
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.
This segment sells primarily to retailers as well as through our direct-to-consumer channel. • Health & Wellness: Provides health and wellness products including healthcare devices, thermometers, water and air filtration systems, humidifiers, and fans.
This segment sells primarily to retailers as well as through our direct-to-consumer channel. • Beauty & Wellness: Provides beauty and wellness products including mass and prestige market beauty appliances, prestige market liquid-based hair and personal care products, and wellness devices including thermometers, water and air filtration systems, humidifiers, and fans.
Beauty Conair, Spectrum Brands Holdings Inc. (Remington), Coty Inc., Dyson Ltd, L'Oréal S.A. 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.
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.
We are currently constructing an additional distribution facility in Gallaway, Tennessee that we expect to be operational by the end of fiscal year 2023. 6 Table of Contents Customers Sales to our largest customer, Amazon.com Inc., accounted for approximately 19%, 20% and 18% of our consolidated net sales revenue in fiscal 2022, 2021 and 2020, 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. 6 Table of Contents Customers Sales to our largest customer, Amazon.com Inc., accounted for approximately 17%, 19% and 20% of our consolidated net sales revenue in fiscal 2023, 2022 and 2021, respectively.
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 and Health & Wellness segments and our Beauty appliances and accessories product category. The personal and hair care category of the Beauty segment sources most of its products from U.S. manufacturers.
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.
Our segments primarily sell their products through mass merchandisers, drugstore chains, warehouse clubs, home improvement stores, grocery stores, specialty stores, beauty supply retailers, e-commerce retailers, wholesalers, and various types of distributors, as well as directly to consumers.
Sales within the U.S. comprised approximately 74%, 78% and 79% of total net sales revenue in fiscal 2023, 2022 and 2021, respectively. Our segments primarily sell their products through mass merchandisers, drugstore chains, warehouse clubs, home improvement stores, grocery stores, specialty stores, beauty supply retailers, e-commerce retailers, wholesalers, and various types of distributors, as well as directly to consumers.
Sales to our second largest customer, Walmart, Inc., including its worldwide affiliates, accounted for approximately 11%, 13% and 14% of our consolidated net sales revenue in fiscal 2022, 2021 and 2020, respectively. Sales to our third largest customer, Target Corporation, accounted for approximately 11%, 11% and 9% of our consolidated net sales revenue in fiscal 2022, 2021 and 2020, respectively.
Sales to our third largest customer, Walmart, Inc., including its worldwide affiliates, accounted for approximately 10%, 11% and 13% of our consolidated net sales revenue in fiscal 2023, 2022 and 2021, respectively. No other customers accounted for 10% or more of consolidated net sales revenue during these fiscal years.
We improved organic sales growth by focusing on our Leadership Brands, made strategic acquisitions, became a more efficient operating company with strong global shared services, upgraded our organization and culture, improved inventory turns and return on invested capital, and returned capital to shareholders.
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.
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.
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.
Finished goods manufactured by vendors in Asia comprised approximately 88%, 80% and 76% of finished goods purchased for fiscal 2022, 2021 and 2020, respectively. We occupy owned and leased office and distribution space in various locations to support our operations.
The personal and hair care category of the Beauty & Wellness segment sources most of its products from U.S. manufacturers. Finished goods manufactured by vendors in Asia comprised approximately 87%, 88%, and 80% of finished goods purchased in fiscal 2023, 2022, and 2021, respectively. We occupy owned and leased office and distribution space in various locations to support our operations.
The acquisition was funded with cash on hand and borrowings under our existing revolving credit facility. On December 29, 2021, we completed the acquisition of Osprey, a longtime U.S. leader in technical and everyday packs, for $410.9 million in cash, net of a preliminary closing net working capital adjustment and cash acquired.
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.
(KitchenAid), Newell Brands Inc., Simple Human LLC, Yeti Holdings, Inc., Bradshaw Home, Inc., Gregory Mountain Products, Mystery Ranch, CamelBak, The North Face, Deuter Health & Wellness Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands, Inc., Lasko Products, LLC, The Clorox Company (Brita), Zero Technologies, LLC, Vornado Air Circulation Systems, Dyson Ltd, Unilever (Blueair), Guardian Technologies LLC.
(Remington), Coty Inc., Dyson Ltd, L'Oréal S.A., DevaCurl, Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands, Inc., Lasko Products, LLC, The Clorox Company (Brita), Zero Technologies, LLC, Vornado Air Circulation Systems, Unilever (Blueair), Guardian Technologies LLC.
Subsequent to our fiscal 2022 year end, 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, net of cash acquired, was $150.0 million in cash, subject to certain customary closing adjustments.
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.
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.
Sales to our top five customers accounted for approximately 43%, 49% and 52% of our consolidated net sales revenue in fiscal 2023, 2022 and 2021, 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.
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.
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.
While we have resumed normalized levels of shipping of the affected inventory, we are still in process of repackaging our existing inventory of impacted products. Additionally, as a result of continuing dialogue with the EPA, we are executing further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products.
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.
The acquisition of Osprey complements our outdoor platform, accelerates our international strategy and adds a 9th Leadership Brand to the Company. On January 23, 2020, we completed the acquisition of Drybar Products LLC (“Drybar Products”), for approximately $255.9 million in cash.
The acquisition of Osprey complements our outdoor platform, accelerates our international strategy and added a 9th Leadership Brand to the Company.
Subsequent to our fiscal 2022 year end, on March 25, 2022, we completed the sale of the Latin America and Caribbean Personal Care businesses to HRB Brands LLC, for $1.8 million in cash. 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.
On March 25, 2022, we completed the sale of the Latin America and Caribbean Personal Care business to HRB 4 Table of Contents Brands LLC, for $1.8 million in cash and recognized a gain on the sale in SG&A totaling $1.3 million.
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.
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.
Our previously named “Housewares” segment was changed to “Home & Outdoor,” and our previously named “Health & Home” segment was changed to “Health & Wellness.” There were no changes to the products or brands included within the segments as part of these name changes.
There were no changes to the products or brands included within our Home & Outdoor reportable segment as part of these organizational changes nor to the way in which our CEO assesses performance and allocates resources for the Home & Outdoor segment.
For more segment and geographic information concerning our net sales revenue, long-lived assets and operating income, refer to Note 18 to the accompanying consolidated financial statements. Our Strategic Initiatives In fiscal 2015, we launched a five-year transformational strategy designed to improve the performance of our business segments and strengthen our shared service capabilities.
Sales for the segment are primarily to retailers, distributors, beauty supply wholesalers 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 18 to the accompanying consolidated financial statements.
During fiscal 2022, we completed the sale of our North America Personal Care business. We continued to classify the identified net assets of the Latin America and Caribbean Personal Care businesses as held for sale. Subsequent to our fiscal 2022 year end, on March 25, 2022, we completed the sale of the Latin America and Caribbean Personal Care businesses.
At the beginning of fiscal 2023, we completed the sale of the Latin America and Caribbean Personal Care business. During fiscal 2022, we completed the sale of our North America Personal Care business. For additional information see Note 4 to the accompanying consolidated financial statements.
These charges are referred to throughout this Annual Report as “EPA compliance costs.” In addition, during fiscal 2022, we incurred and capitalized into 8 Table of Contents inventory costs to repackage a portion of our existing inventory of the affected products and expect to continue to incur and capitalize such costs as we continue to repackage inventory.
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.
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 49%, 52% and 50% of our consolidated net sales revenue in fiscal 2022, 2021 and 2020, respectively.
Sales to our second largest customer, Target Corporation, accounted for approximately 10% in fiscal 2023 and 11% in both fiscal 2022 and 2021 of our consolidated net sales revenue.
Removed
Segment Information In the fourth quarter of fiscal 2022, we changed the names of two of our segments to align with the growth in certain product offerings and brands within our portfolio.
Added
Segment Information During the fourth quarter of fiscal 2023, we made changes to the structure of our organization in connection with our global restructuring plan (as further described below) that resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment, which is referred to herein as “Beauty & Wellness.” In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our Chief Executive Officer (“CEO”), our chief operating decision maker, assesses performance and allocates resources.
Removed
The Osprey brand and products were added to the Home & Outdoor segment upon the completion of the acquisition of Osprey Packs, Inc. ("Osprey") discussed further below.
Added
We believe that these changes better align internal resources and external go to market activities in order to create a more efficient and effective organizational structure.
Removed
Sales for the segment are primarily to retailers and distributors with some direct-to-consumer channel sales. • Beauty: Provides mass and prestige market beauty appliances including hair styling appliances, grooming tools, decorative hair accessories, and prestige market liquid-based hair and personal care products. This segment sells primarily to retailers, beauty supply wholesalers and through our direct- to- consumer channel.
Added
As a result of these changes, our disclosures reflect two reportable segments, Home & Outdoor and Beauty & Wellness. Comparative prior period segment information in this Annual Report has been recast to conform to this change in our reportable segments.
Removed
Fiscal 2019 marked the completion of Phase I of our multi-year transformation strategy, which delivered performance across a wide range of measures.
Added
Our external reportable segments will continue to align with our internal reporting to enable users of the financial statements to better understand our performance, better assess our future net cash flows, and make more informed judgements about the Company as a whole.
Removed
Accordingly, we continued to classify the identified net assets of the Latin America and Caribbean Personal Care businesses as held for sale in our fiscal 2022 consolidated balance sheet.
Added
During the second quarter of fiscal 2023, we focused on developing a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and reduce costs (referred to as “Project Pegasus”).
Removed
Sales within the U.S. comprised approximately 78% of total net sales revenue in fiscal 2022 and 79% of total net sales revenue in both fiscal 2021 and 2020.
Added
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.
Removed
The EPA approved modest changes to our labeling claims on packaging of the air and water filtration impacted products, which we implemented, and subsequently resumed shipping during fiscal 2022.
Added
We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments.
Removed
If we are not able to execute our repackaging plans on schedule to meet demand, our net sales revenue, gross profit and operating income could continue to be materially and adversely impacted. At this time, we are not aware of any fines or penalties related to this matter imposed against us by the EPA.
Added
As part of our initiative focused on streamlining and simplifying the organization, we made further changes to the structure of our organization, which include 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.
Removed
While we do not anticipate material fines or penalties, there can be no assurances that such fines or penalties will not be imposed.
Added
This new structure, inclusive of the organizational structure changes described above resulting in the reportable segment change, will reduce the size of our global workforce by approximately 10%.
Removed
We also expect to incur additional compliance costs, which may include incremental freight, warehouse storage costs, charges from vendors, and legal fees, among other things. Such potential incremental EPA compliance costs will be expensed as incurred and could materially and adversely impact our consolidated and Health & Wellness segment’s gross profit and operating income.
Added
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. See Note 12 to the accompanying consolidated financial statements for additional information.
Removed
In addition, our net sales revenue could be materially and adversely impacted by customer returns, an increase in sales discounts and allowances and by the potential impact of distribution losses at certain retailers. 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.
Added
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 adds another prestige market brand of products to our Beauty & Wellness portfolio and further advances our Phase II objective of continuing to expand margin.
Removed
The information contained on this website is not included as a part of, or incorporated by reference into, this Annual Report.
Added
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. As a result of these dispositions, we no longer have any assets or liabilities classified as held for sale.
Added
As such, there usually is no significant backlog of orders in any of our distribution channels.
Added
(KitchenAid), Breville Group, Corning Incorporated (Pyrex), Meyer Corporation (Farberware), Newell Brands Inc., Simple Human LLC, Yeti Holdings, Inc., Bradshaw International (GoodCook), Patagonia, Gregory Mountain Products, Mystery Ranch, CamelBak, The North Face, Deuter Beauty & Wellness Conair, Spectrum Brands Holdings Inc.
Added
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging of our existing inventory of impacted products during fiscal 2023.
Added
Although, we are not aware of any fines or penalties related to this matter imposed against us by the EPA, there can be no assurances that such fines or penalties will not be imposed. 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

96 edited+27 added−38 removed85 unchanged
Biggest changeBusiness, Operational and Strategic Risks • 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. • The geographic concentration and peak season capacity of certain of our U.S. distribution facilities increase our risk to disruptions that could affect our ability to deliver products in a timely manner. • Our ability to successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of COVID-19 and any similar future public health crisis, pandemic or epidemic. • 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 actions in the U.S. and abroad, such as the current conflict between Russia and Ukraine, 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. • We are subject to risks associated with the use of licensed trademarks from or to third parties. • 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 Chief Executive Officer and a limited number of other key senior officers to operate our business. • We may be unsuccessful integrating acquired businesses or disaggregating divested businesses. 12 Table of Contents 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. • Under current tax law, favorable tax treatment of our non-U.S. income is dependent on our ability to avoid classification as a Controlled Foreign Corporation. • Legislation enacted in Bermuda and Barbados in response to the European Union’s 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. • 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. • We face risks associated with product recalls, product liability and other claims against us.
Biggest changeBusiness, Operational and Strategic Risks • 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. • The geographic concentration of certain of our U.S. distribution facilities increase our risk to disruptions that could affect our ability to deliver products in a timely manner. • 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 actions in the U.S. and abroad, such as the current conflict between Russia and Ukraine, 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. • We are subject to risks associated with the use of licensed trademarks from or to third parties. • 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. 12 Table of Contents • 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.
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 (including COVID-19); • reduced protection of intellectual property rights in some countries; • increases in duties and taxation; • restrictions on transfer of funds or exchange of currencies; 19 Table of Contents • 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.
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 (including COVID-19); • 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.
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 the laws (such as individual rights of access, correction, and deletion of their personal information), and to implement our business models effectively.
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.
Financial Risks • 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. • Increased costs of raw materials, energy and transportation may adversely affect our operating results and cash flow. • Our liquidity or cost of capital may be materially adversely affected by constraints or changes in the capital and credit markets and limitations under our financing arrangements. • We face risks associated with foreign currency exchange rate fluctuations. • Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary in a material amount from our projections.
Financial Risks • 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. • Increased costs of raw materials, energy and transportation may adversely affect our operating results and cash flow. • 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 face risks associated with foreign currency exchange rate fluctuations. • Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary in a material amount from our projections.
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 long-lived assets held for sale quarterly to determine if fair value less cost to sell has changed during the reporting period.
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.
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 centers, and store and deliver them to our customers on time and in the correct amounts.
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.
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.
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, 16 Table of Contents 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.
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 centers to customers.
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.
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 Health & Wellness segment that are sold in the U.S.
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.
We believe that we could source 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. However, the relocation of any production capacity could require substantial time and costs.
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. However, the relocation of any production capacity could require substantial time and costs.
Our liquidity or cost of capital may be materially adversely affected by constraints or changes in the capital and credit markets 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.
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.
Similarly, some of our Beauty segment’s customers require that our Beauty 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.
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.
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.
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 23 Table of Contents 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.
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, 23 Table of Contents store, share and transmit personal data. This increased scrutiny may result in new interpretations of existing laws, thereby further impacting our business.
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.
We may be negatively affected by changes in the policies of our customers, such as actions to respond to a public health crisis, on-hand inventory reductions, limitations on access to shelf space, use of private label brands, price and term demands, and other conditions, which could negatively impact our business, operating results and financial condition.
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.
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 either facility, or even cause the closure of either facility, which could have a material adverse effect on 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.
In recent years, increasing labor costs, import tariffs, regional labor dislocations driven by new government policies, local 17 Table of Contents 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 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.
Legislation enacted in Bermuda and Barbados in response to the European Union’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.
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.
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.
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 18 Table of Contents 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 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 13 Table of Contents will continue to be subject to ongoing threats.
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.
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 22 Table of Contents identification, labeling and claim requirements.
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.
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. 16 Table of Contents Large customers may take actions that adversely affect our gross profit and operating results .
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 .
Failure to deliver products to our retailers in a timely and effective manner could damage our reputation and brands and result in the loss 18 Table of Contents of customers or reduced orders, which could have a material adverse effect on our business, operating results and financial condition.
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.
Sales in our Health & 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 adverse effect on our business, operating results and financial condition.
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.
Sanctions imposed by the US and other countries in response to such conflicts, including the one in Ukraine, 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.
Sanctions imposed by the U.S. and other countries in response to such conflicts, including the one in Ukraine, 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.
The loss of our Chief Executive Officer 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.
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.
For example, thermometers distributed by our Health & Wellness segment must comply with various regulations governing the production and distribution of medical devices.
For example, thermometers distributed by our Beauty & Wellness segment must comply with various regulations governing the production and distribution of medical devices.
If we are unable to attract or retain the right individuals for the team, it could hinder our ability to grow our business and could disrupt our operations or otherwise have a material adverse effect on our business.
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.
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 30% of our consolidated net sales revenue in fiscal 2022.
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 27% of our consolidated net sales revenue in fiscal 2023.
While only three customers individually accounted for 10% or more of our consolidated net sales revenue in fiscal 2022, sales to our top five customers in aggregate accounted for approximately 49% of fiscal 2022 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.
While only three customers individually accounted for 10% or more of our consolidated net sales revenue in fiscal 2023, sales to our top five customers in aggregate accounted for approximately 43% of fiscal 2023 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.
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 substantial portion of our sales revenue comes from selling products under licensed trademarks, particularly in the Beauty and Health & Wellness segments.
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.
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, and increased security restrictions associated with the carriers’ ability to provide delivery services to meet our shipping needs.
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.
We rely on our Chief Executive Officer 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.
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.
Some of our customers creditworthiness may be vulnerable to the impact of COVID-19 or a prolonged economic downturn. We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate.
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.
Additionally, we may have heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements. Our workforce is in a state of transition to a combination of remote work and flexible work schedules opening us up for cybersecurity threats and potential breaches as a result of increased employee usage of networks other than company-managed.
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 employee usage of networks other than company-managed.
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.
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.
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.
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.
The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.
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.
In addition, natural disasters or other extraordinary events may disrupt our information systems and other infrastructure, and our data recovery processes may not be sufficient to protect against loss. Certain of our U.S. distribution facilities are geographically concentrated and operate during peak shipping periods at or near capacity.
In addition, natural disasters or other extraordinary events may disrupt our information systems and other infrastructure, and our data recovery processes may not be sufficient to protect against loss. Certain of our U.S. distribution facilities are geographically concentrated.
If such trends continue, 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.
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.
In addition, covenants in our debt agreements could restrict or delay our ability to 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.
In addition, covenants in our debt agreements 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 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 future downturn from the effects of COVID-19 or other public health crises.
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 (including any lingering effects of new surges of COVID-19) or similar conditions.
In addition to increasing cost trends, our third party manufacturing partners are not equipped to hold meaningful amounts of inventory and if shipping container capacity remains limited or unavailable, they could pause manufacturing, which could ultimately impact our ability to meet consumer demand on a timely basis.
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, 17 Table of Contents which could ultimately impact our ability to meet consumer demand on a timely basis.
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, credit facilities, and other debt arrangements. If our sources of liquidity do not satisfy our requirements, we may need to seek additional financing.
Without sufficient liquidity, we could be forced to curtail 26 Table of Contents 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, credit facilities, and other debt arrangements.
While we do not anticipate material fines or penalties by the EPA, there can be no assurances that such fines or penalties will not be imposed against us. Additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today.
Although, we are not aware of any fines or penalties related to this matter imposed against us by the EPA, there can be no assurances that such fines or penalties will not be imposed. Additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today.
For fiscal 2022, finished goods manufactured in Asia comprised approximately 88% of total finished goods purchased.
For fiscal 2023, finished goods manufactured in Asia comprised approximately 87% of total finished goods purchased.
These factors increase 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. Most of our U.S. distribution, receiving and storage functions are consolidated into two distribution facilities in northern Mississippi.
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 2023, most of our U.S. distribution, receiving and storage functions were consolidated into three distribution facilities in northern Mississippi.
During fiscal 2022, the average exchange rate of the Chinese Renminbi strengthened against the U.S. dollar by approximately 5% compared to the average rate during fiscal 2021. Chinese Renminbi currency fluctuations have the potential to add volatility to our product costs over time.
The Chinese Renminbi has fluctuated against the U.S. Dollar in recent years. During fiscal 2023, the average exchange rate of the Chinese Renminbi weakened against the U.S. dollar by approximately 6% compared to the average rate during fiscal 2022. Chinese Renminbi currency fluctuations have the potential to add volatility to our product costs over time.
As a result of such circumstances and the current public health crisis, we may be required to revise certain accounting estimates and judgments such as those 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.
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.
Consumer spending in any geographic region is generally affected by a number of factors, including local economic conditions, government actions, inflation, interest rates, energy costs, unemployment rates, gasoline prices, and consumer confidence, all of which are beyond our control.
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.
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 dealing 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.
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 dealing with local and federal law enforcement.
These projections are highly subjective since sales to our customers can fluctuate substantially based on the demand of their retail consumers and related ordering 28 Table of Contents patterns, as well as other risks described in this Annual Report.
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.
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.
We record impairment charges to the extent the carrying values of these assets are not recoverable in accordance with the applicable accounting standards. 25 Table of Contents 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.
We are evaluating the guidelines and will be implementing changes as needed to comply with the legislation. However, 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.
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.
Additionally, the impact of COVID-19, as well as other factors, has continued to strain the global supply chain network resulting in higher inbound freight costs and surges in prices for raw materials, components and semiconductor chips, which has adversely impacted our operating costs.
Additionally, during fiscal 2021 and 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.
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. Failure to comply with the economic substance requirements could result in automatic disclosure of relevant information to competent authorities in the EU (and perhaps elsewhere).
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.
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.
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.
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 drive up fuel prices resulting in higher transportation prices and product costs.
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 drive up fuel prices resulting in higher transportation prices and product costs. We are heavily dependent on inbound sea, rail and truck freight.
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.
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.
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 seizures, any of which could have a material adverse effect on our business, results of operations and financial condition.
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 seizures, any of which could have a material adverse effect on our business, results of operations and financial condition. 22 Table of Contents Additionally, some product lines within our Beauty & Wellness segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S.
Changes in the relation of other foreign currencies to the U.S. Dollar will affect our sales and profitability and can result in 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”).
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 exchange losses because we have operations and assets located outside the U.S.
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.
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.
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 19 to the accompanying consolidated financial statements.
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.
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.
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 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.
There are numerous uncertainties 15 Table of Contents 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, 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.
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. 19 Table of Contents 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.
Other sanctions include financial penalties, restriction or regulation of business activities and/or being struck off as a registered entity in Bermuda or Barbados. 24 Table of Contents 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.
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.
Sales volumes for thermometers, 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 20 Table of Contents and summer months. Weather conditions can also more broadly impact sales across the organization.
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.
Any acquisition or divestiture, 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.
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.
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. Under current tax law, favorable tax treatment of our non-U.S. income is dependent on our ability to avoid classification as a Controlled Foreign Corporation.
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.
Approximately 67% of our consolidated gross sales volume shipped from facilities in this region in fiscal 2022. For this reason, any disruption in our distribution process in either of these facilities, even for a few days, could adversely affect our business, operating results and financial condition.
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.
These and other factors described above could cause delays in the delivery of our products and increases in shipping and storage costs that could have a material and 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. To compete successfully, we must develop and introduce a continuing stream of innovative new products to meet changing consumer preferences.
We are heavily dependent on inbound sea, rail and truck freight. Disruptions in the global supply chain and freight networks, including shortages of qualified drivers, has, and may continue to limit inbound and outbound shipment capacity and increase our cost of goods sold and certain operating expenses.
Disruptions in the global supply chain and freight networks, has, and may continue to increase our cost of goods sold and certain operating expenses.
As of April 20, 2022, the remaining amount available for borrowings under our Credit Agreement was $192.8 million. 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.
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.
Business, Operational and Strategic Risks 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.
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. 13 Table of Contents Business, Operational and Strategic Risks 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.
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.
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 21 Table of Contents estimates.
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.
For additional information regarding our taxes, see Note 19 to the accompanying consolidated financial statements. 24 Table of Contents 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.
Additionally, we frequently evaluate our portfolio of business products and may consider divestitures or exits of businesses that we no longer believe to be an appropriate strategic fit.
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.
Our ERP system is subject to continually evolving cybersecurity and technological risks, including risks associated with cloud data storage.
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.
These matters may include personal injury and other tort claims, deceptive trade practice disputes, intellectual property disputes, 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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of February 28, 2022, 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. Our U.S. headquarters are located in El Paso, Texas, and we have two main distribution facilities in Southaven and Olive Branch, Mississippi, which service all of our segments.
Biggest changeItem 2. Properties As of February 28, 2023, 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 are currently constructing an additional distribution facility in Gallaway, Tennessee that we expect to be operational by the end of fiscal year 2023 and will service our Home & Outdoor segment. We believe our facilities are adequate to conduct our business.
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 our Home & Outdoor segment. We believe our facilities are adequate to conduct our business.
Added
Our U.S. headquarters is located in El Paso, Texas, and we own two main distribution facilities in Southaven and Olive Branch, Mississippi, and lease one distribution facility in Olive Branch, Mississippi, which service both of our segments.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile we have resumed normalized levels of shipping of the affected inventory, we are still in process of repackaging our existing inventory of impacted products. Additionally, as a result of continuing dialogue with the EPA, we are executing further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products.
Biggest changeAdditionally, 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.
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 Health & Wellness segment that are sold in the U.S.
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.
Litigation is inherently unpredictable, and the resolution or disposition of these proceedings could, if 29 Table of Contents adversely determined, have a material and adverse impact on our financial position and results of operations.
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.
The complaint in the ITC Action also alleges patent infringement by the Company with respect to its PUR gravity-fed water filtration systems. In the ITC Action, Brita LP requested the ITC to initiate an unfair import investigation relating to the filtration systems.
The complaint in the ITC Action also alleges 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.
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 across this line of products in the U.S. as we worked with the EPA towards an expedient resolution.
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 consolidated and Health & Wellness segment’s net sales revenue, gross profit and operating income during fiscal 2022 was materially and adversely impacted by the stop shipment actions and the time needed to execute repackaging plans after changes were approved by the EPA.
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.
While we do not anticipate material fines or penalties, there can be no assurances that such fines or penalties will not be imposed. See Note 13 to the accompanying consolidated financial statements for further discussion. Item 4. Mine Safety Disclosures Not applicable. 30 Table of Contents PART II
Although, we are not aware of any fines or penalties related to this matter imposed against us by the EPA, there can be no assurances that such fines or penalties will not be imposed. See Note 13 to the accompanying consolidated financial statements for further discussion. Item 4. Mine Safety Disclosures Not applicable. 30 Table of Contents PART II
It seeks injunctive relief to prevent entry of PUR products (and certain other products) into the U.S. and removal of existing inventory that is already in the U.S. On January 25, 2022, the ITC instituted the investigation requested by the ITC Action. The Patent Litigation has been stayed pending resolution of the ITC Action.
This action seeks 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.
We intend to vigorously pursue our claims and defenses in these proceedings. However, we cannot predict the outcome of these proceedings, the amount or range of any potential loss, or when the proceedings will be resolved.
We cannot predict the outcome of these proceedings, the amount or range of any potential loss, when the proceedings will be resolved, or 29 Table of Contents customer acceptance of any replacement water filter.
Removed
The EPA approved modest changes to our labeling claims on packaging of the air and water filtration impacted products, which we implemented, and subsequently resumed shipping during fiscal 2022.
Added
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.
Removed
If we are not able to execute our repackaging plans on schedule to meet demand, our net sales revenue, gross profit and operating income could continue to be materially and adversely impacted. At this time, we are not aware of any fines or penalties related to this matter imposed against us by the EPA.
Added
On February 28, 2023, the ITC issued an Initial Determination in the ITC Action, tentatively ruling against Kaz USA, Inc. and the other respondents.
Added
The ITC has a guaranteed review process, and thus all respondents, including Kaz USA, Inc., filed a petition with the ITC for a full review of the Initial Determination prior to the ITC making any final decision in this matter. We are now awaiting a decision by the ITC regarding whether it will review any portion of the Initial Determination.
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The final decision in the ITC Action is expected by June 28, 2023. The Patent Litigation has been stayed pending resolution of the ITC Action.
Added
While we intend to continue to vigorously pursue our claims and defenses in these proceedings, we have also implemented mitigation plans to help minimize the expected potential impact to the Company, its customers and consumers of a negative ITC decision.
Added
These mitigation plans include the introduction of an alternative replacement water filter that could be distributed to customers promptly following a potentially adverse ITC decision at the end of June.
Added
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging of our existing inventory of impacted products during fiscal 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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.
Biggest changeThe 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.
Item 5. Market for Registrant's Common Equity, Related Shareholder 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 28, 2022.
Item 5. Market for Registrant's Common Equity, Related Shareholder 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 28, 2023.
For additional information, see Note 11 to the accompanying consolidated financial statements. 32 Table of Contents 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, 2017. The Peer Group Index is the Dow Jones - U.S.
For additional information, see Note 11 to the accompanying consolidated financial statements. 32 Table of Contents 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, 2018. The Peer Group Index is the Dow Jones U.S. Personal Products Index.
As of April 21, 2022, there were 119 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.
As of April 21, 2023, there were 111 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.
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 33 Table of Contents Item 7.
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.
Net exercises are treated as purchases and retirements of shares. 31 Table of Contents Share repurchase activity during the three-month period ended February 28, 2022, 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, 2021 21 $ 246.27 21 $ 497,166 January 1 through January 31, 2022 338,720 221.24 338,720 422,227 February 1 through February 28, 2022 1,170 204.80 1,170 421,988 Total 339,911 $ 221.19 339,911 (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.
Net exercises are treated as purchases and retirements of shares. 31 Table of Contents Share repurchase activity during the three-month period ended February 28, 2023, 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, 2022 20 $ 178.83 20 $ 403,634 January 1 through January 31, 2023 13 127.03 13 403,632 February 1 through February 28, 2023 88 113.03 88 403,623 Total 121 $ 125.41 121 (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 three-month period ended February 28, 2022, 152 shares were acquired from associates at an average price per share of $215.68. (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 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.
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Personal Products, Broad Market Cap, Yearly, and Total Return 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.
Removed
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.
Removed
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 number-one and number-two positions in their respective categories and include OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools and Drybar.
Removed
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 asset impairment charges, acquisition-related expenses, EPA compliance costs, restructuring charges, tax reform, amortization of intangible assets, and non-cash share-based compensation for the periods presented, as applicable.
Removed
These measures may be considered non-GAAP financial information as set forth in SEC Regulation G, Rule 100. The tables reconcile these measures to their corresponding GAAP-based measures presented in our consolidated statements of income.
Removed
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.
Removed
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.
Removed
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 are incurred, even though such charges and benefits may be incurred and reflected in our GAAP financial results in the near future.
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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.
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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 information and may be calculated differently than non-GAAP financial information disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP information.
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These non-GAAP measures are discussed further and reconciled to their applicable GAAP-based measures contained in this MD&A beginning on page 50. We also refer to a number of other key financial measures, some of which are non-GAAP. Management primarily uses these measures to evaluate historical performance on a comparable basis, predict future performance and benchmark our performance against our competitors.
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Management also uses certain of these financial measures to calculate and monitor our compliance with the covenants in our Credit Agreement and determine amounts available for borrowings. We believe these measures provide management and investors with important information that is useful in understanding our business results, trends and the covenants in our Credit Agreement.
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The following represents our key financial measures: • Accounts receivable turnover: Twelve-month trailing net sales revenue divided by the average of the current and prior four fiscal quarters’ ending accounts receivable balances.
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This result is divided by 365 days to express turnover in terms of average days outstanding. 34 Table of Contents • Core business sales: Net sales revenue associated with strategic business that we expect to be an ongoing part of our operations. • Current ratio: Current assets divided by current liabilities at the end of a reporting period, expressed as a ratio. • EBITDA: Earnings before interest, taxes, depreciation and amortization expense. • Ending debt to ending equity ratio: Total interest bearing short- and long-term debt divided by stockholders’ equity at the end of a reporting period, expressed as a ratio. • Gross profit margin: Gross profit divided by the related net sales revenue expressed as a percentage. • Inventory turnover: Trailing twelve month cost of goods sold divided by the average of the current and prior four fiscal quarters’ ending inventory balances to express turnover in terms of the number of times per year. • Leadership Brand sales revenue, net: Net sales revenue from brands which have number-one and number-two positions in their respective categories and include OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools and Drybar. • Leverage ratio: Total current and long-term debt plus outstanding letters of credit, divided by EBITDA plus non-cash charges and certain allowed addbacks, less certain non-cash income, plus the pro forma effect of acquisitions and certain pro forma run-rate cost savings for acquisitions and dispositions, as defined in our Credit Agreement. • Non-Core business sales: Net sales revenue associated with business or net assets (including net assets held for sale) that we expect to divest within a year of its designation as Non-Core. • Online channel net sales: Direct to consumer online net sales, net sales to retail customers fulfilling end-consumer online orders and net sales to pure-play online retailers. • Operating margin: Operating income for the Company or a business segment divided by the related net sales revenue for the Company or a business segment. • Organic business sales: 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. • Return on average equity: Trailing twelve month net income divided by the average of the current and prior four fiscal quarters’ ending stockholders’ equity. • SG&A ratio: Total selling, general and administrative expense (“SG&A”) divided by net sales revenue. • Working capital: Current assets less current liabilities. 35 Table of Contents Overview We are a leading global consumer products company offering creative products and solutions for our customers through a diversified portfolio of brands.
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We have built leading market positions through new product innovation, product quality and competitive pricing. We currently operate in three segments consisting of Home & Outdoor, Health & Wellness and Beauty.
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In the fourth quarter of fiscal 2022, we changed the names of two of our segments to align with the growth in certain product offerings and brands within our portfolio.
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Our previously named “Housewares” segment was changed to “Home & Outdoor,” and our previously named “Health & Home” segment was changed to “Health & Wellness.” There were no changes to the products or brands included within our reportable segments as part of these name changes.
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The Osprey brand and products were added to the Home & Outdoor segment upon the completion of the acquisition of Osprey discussed further below. In fiscal 2015, we launched a five-year transformational strategy designed to improve the performance of our business segments and strengthen our shared service capabilities.
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Fiscal 2019 marked the completion of Phase I of our multi-year transformation strategy, which delivered performance across a wide range of measures.
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We improved organic sales growth by focusing on our Leadership Brands, made strategic acquisitions, became a more efficient operating company with strong global shared services, upgraded our organization and culture, improved inventory turns and return on invested capital, and returned capital to shareholders.
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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 include improved organic sales growth, continued margin expansion, and strategic and effective capital deployment.
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Phase II includes continued investment 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 are building further shared service capability and operating efficiency, as well as focusing on attracting, retaining, unifying and training the best people.
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Additionally, we are continuing to enhance and consolidate our ESG efforts and accelerate programs related to DE&I to support our Phase II transformation. Consistent with our 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 Personal Care business.
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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.
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Subsequent to our fiscal 2022 year end, on March 25, 2022, we completed the sale of the Latin America and Caribbean Personal Care businesses to HRB Brands LLC, for $1.8 million in cash. 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.
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Accordingly, we continued to classify the identified net assets of the Latin America and Caribbean Personal Care businesses as held for sale in our fiscal 2022 consolidated balance sheet. See Note 4 to the accompanying consolidated financial statements for additional information.
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Subsequent to our fiscal 2022 year end, 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, net of cash acquired, was $150.0 million in cash, subject to certain customary closing adjustments.
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The acquisition was funded with cash on hand and borrowings from our existing revolving credit facility. On December 29, 2021, we completed the acquisition of Osprey, a longtime U.S. leader in technical and everyday packs, for $410.9 million in cash, net of a preliminary closing net working capital adjustment and cash acquired.
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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, 36 Table of Contents trail running, commuting, and school, as well as rugged adventure travel packs, wheeled luggage, and travel accessories.
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On December 22, 2020, we entered into an amended and extended Trademark License Agreement with Revlon to license Revlon’s trademark for hair care appliances and tools (the “Revlon License”). The Revlon License grants us an exclusive, global, fully paid-up license to use the licensed trademark to manufacture, sell and distribute licensed merchandise in accordance with the terms of the agreement.
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The Revlon License has an initial term of 40 years, which will automatically renew at the end of the initial term for three consecutive additional 20-year periods unless we give notice of non-renewal.
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The Revlon License amends and restates the existing Revlon trademark licensing agreements entirely, and eliminates ongoing royalties we have historically paid and recognized as expense within SG&A in accordance with such agreements.
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In exchange for this exclusive global license, we paid a one-time, up-front license fee of $72.5 million, which was recorded as an intangible asset at cost and is being amortized on a straight-line basis over a useful life of 40 years, representing the initial term.
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As a result of the Revlon License, we are no longer obligated to pay royalties to Revlon, and thus have not recognized royalty expense after December 22, 2020, the effective date of the Revlon License. On January 23, 2020, we completed the acquisition of Drybar Products, for approximately $255.9 million in cash.
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Drybar is an innovative, trend-setting prestige hair care and styling brand in the multibillion-dollar beauty industry. In fiscal 2018, we announced a restructuring plan (referred to as “Project Refuel”) intended to enhance performance primarily in the Beauty and former Nutritional Supplements segments. Project Refuel includes charges for a reduction-in-force and the elimination of certain contracts.
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During the first quarter of fiscal 2019, we expanded Project Refuel to include the realignment and streamlining of our supply chain structure. During fiscal 2022, we incurred $0.4 million of pre-tax restructuring costs related to Project Refuel.
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During the fourth quarter of fiscal 2022, we completed the plan, which resulted in total restructuring charges of $9.6 million and total annualized profit improvements of approximately $12.5 million over the duration of the plan. See Note 12 to the accompanying consolidated financial statements for additional information.
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Subsequent to our fiscal 2022 year end, on March 30, 2022, a third-party facility that we utilize for inventory storage incurred severe damage from a weather-related incident. The inventory stored at this facility primarily relates to our Health & Wellness and Beauty segments.
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While the inventory is insured, some seasonal inventory and inventory designated for specific customer promotions is currently not accessible, and as a result, may unfavorably impact our net sales revenue in the first half of fiscal 2023.
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We are working with local officials and our insurance provider to understand the extent of the damage, however the building must be assessed and made structurally sound before we will have access to the inventory and be able to fully assess damages.
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The potential financial impact of this weather-related incident remains ongoing and could have a material adverse effect on our operating results and financial condition. Significant Trends Impacting the Business Impact of COVID-19 In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) to be a pandemic. COVID-19 has spread throughout the U.S. and the world.
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COVID-19 is impacting consumer shopping patterns and demand for goods in certain product categories. Additionally, COVID-19 has disrupted certain parts of our supply chain, which in certain cases, limited our ability to fulfill demand and may limit our ability to fulfill demand in the future.
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Surges in demand and shifts in shopping patterns related to COVID-19, as well as other factors, have strained the global freight network, which is resulting in higher costs, less capacity, and longer lead times. 37 Table of Contents During fiscal 2021, the COVID-19 related impact on our business included the effect of temporary closures of certain customer stores or limited hours of operation and materially lower store traffic which shifted consumer shopping preferences from brick and mortar to more online purchases.
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In addition, we saw high demand for healthcare products as well as cooking, storage and related product lines as consumers spent more time at home. We also experienced disruptions to our supply chain due to shifting consumer purchasing patterns, limited capacity of shipping containers, and COVID-19 related work stoppages in the global supply chain.
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During the first quarter of fiscal 2021, we implemented a number of temporary precautionary cost reduction measures, many of which we reversed during the second quarter of fiscal 2021, including restoration of all wages, salaries and director compensation to pre-COVID-19 levels. In addition, during the third quarter of fiscal 2021, we reinstituted merit increases, promotions and new associate hiring.
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In the third and fourth quarters of fiscal 2021, we continued to increase the amount of our investments including marketing, new product development and capital expenditures to continue progressing our Phase II transformation plan and longer-term opportunities to further grow our business. During fiscal 2022, we were adversely impacted by COVID-19 related global supply chain disruptions and cost increases.
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We also saw recovery of our product lines and brands that were unfavorably impacted in fiscal 2021 as a result of the pandemic. Additionally, as customers have been able to return to more brick and mortar shopping, our mix of online sales has been negatively impacted compared to fiscal 2021.
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Impacts could arise in the future as this situation continues to evolve, and additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today.
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The extent of COVID-19’s impact on the demand for certain of our product lines in the future will depend on future developments, including the continued surges in the spread of COVID-19, our continued ability to source and distribute our products, the impact of COVID-19 on capital and financial markets, and the related impact on consumer confidence and spending, all of which are uncertain and difficult to predict considering the continuously evolving landscape.
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Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
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For additional information on our related material risks, see Item 1A., “Risk Factors.” Global Supply Chain and Related Cost Inflation Trends Surges in demand and shifts in shopping patterns related to COVID-19, as well as other factors, have continued to strain the global supply chain network, which has resulted in carrier-imposed capacity restrictions, carrier delays, and longer lead times.
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Demand for Chinese imports has caused shipment receiving and unloading backlogs at many U.S. ports that have been unable to keep pace with unprecedented inbound container volume. The situation has been further exacerbated by COVID-19 illness and protocols at many port locations.
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Due to the backlog and increasing trade imbalance with China, many shipping containers are not being sent back to China, or are being sent to China empty.
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With continued increases in demand for containers, limited supply and freight vendors bearing the cost of shipping empty containers, the market cost of inbound freight has increased by several multiples compared to calendar year 2020 averages.
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The disruptions in the global supply chain and freight networks are also resulting in shortages of qualified drivers, which has, and may continue to limit inbound and outbound shipment capacity and increase our costs of goods sold and certain operating expenses.
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In addition to increasing cost trends, our third party manufacturing partners are not equipped to hold meaningful amounts of inventory and if shipping container capacity remains limited or unavailable, they could pause manufacturing, which could ultimately impact our ability to meet consumer demand on a timely basis.
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Demand for raw materials, components and semiconductor chips impacted by the supply chain challenges described above has created surges in prices and shortages of these materials may become more significant which could further increase our costs.
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Further, in the U.S., the surge in demand for labor along with COVID-19 related government stimulus payments and rising hourly labor wages, have created labor shortages and higher labor costs.
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The majority of our hourly labor is employed in our distribution centers and these factors have, and may further, increase our costs and negatively impact our ability to attract and retain qualified associates. Global supply chain disruptions and related inflationary cost trends have adversely impacted our business, financial condition, cash flows 38 Table of Contents and results of operations.
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Continuation of current trends, or more pronounced adverse impacts may arise which could have further negative impacts to our business, results of operations and financial condition. EPA Compliance Costs Some product lines within our Health & Wellness segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S.
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Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.
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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 Health & Wellness segment that are sold in the U.S. The EPA did not raise any product quality, safety or performance issues.
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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. The EPA approved modest changes to our labeling claims on packaging of the air and water filtration impacted products, which we implemented, and subsequently resumed shipping during fiscal 2022.
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Our fiscal 2022 consolidated, and Health & Wellness segment’s, net sales revenue, gross profit, SG&A, and operating income was materially and adversely impacted by the stop shipment actions and the time needed to execute repackaging plans after changes were approved by the EPA.
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While we have resumed normalized levels of shipping of the affected inventory, we are still in process of repackaging our existing inventory of impacted products. Additionally, as a result of continuing dialogue with the EPA, we are executing further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products.
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If we are not able to execute our repackaging plans on schedule to meet demand, our net sales revenue, gross profit and operating income could continue to be materially and adversely impacted.
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In addition, our net sales revenue could be materially and adversely impacted by customer returns, an increase in sales discounts and allowances and by the potential impact of distribution losses at certain retailers.
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During fiscal 2022, we recorded a $13.1 million charge to cost of goods sold to write-off the obsolete packaging for the affected products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022.
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During fiscal 2022, we incurred additional compliance costs of $19.3 million, comprised of $14.6 million of incremental warehouse storage costs and legal fees, which were recognized in SG&A, and $4.7 million of storage, obsolete packaging and other charges from vendors, which were recognized in cost of goods sold.
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These charges are referred to throughout this Annual Report as “EPA compliance costs.” In addition, during fiscal 2022, we incurred and capitalized into inventory costs to repackage a portion of our existing inventory of the affected products and expect to continue to incur and capitalize such costs as we continue to repackage inventory.
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We also expect to incur additional compliance costs, which may include incremental freight, warehouse storage costs, charges from vendors, and legal fees, among other things. Such potential incremental EPA compliance costs will be expensed as incurred and could materially and adversely impact our consolidated and Health & Wellness segment's gross profit and operating income.
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Additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today. Accordingly, our business, results of operations and financial condition could be adversely and materially impacted in ways that we are not able to predict today.
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At this time, we are not aware of any fines or penalties related to this matter imposed against us by the EPA. While we do not anticipate material fines or penalties, there can be no assurances that such fines or penalties will not be imposed.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

106 edited+162 added−20 removed58 unchanged
Biggest changeFor 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 28, 2022 (in thousands) Home & Outdoor (1) Health & Wellness Beauty (2) Total Operating income, as reported (GAAP) $ 134,925 15.6 % $ 39,217 5.0 % $ 98,408 17.0 % $ 272,550 12.3 % Acquisition-related expenses 2,424 0.3 % — — % — — % 2,424 0.1 % EPA compliance costs — — % 32,354 4.2 % — — % 32,354 1.5 % Restructuring charges 369 — % — — % 11 — % 380 — % Subtotal 137,718 15.9 % 71,571 9.2 % 98,419 17.0 % 307,708 13.8 % Amortization of intangible assets 2,891 0.3 % 2,284 0.3 % 7,589 1.3 % 12,764 0.6 % Non-cash share-based compensation 13,812 1.6 % 12,001 1.5 % 8,805 1.5 % 34,618 1.6 % Adjusted operating income (non-GAAP) $ 154,421 17.8 % $ 85,856 11.0 % $ 114,813 19.8 % $ 355,090 16.0 % Fiscal Year Ended February 28, 2021 (in thousands) Home & Outdoor Health & Wellness Beauty (2) Total Operating income, as reported (GAAP) $ 122,487 16.8 % $ 94,103 10.6 % $ 64,898 13.5 % $ 281,488 13.4 % Asset impairment charges — — % — — % 8,452 1.8 % 8,452 0.4 % Restructuring charges 249 — % (6) — % 107 — % 350 — % Subtotal 122,736 16.9 % 94,097 10.6 % 73,457 15.3 % 290,290 13.8 % Amortization of intangible assets 2,055 0.3 % 8,611 1.0 % 6,977 1.4 % 17,643 0.8 % Non-cash share-based compensation 10,278 1.4 % 9,191 1.0 % 6,949 1.4 % 26,418 1.3 % Adjusted operating income (non-GAAP) $ 135,069 18.6 % $ 111,899 12.6 % $ 87,383 18.2 % $ 334,351 15.9 % Fiscal Year Ended February 29, 2020 (in thousands) Home & Outdoor Health & Wellness Beauty (2) Total Operating income (loss), as reported (GAAP) $ 123,135 19.2 % $ 68,166 9.9 % $ (13,050) (3.4) % $ 178,251 10.4 % Acquisition-related expenses — — % — — % 2,546 0.7 % 2,546 0.1 % Asset impairment charges — — % — — % 41,000 10.8 % 41,000 2.4 % Restructuring charges 1,351 0.2 % 93 — % 1,869 0.5 % 3,313 0.2 % Subtotal 124,486 19.4 % 68,259 10.0 % 32,365 8.5 % 225,110 13.2 % Amortization of intangible assets 2,055 0.3 % 10,539 1.5 % 8,677 2.3 % 21,271 1.2 % Non-cash share-based compensation 7,218 1.1 % 9,717 1.4 % 5,994 1.6 % 22,929 1.3 % Adjusted operating income (non-GAAP) $ 133,759 20.9 % $ 88,515 12.9 % $ 47,036 12.3 % $ 269,310 15.8 % (1) Fiscal 2022 includes approximately nine weeks of operating results from Osprey, acquired on December 29, 2021.
Biggest changeFor 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 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 % Fiscal Year Ended February 28, 2021 (in thousands) Home & Outdoor Beauty & Wellness Total Operating income, as reported (GAAP) $ 122,487 16.8 % $ 159,001 11.6 % $ 281,488 13.4 % Asset impairment charges — — % 8,452 0.6 % 8,452 0.4 % Restructuring charges 249 — % 101 — % 350 — % Subtotal 122,736 16.9 % 167,554 12.2 % 290,290 13.8 % Amortization of intangible assets 2,055 0.3 % 15,588 1.1 % 17,643 0.8 % Non-cash share-based compensation 10,278 1.4 % 16,140 1.2 % 26,418 1.3 % Adjusted operating income (non-GAAP) $ 135,069 18.6 % $ 199,282 14.5 % $ 334,351 15.9 % (1) Fiscal 2023 includes a full year of operating results from Osprey, acquired on December 29, 2021, compared to approximately nine weeks of operating results in fiscal 2022.
Consolidated Net Sales Revenue Comparison of Fiscal 2022 to 2021 Consolidated net sales revenue increased $124.6 million, or 5.9%, to $2,223.4 million, compared to $2,098.8 million.
Comparison of Fiscal 2022 to 2021 Consolidated net sales revenue increased $124.6 million, or 5.9%, to $2,223.4 million, compared to $2,098.8 million.
We evaluate long-lived assets held for sale quarterly to determine if fair value less cost to sell has changed during the reporting period. This analysis entails a significant amount of judgment and subjectivity. See Note 4 to the accompanying consolidated financial statements for additional information on our assets held for sale impairment analysis.
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. This analysis entails a significant amount of judgment and subjectivity. See Note 4 to the accompanying consolidated financial statements for additional information on our assets held for sale impairment analysis.
These factors were partially offset by: • a decrease in marketing expense; • lower royalty expense; • reduced amortization expense; and • the favorable leverage impact of net sales growth. Asset Impairment Charges Fiscal 2022 We did not record any asset impairment charges.
These factors were partially offset by: • a decrease in marketing expense; • lower royalty expense; • reduced amortization expense; and • the favorable leverage impact of net sales growth. Asset Impairment Charges Fiscal 2023 We did not record any asset impairment charges. Fiscal 2022 We did not record any asset impairment charges.
All statements that address operating results, events or developments that may occur in the future, including statements related to sales, 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.
All statements that address operating results, events or developments that may 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.
These factors were partially offset by: • a decrease in sales in our Health & Wellness segment as a result of the EPA packaging compliance matter and related stop shipment actions and stronger COVID-19 driven demand for healthcare and healthy living products, primarily in thermometry and air filtration, in the comparative prior year; and • a net sales revenue decline in Non-Core business primarily due to the sale of our North America Personal Care business during the second quarter of fiscal 2022.
These factors were partially offset by: • a net sales revenue decline in Non-Core business primarily due to the sale of our North America Personal Care business during the second quarter of fiscal 2022; and • a decrease in sales in our Beauty & Wellness segment as a result of the EPA packaging compliance matter and related stop shipment actions and stronger COVID-19 driven demand for healthcare and healthy living products, primarily in thermometry and air filtration, in the comparative prior year.
The increase in the consolidated SG&A ratio was primarily due to: • the comparative impact of higher personnel expense due to cost reduction initiatives in the prior year period related to the uncertainty of COVID-19; • EPA compliance costs of $14.6 million in the Health & Wellness segment as a result of the EPA packaging compliance matter and related stop shipment actions; • higher share-based compensation expense; and • increased distribution expense.
The increase in the consolidated SG&A ratio was primarily due to: • the comparative impact of higher personnel expense due to cost reduction initiatives in the prior year period related to the uncertainty of COVID-19; • EPA compliance costs of $14.6 million in the Beauty & Wellness segment as a result of the EPA packaging compliance matter and related stop shipment actions; • higher share-based compensation expense; and • increased distribution expense.
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”).
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 P3Y and are contingent upon meeting one or more defined operational performance metrics over the three year performance period (“Performance Condition Awards”).
Growth was driven by an increase from Organic business of $113.5 million, or 15.6%, primarily due to: 47 Table of Contents • higher brick and mortar and online channel sales driven by strong consumer demand and the favorable comparative impact of COVID-19 related store closures, reduced store traffic and a soft back-to-school season in the prior year; • higher sales in the club and closeout channels; • growth in international sales; and • the impact of customer price increases related to rising freight and product costs.
Growth was driven by an increase from Organic business of $113.5 million, or 15.6%, primarily due to: • higher brick and mortar and online channel sales driven by strong consumer demand and the favorable comparative impact of COVID-19 related store closures, reduced store traffic and a soft back-to-school season in the prior year; • higher sales in the club and closeout channels; • growth in international sales; and • the impact of customer price increases related to rising freight and product costs.
Diluted EPS decreased primarily due to lower operating income in the Health & Wellness segment and a higher effective income tax rate primarily due to the tax reform benefit recognized in the prior year, partially offset by higher operating income in the Beauty and Home & Outdoor segments and lower weighted average diluted shares outstanding.
Diluted EPS decreased primarily due to lower operating income in the Beauty & Wellness segment and a higher effective income tax rate primarily due to the tax reform benefit recognized in the prior year, partially offset by higher operating income in the Home & Outdoor segment and lower weighted average diluted shares outstanding.
Generally, the words “anticipates”, “believes”, “expects”, “plans”, “may”, “will”, “would”, “should”, “seeks”, “estimates”, “project”, “predict”, “potential”, “currently”, “continue”, “intends”, “outlook”, “forecasts”, “could”, and other similar words identify forward-looking statements.
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.
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.
These estimates 64 Table of Contents 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.
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 to manage our underlying business.
In projecting future taxable income, we begin with historical results and incorporate assumptions including future operating income, the reversal 63 Table of Contents 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 to manage our underlying business.
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. New Accounting Guidance For information on recently adopted and issued accounting pronouncements, see Note 2 to the accompanying consolidated financial statements.
Note 1 describes several 66 Table of Contents 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. New Accounting Guidance For information on recently adopted and issued accounting pronouncements, see Note 2 to the accompanying consolidated financial statements.
During fiscal 2021, we made total cash restructuring payments of $1.1 million and had a remaining liability of $0.1 million as of February 28, 2021. 49 Table of Contents 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 asset impairment charges, acquisition-related expenses, EPA compliance costs, 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.
During fiscal 2021, we made total cash restructuring payments of $1.1 million and had a remaining liability of $0.1 million as of February 28, 2021. 51 Table of Contents 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 asset impairment charges, acquisition-related expenses, EPA compliance costs, gain from insurance recoveries, 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.
The remaining 0.1 percentage point increase in consolidated operating margin was primarily driven by: • a favorable product mix within the Beauty and Home & Outdoor segment and a favorable mix of more Beauty and Home & Outdoor sales within our consolidated net sales revenue; • a decrease in marketing expense; • lower royalty expense; and • reduced amortization expense.
The remaining 0.1 percentage point increase in consolidated operating margin was primarily driven by: • a favorable mix of more Home & Outdoor sales within our consolidated net sales revenue; • a decrease in marketing expense; • lower royalty expense; and • reduced amortization expense.
In addition, capital expenditures of $26.2 million were made for molds, production and distribution equipment, information technology equipment, and software. Financing Activities Financing activities provided cash of $286.4 million in fiscal 2022 and used cash of $194.8 million in fiscal 2021.
In addition, capital expenditures of $26.2 million were made for molds, production and distribution equipment, information technology equipment, and software. Financing Activities Financing activities provided cash of $106.8 million and $286.4 million in fiscal 2023 and 2022, respectively, and used cash of $194.8 million in fiscal 2021.
The decrease was primarily driven by a decrease in cash earnings and increases in cash used primarily for inventory purchases, customer incentives, annual incentive compensation payments, and accounts receivable to extend credit to our retail customers, partially offset by an increase in accrued income taxes. 56 Table of Contents Investing Activities Investing activities used cash of $438.9 million and $98.7 million in fiscal 2022 and 2021, respectively.
The decrease was primarily driven by a decrease in cash earnings and increases in cash used primarily for inventory purchases, customer incentives, annual incentive compensation payments, and accounts receivable to extend credit to our retail customers, partially offset by an increase in accrued income taxes. 59 Table of Contents Investing Activities Investing activities used cash of $319.3 million, $438.9 million and $98.7 million in fiscal 2023, 2022 and 2021, respectively.
Our debt agreements also contain other customary covenants, including, among other things, covenants restricting or limiting us, except under certain conditions set forth therein, from (1) incurring debt, (2) incurring liens on our properties, (3) making certain types of investments, (4) selling certain assets or making other fundamental changes relating to mergers and consolidations, and (5) repurchasing shares of our common stock and paying dividends.
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 debt, (2) incurring liens on our properties, (3) making certain types of investments, (4) selling certain assets or making other fundamental changes relating to mergers and consolidations, and (5) repurchasing shares of our common stock and paying dividends.
Growth was driven by an increase from Organic business of $93.4 million, or 4.4%, primarily due to: • higher brick and mortar and online channel sales in our Beauty and Home & Outdoor segments primarily reflecting strong consumer demand and the favorable comparative impact of COVID-19 related store closures, reduced store traffic and a soft back-to-school season in the prior year; • higher sales in the club and closeout channels; • growth in consolidated international sales; and • the impact of customer price increases related to rising freight and product costs.
Growth was driven by an increase from Organic business of $93.4 million, or 4.4%, primarily due to: • higher brick and mortar and online channel sales in our Home & Outdoor segment and our Beauty & Wellness segment's hair appliances category primarily reflecting strong consumer demand and the favorable comparative impact of COVID-19 related store closures, reduced store traffic and a soft back-to-school season in the prior year; • higher sales in the club and closeout channels; • growth in consolidated international sales; and • the impact of customer price increases related to rising freight and product costs.
For tax positions that do not meet the threshold requirement, we 60 Table of Contents 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.
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.
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 61 Table of Contents below an operating segment).
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).
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.
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.
(4) As defined in the Credit Agreement and Guaranty 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.
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 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 Shareholder Matters and Issuer Purchases of Equity Securities” in this Annual Report. Operating Activities Comparison of Fiscal 2022 to 2021 Operating activities provided net cash of $140.8 million compared to $314.1 million.
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 Shareholder Matters and Issuer Purchases of Equity Securities” in this Annual Report. Operating Activities Comparison of Fiscal 2023 to 2022 Operating activities provided net cash of $208.2 million compared to $140.8 million.
We 63 Table of Contents undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
Segment Net Sales Revenue Home & Outdoor Comparison of Fiscal 2022 to 2021 Net sales revenue increased $138.5 million, or 19.0%, to $865.8 million, compared to $727.4 million.
Comparison of Fiscal 2022 to 2021 Net sales revenue increased $138.5 million, or 19.0%, to $865.8 million, compared to $727.4 million.
Highlights from Fiscal 2022 • We paid $410.9 million, net of cash acquired, to acquire Osprey and made investments in capital and intangible asset expenditures of $78.0 million, of which $55.8 million was for land and initial construction expenditures related to a new 2 million square foot distribution center for our Home & Outdoor segment.
Highlights from Fiscal 2022 • We paid $410.9 million, net of cash acquired, to acquire Osprey and made investments in capital and intangible asset expenditures of $78.0 million, of which $55.8 million was for land and initial construction expenditures related to a new 2 million square foot distribution facility.
The assumptions and estimates used in our impairment testing involve significant elements of subjective judgment and analysis by our management.
The assumptions and estimates used in our impairment testing involve significant elements of subjective judgment and analysis 65 Table of Contents by our management.
Our anticipated material cash requirements beyond fiscal 2023 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 2024 and fiscal 2026, in an aggregate principal value of approximately $814.3 million, with $799.5 million of that amount maturing in fiscal 2026 (refer to Note 14 for additional information); • estimated interest payments of approximately $10.8 million, $10.0 million and $0.4 million in fiscal 2024, fiscal 2025, and fiscal 2026, respectively, based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 28, 2022 (refer to Note 14 for additional information); • minimum operating lease payments of approximately $56.8 million over the term of our existing operating lease arrangements (refer to Note 3 for additional information); • minimum royalty payments of approximately $22.8 million over the term of the existing license agreements (refer to Note 13 for additional information); and • capital and intangible asset expenditures to support ongoing operations and future infrastructure needs.
Our anticipated material cash requirements beyond fiscal 2024 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 2025 and fiscal 2026, in an aggregate principal value of approximately $930.6 million, with $924.4 million of that amount maturing in fiscal 2026 (refer to Note 14 for additional information); • estimated interest payments of approximately $62.7 million and $3.9 million in fiscal 2025 and fiscal 2026, respectively, based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 28, 2023 (refer to Note 14 for additional information); • minimum operating lease payments of approximately $53.7 million over the term of our existing operating lease arrangements (refer to Note 3 for additional information); • minimum royalty payments of approximately $20.4 million over the term of the existing license agreements (refer to Note 13 for additional information); and • capital and intangible asset expenditures to support ongoing operations and future infrastructure needs.
All of our debt is unconditionally guaranteed, on a joint and several basis, by the Company and certain of its subsidiaries. Our debt agreements require the maintenance of certain key financial covenants, defined in the table below.
Debt Covenants All of our debt 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.
Restructuring Charges Fiscal 2022 We incurred $0.4 million of pre-tax restructuring costs related to employee severance and termination benefits under Project Refuel. During fiscal 2022, we made total cash restructuring payments of $0.5 million. Fiscal 2021 We incurred $0.4 million of pre-tax restructuring costs related to employee severance and termination benefits and contract termination costs under Project Refuel.
During fiscal 2022, we made total cash restructuring payments of $0.5 million. Fiscal 2021 We incurred $0.4 million of pre-tax restructuring costs related to employee severance and termination benefits and contract termination costs under a prior restructuring plan referred to as Project Refuel.
The table below provides the formulas currently in effect for certain key financial covenants as defined under our debt agreements: Applicable Financial Covenant Credit Agreement and MBFC Loan 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.
As of February 28, 2023, we were in compliance with all covenants as defined under the terms of the Credit Agreement. 62 Table of Contents 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 Allowed as of February 28, 2023: 4.00 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.
Highlights from Fiscal 2021 • we had draws of $937.4 million under our Credit Agreement; • we repaid $928.4 million drawn under our Credit Agreement; • we repaid $1.9 million of long-term debt; • we paid $3.8 million of financing costs in connection with the amendment of our Credit Agreement; and • we repurchased and retired 1,030,023 shares of common stock at an average price of $197.37 per share for a total purchase price of $203.3 million through a combination of open market purchases and the settlement of certain stock awards.
Highlights from Fiscal 2022 • we had draws of $998.2 million under our Credit Agreement; • we repaid $527.7 million drawn under our Credit Agreement; • we repaid $1.9 million of long-term debt; and • we repurchased and retired 854,959 shares of common stock at an average price of $220.13 per share for a total purchase price of $188.2 million through a combination of open market purchases and the settlement of certain stock awards. 60 Table of Contents Highlights from Fiscal 2021 • we had draws of $937.4 million under our Credit Agreement; • we repaid $928.4 million drawn under our Credit Agreement; • we repaid $1.9 million of long-term debt; • we paid $3.8 million of financing costs in connection with the amendment of our Credit Agreement; and • we repurchased and retired 1,030,023 shares of common stock at an average price of $197.37 per share for a total purchase price of $203.3 million through a combination of open market purchases and the settlement of certain stock awards.
Any increase to term loan commitments and revolving loan commitments must be made on terms identical to the revolving loans under the Credit Agreement and must have a maturity date of no earlier than March 13, 2025.
Any increase to term loan commitments and revolving loan commitments must be made on terms identical to the revolving loans under the Credit Agreement and must have a maturity date of no earlier than March 13, 2025. Outstanding letters of credit reduce the borrowing availability under the Credit Agreement on a dollar-for-dollar basis.
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 $140.8 million in cash from operations during fiscal 2022 and had $33.4 million in cash and cash equivalents at February 28, 2022.
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 $208.2 million in cash from operations during fiscal 2023 and had $29.1 million in cash and cash equivalents at February 28, 2023.
Consolidated adjusted operating income increased 6.2% to $355.1 million, or 16.0% of net sales revenue, compared to $334.4 million, or 15.9% of net sales revenue. Home & Outdoor Comparison of Fiscal 2022 to 2021 Operating income was $134.9 million, or 15.6% of segment net sales revenue, compared to $122.5 million, or 16.8% of segment net sales revenue.
Consolidated adjusted operating income increased 6.2% to $355.1 million, or 16.0% of net sales revenue, compared to $334.4 million, or 15.9% of net sales revenue. 53 Table of Contents Home & Outdoor Comparison of Fiscal 2023 to 2022 Operating income was $134.1 million, or 14.6% of segment net sales revenue, compared to $134.9 million, or 15.6% of segment net sales revenue.
The Osprey acquisition also contributed $24.4 million, or 1.2%, to consolidated net sales revenue growth. Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $6.8 million, or 0.3%. Net sales revenue from our Leadership Brands was $1,810.2 million, compared to $1,706.5 million, representing growth of 6.1%.
The Osprey acquisition also contributed $24.4 million, or 1.2%, to consolidated net sales revenue growth. Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $6.8 million, or 0.3%.
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.
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.
The decrease was primarily driven by a decrease from Organic business of $116.7 million, or 13.1%, primarily due to: • a decrease in both brick and mortar and online sales of air filtration, water filtration, and humidification products as a result of the EPA packaging compliance matter and related stop shipment actions; • a decline in sales of thermometers and air filtration products due to stronger COVID-19 driven demand for healthcare and healthy living products in the comparative prior year; and • the unfavorable impact on sales of air filtration products driven by greater wildfire activity on the west coast of the U.S. in the comparative prior year.
The decrease was primarily driven by a decrease from Organic business of $20.1 million, or 1.5%, primarily due to: • a decrease in both brick and mortar and online sales of air filtration, water filtration, and humidification products as a result of the EPA packaging compliance matter and related stop shipment actions; • a decline in sales of thermometers and air filtration products due to stronger COVID-19 driven demand for healthcare and healthy living products in the comparative prior year; • a decline in Non-Core business net sales revenue primarily due to the sale of the North America Personal Care business during the second quarter of fiscal 2022; and • the unfavorable impact on sales of air filtration products driven by greater wildfire activity on the west coast of the U.S. in the comparative prior year.
Consolidated operating income for fiscal 2021 included pre-tax asset impairment charges of $8.5 million and pre-tax restructuring charges of $0.4 million related to Project Refuel. • Consolidated adjusted operating income increased 6.2%, or $20.7 million, to $355.1 million, compared to $334.4 million for the same period last year.
Consolidated operating income for fiscal 2021 included pre-tax asset impairment charges of $8.5 million and pre-tax restructuring charges of $0.4 million. • Consolidated adjusted operating income increased 6.2%, or $20.7 million, to $355.1 million in fiscal 2022, compared to $334.4 million in fiscal 2021.
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.
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.
Credit Agreement and Other Debt Agreements Credit Agreement We have an amended credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders that provides for an unsecured total revolving commitment of $1.25 billion and matures on March 13, 2025.
Credit Agreement and Other Debt Agreements Credit Agreement We have a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders that provides for an unsecured total revolving commitment of $1.25 billion and matures on March 13, 2025. The Credit Agreement includes a $300 million accordion, which can be used for term loan commitments.
Consolidated operating margin decreased 1.1 percentage points to 12.3%, compared to 13.4% for the same period last year. Consolidated operating income for fiscal 2022 includes pre-tax restructuring charges of $0.4 million related to Project Refuel, pre-tax acquisition-related expenses of $2.4 million, and pre-tax EPA compliance costs of $32.4 million.
Consolidated operating margin decreased 1.1 percentage points to 12.3% in fiscal 2022, compared to 13.4% in fiscal 2021. Consolidated operating income for fiscal 2022 included pre-tax restructuring charges of $0.4 million, pre-tax acquisition-related expenses of $2.4 million, and pre-tax EPA compliance costs of $32.4 million.
The 5.6 percentage point decrease in segment operating margin is primarily due to: • unfavorable operating leverage; • EPA compliance costs of $32.4 million; • the net dilutive impact of inflationary costs and related customer price increases; 51 Table of Contents • higher personnel expense; • increased inventory obsolescence expense; • increased distribution expense; and • higher share-based compensation expense.
The 1.5 percentage point decrease in segment operating margin is primarily due to: • EPA compliance costs of $32.4 million; • higher salary and wage costs; • the net dilutive impact of inflationary costs and related customer price increases; • higher share-based compensation expense; and • increased distribution expense.
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. Our impairment test methodology primarily uses estimated future discounted cash flow models (“DCF Models”).
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.
Our debt agreements also contain customary events of default, including failure to pay principal or interest when due, among others. Our debt agreements are cross-defaulted to each other. Upon an event of default under our debt agreements, the holders or lenders may, among other things, accelerate the maturity of any amounts outstanding under our debt agreements.
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.
For additional information see Note 7 to the accompanying consolidated financial statements * Calculation is not meaningful. 42 Table of Contents Fiscal 2022 Financial Results • Consolidated net sales revenue increased 5.9%, or $124.6 million, to $2,223.4 million compared to $2,098.8 million for the same period last year. • Consolidated operating income decreased 3.2%, or $8.9 million, to $272.6 million, compared to $281.5 million for the same period last year.
For additional information see Note 7 to the accompanying consolidated financial statements. * Calculation is not meaningful. 43 Table of Contents Fiscal 2023 Financial Results • Consolidated net sales revenue decreased 6.8%, or $150.7 million, to $2,072.7 million compared to $2,223.4 million for the same period last year. • Consolidated operating income decreased 22.3%, or $60.8 million, to $211.8 million, compared to $272.6 million for the same period last year.
The decrease in consolidated gross profit margin was primarily due to: • the net dilutive impact of inflationary costs and related customer price increases; • EPA compliance costs recognized in cost of goods sold in the Health & Wellness segment of $17.8 million; and • a less favorable channel mix within the Home & Outdoor segment.
The decrease in consolidated gross profit margin was primarily due to: • the net dilutive impact of inflationary costs and related customer price increases; • EPA compliance costs recognized in cost of goods sold in the Beauty & Wellness segment of $17.8 million; and • a less favorable channel mix within the Home & Outdoor segment. 49 Table of Contents These factors were partially offset by a favorable mix of more Home & Outdoor sales within our consolidated net sales revenue.
Drybar Products sales prior to the first annual anniversary of the acquisition are reported in Acquisition in fiscal 2021 and consist of approximately 47 weeks of incremental operating results. For additional information see Note 7 to the accompanying consolidated financial statements.
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 7 to the accompanying consolidated financial statements.
Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $2.6 million, or 0.5%. 48 Table of Contents Consolidated Gross Profit Margin Comparison of Fiscal 2022 to 2021 Consolidated gross profit margin decreased 1.3 percentage points to 42.9%, compared to 44.2%.
Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $6.2 million, or 0.5%. Consolidated Gross Profit Margin Comparison of Fiscal 2023 to 2022 Consolidated gross profit margin increased 0.5 percentage points to 43.4%, compared to 42.9%.
For additional information see Note 7 to the accompanying consolidated financial statements. 50 Table of Contents Consolidated Operating Income Comparison of Fiscal 2022 to 2021 Consolidated operating income was $272.6 million, or 12.3% of net sales revenue, compared to $281.5 million, or 13.4% of net sales revenue.
For additional information see Note 7 to the accompanying consolidated financial statements. 52 Table of Contents Consolidated Operating Income Comparison of Fiscal 2023 to 2022 Consolidated operating income was $211.8 million, or 10.2% of net sales revenue, compared to $272.6 million, or 12.3% of net sales revenue.
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 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 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.
For additional information see Note 7 to the accompanying consolidated financial statements. (2) Fiscal 2020 includes approximately five weeks of operating results from Drybar Products, acquired on January 23, 2020, and fiscal 2022 and 2021 include a full year of operating results.
For additional information see Note 7 to the accompanying consolidated financial statements. (2) Fiscal 2022 includes approximately nine weeks of operating results from Osprey, acquired on December 29, 2021, and fiscal 2023 includes a full year of operating results.
The CARES Act is an emergency economic stimulus package in response to the COVID-19 outbreak that contains numerous tax provisions. Among other things, the CARES Act included technical corrections to the effective date language in the Tax Cuts and Jobs Act, enacted into law on December 22, 2017 (the “Tax Act”), related to net operating loss carrybacks.
Among other things, the CARES Act included technical corrections to the effective date language in the Tax Cuts and Jobs Act, enacted into law on December 22, 2017 (the “Tax Act”), related to net operating loss carrybacks.
Consolidated adjusted operating margin increased 0.1 percentage points to 16.0% of consolidated net sales revenue, compared to 15.9% for the same period last year. • Net income decreased 11.9%, or $30.2 million, to $223.8 million, compared to $253.9 million for the same period last year.
Consolidated adjusted operating margin increased 0.1 percentage point to 16.0% of consolidated net sales revenue in fiscal 2022, compared to 15.9% in fiscal 2021. • Net income decreased 11.9%, or $30.2 million, to $223.8 million in fiscal 2022, compared to $253.9 million in fiscal 2021.
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.
Our quantitative impairment test methodology primarily uses estimated future discounted cash flow models (“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.
Interest Expense Comparison of Fiscal 2022 to 2021 Interest expense was $12.8 million, compared to $12.6 million. The increase in interest expense was primarily due to higher average levels of debt outstanding, including borrowings to fund the acquisition of Osprey, partially offset by lower average interest rates compared to the prior year.
The increase in interest expense was primarily due to higher average levels of debt outstanding, including borrowings to fund the acquisition of Curlsmith, as well as construction of a new distribution facility, and higher average interest rates compared to the prior year. Comparison of Fiscal 2022 to 2021 Interest expense was $12.8 million, compared to $12.6 million.
Borrowings under the Credit Agreement bear interest at either the Base Rate or LIBOR, plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0%, respectively, for Base Rate and LIBOR borrowings. Outstanding letters of credit reduce the borrowing availability under the Credit Agreement on a dollar-for-dollar basis.
Following the amendment, borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term SOFR, plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively, plus a credit spread of 0.10% for Term SOFR borrowings.
The CARES Act effectively reversed the impact of the Tax Act on our net operating loss, resulting in a corresponding tax benefit of $9.4 million recorded in the first quarter of fiscal 2021.
The CARES Act effectively reversed the impact of the Tax Act on our net operating loss, resulting in a corresponding tax benefit of $9.4 million recorded in the first quarter of fiscal 2021. Our Macau subsidiary generates income from the sale of the goods that it has sourced and procured.
(2) Computed using the ending debt balances plus outstanding letters of credit as of the latest reported fiscal quarter. 59 Table of Contents (3) In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.25 to 1.00 for the first fiscal quarter after the qualified acquisition and then steps down until the maximum leverage ratio is 3.75 to 1.00 at the end of the fifth fiscal quarter after the qualified acquisition is consummated.
(3) In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.25 to 1.00 for the first fiscal quarter after the qualified acquisition and then steps down until the maximum leverage ratio is 3.75 to 1.00 at the end of the fifth fiscal quarter after the qualified acquisition is consummated.
In addition to the $150.0 million of cash used for our acquisition of Curlsmith, our anticipated remaining material cash requirements in fiscal 2023 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 $1.9 million; 55 Table of Contents • estimated interest payments of approximately $12.1 million based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 28, 2022; • minimum operating lease payments under existing obligations of approximately $8.3 million; • minimum royalty payments under existing license agreements of approximately $7.4 million; and • capital and intangible asset expenditures between approximately $180 million to $205 million to support ongoing operations and future infrastructure needs, including construction and equipment expenditures related to a new 2 million square foot distribution center that we expect to be operational by the end of fiscal 2023.
Our anticipated material cash requirements in fiscal 2024 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 $57.9 million based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 28, 2023; • minimum operating lease payments under existing obligations of approximately $9.4 million; • minimum royalty payments under existing license agreements of approximately $6.4 million; • restructuring payments under Project Pegasus of approximately $31.0 million (refer to Note 12 for additional information); and 58 Table of Contents • capital and intangible asset expenditures between approximately $45 million to $50 million for automation equipment at our new distribution facility and to support ongoing operations and future infrastructure needs.
Diluted EPS decreased 9.0% to $9.17, compared to $10.08 for the same period last year. • Adjusted income increased 2.8% to $301.8 million, compared to $293.7 million for the same period last year.
Diluted EPS decreased 9.0% to $9.17 in fiscal 2022, compared to $10.08 in fiscal 2021. • Adjusted income increased 2.8% to $301.8 million in fiscal 2022, compared to $293.7 million in fiscal 2021.
Fiscal 2021 As a result of our quarterly impairment evaluation of long-lived assets held for sale, we recorded an asset impairment charge of $8.5 million ($7.4 million after tax) to reduce the goodwill of our Personal Care business during the fourth quarter of fiscal 2021.
Fiscal 2021 As a result of our quarterly impairment evaluation of long-lived assets held for sale, we recorded an asset impairment charge of $8.5 million ($7.4 million after tax) to reduce the goodwill of our Personal Care business during the fourth quarter of fiscal 2021. 50 Table of Contents Restructuring Charges 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.
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 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 Fiscal Year Ended February 28, 2021 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 269,430 $ 15,484 $ 253,946 $ 10.69 $ 0.61 $ 10.08 Asset impairment charges 8,452 1,009 7,443 0.34 0.04 0.30 Restructuring charges 350 2 348 0.01 — 0.01 Tax reform — 9,357 (9,357) — 0.37 (0.37) Subtotal 278,232 25,852 252,380 11.04 1.03 10.02 Amortization of intangible assets 17,643 865 16,778 0.70 0.03 0.67 Non-cash share-based compensation 26,418 1,926 24,492 1.05 0.08 0.97 Adjusted (non-GAAP) $ 322,293 $ 28,643 $ 293,650 $ 12.79 $ 1.14 $ 11.65 Weighted average shares of common stock used in computing diluted EPS 25,196 Fiscal Year Ended February 29, 2020 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 165,940 $ 13,607 $ 152,333 $ 6.55 $ 0.54 $ 6.02 Acquisition-related expenses 2,546 38 2,508 0.10 — 0.10 Asset impairment charges 41,000 4,574 36,426 1.62 0.18 1.44 Restructuring charges 3,313 161 3,152 0.13 0.01 0.12 Subtotal 212,799 18,380 194,419 8.40 0.73 7.68 Amortization of intangible assets 21,271 1,245 20,026 0.84 0.05 0.79 Non-cash share-based compensation 22,929 1,803 21,126 0.91 0.07 0.83 Adjusted (non-GAAP) $ 256,999 $ 21,428 $ 235,571 $ 10.15 $ 0.85 $ 9.30 Weighted average shares of common stock used in computing diluted EPS 25,322 54 Table of Contents Comparison of Fiscal 2022 to 2021 Net Income was $223.8 million compared to $253.9 million.
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 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 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 Fiscal Year Ended February 28, 2021 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 269,430 $ 15,484 $ 253,946 $ 10.69 $ 0.61 $ 10.08 Asset impairment charges 8,452 1,009 7,443 0.34 0.04 0.30 Restructuring charges 350 2 348 0.01 — 0.01 Tax reform — 9,357 (9,357) — 0.37 (0.37) Subtotal 278,232 25,852 252,380 11.04 1.03 10.02 Amortization of intangible assets 17,643 865 16,778 0.70 0.03 0.67 Non-cash share-based compensation 26,418 1,926 24,492 1.05 0.08 0.97 Adjusted (non-GAAP) $ 322,293 $ 28,643 $ 293,650 $ 12.79 $ 1.14 $ 11.65 Weighted average shares of common stock used in computing diluted EPS 25,196 57 Table of Contents Comparison of Fiscal 2023 to 2022 Net Income was $143.3 million compared to $223.8 million.
These factors were partially offset by: • a decrease in marketing expense; • lower inbound air freight expense; • the favorable comparative impact of tariff exclusion refunds received in fiscal 2022; • lower royalty expense; • reduced amortization expense; and • decreased annual incentive compensation expense.
These factors were partially offset by: • a decrease in marketing expense; • lower inbound air freight expense; • the favorable comparative impact of tariff exclusion refunds received in fiscal 2022; • reduced royalty expense, primarily as a result of the amended Revlon trademark license; • a decrease in asset impairment charges of $8.5 million; and • reduced amortization expense.
These factors were partially offset by an increase in sales of fans as some customers accelerated seasonal orders, and the impact of customer price increases related to rising freight and product costs. Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $3.6 million, or 0.4%.
These factors were partially offset by higher sales in the closeout channel and the impact of customer price increases related to rising freight and product costs. Net sales revenue was also unfavorably impacted by net foreign currency fluctuations of approximately $9.3 million, or (1.1)%.
Osprey sales are reported in Acquisition in fiscal 2022 and consist of approximately nine weeks of operating results. For additional information see Note 7 to the accompanying consolidated financial statements. (2) On January 23, 2020, we completed the acquisition of Drybar Products.
Curlsmith sales are reported in Acquisition for the Beauty & Wellness segment in fiscal 2023 and consist of approximately forty-five weeks of operating results. For additional information see Note 7 to the accompanying consolidated financial statements. (2) On December 29, 2021, we completed the acquisition of Osprey. As such, fiscal 2022 includes approximately nine weeks of operating results from Osprey.
As of February 28, 2022, the amount of cash and cash equivalents held by our foreign subsidiaries was $25.5 million. Capital and intangible asset expenditures in fiscal 2022 of $78.0 million included the purchase of land and initial construction expenditures related to a new two million square foot distribution center for our Home & Outdoor segment.
As of February 28, 2023, the amount of cash and cash equivalents held by our foreign subsidiaries was $27.0 million. Capital and intangible asset expenditures in fiscal 2023 of $174.9 million included construction expenditures inclusive of capitalized interest related to a new two million square foot distribution facility.
Health & Wellness Comparison of Fiscal 2022 to 2021 Operating income was $39.2 million, or 5.0% of segment net sales revenue, compared to $94.1 million, or 10.6% of segment net sales revenue.
Beauty & Wellness Comparison of Fiscal 2023 to 2022 Operating income was $77.7 million, or 6.7% of segment net sales revenue, compared to $137.6 million, or 10.1% of segment net sales revenue.
During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Personal Care business. As a result, sales from 45 Table of Contents our Personal Care business are included in Non-Core business for all periods presented. On June 7, 2021, we completed the sale of our North America Personal Care business.
During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Personal Care business. On June 7, 2021, we completed the sale of our North America Personal Care business and on March 25, 2022, we completed 45 Table of Contents the sale of the Latin America and Caribbean Personal Care businesses.
Borrowings accrue interest under one of two alternative 57 Table of Contents methods (based upon a Base Rate or LIBOR) as described in the Credit Agreement. With each borrowing against our credit line, we can elect the interest rate method based on our funding needs at the time.
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.
Beginning in calendar year 2021, our Macau subsidiary transitioned to onshore status and became subject to a statutory corporate income tax of approximately 12%.
Existing approved offshore institutions such as ours continued to operate under the offshore regime until the end of the calendar year 2020. Beginning in calendar year 2021, our Macau subsidiary transitioned to onshore status and became subject to a statutory corporate income tax of approximately 12%.
We also incur loan commitment and letter of credit fees under the Credit Agreement. The Credit Agreement includes a $300 million accordion, which can be used for term loan commitments. The accordion permits the Company to request to increase its borrowing capacity, not to exceed the $300 million commitment in the aggregate, provided certain conditions are met, including lender approval.
The accordion permits the Company to request to increase its borrowing capacity, not to exceed the $300 million commitment in the aggregate, provided certain conditions are met, including lender approval. As described below, in June of 2022, we exercised $250 million of the $300 million accordion under the Credit Agreement and borrowed $250 million as term loans.
Fiscal Years Ended Last Day of February, % of Sales Revenue, net % Change (in thousands) 2022 (1)(2) 2021 (2) 2020 (2) 2022 2021 2020 22/21 21/20 Sales revenue by segment, net Home & Outdoor $ 865,844 $ 727,354 $ 640,965 38.9 % 34.7 % 37.5 % 19.0 % 13.5 % Health & Wellness 777,080 890,191 685,397 35.0 % 42.4 % 40.1 % (12.7) % 29.9 % Beauty 580,431 481,254 381,070 26.1 % 22.9 % 22.3 % 20.6 % 26.3 % Total sales revenue, net 2,223,355 2,098,799 1,707,432 100.0 % 100.0 % 100.0 % 5.9 % 22.9 % Cost of goods sold 1,270,168 1,171,497 972,966 57.1 % 55.8 % 57.0 % 8.4 % 20.4 % Gross profit 953,187 927,302 734,466 42.9 % 44.2 % 43.0 % 2.8 % 26.3 % SG&A 680,257 637,012 511,902 30.6 % 30.4 % 30.0 % 6.8 % 24.4 % Asset impairment charges — 8,452 41,000 — % 0.4 % 2.4 % * (79.4) % Restructuring charges 380 350 3,313 — % — % 0.2 % 8.6 % (89.4) % Operating income 272,550 281,488 178,251 12.3 % 13.4 % 10.4 % (3.2) % 57.9 % Non-operating income, net 260 559 394 — % — % — % (53.5) % 41.9 % Interest expense 12,844 12,617 12,705 0.6 % 0.6 % 0.7 % 1.8 % (0.7) % Income before income tax 259,966 269,430 165,940 11.7 % 12.8 % 9.7 % (3.5) % 62.4 % Income tax expense 36,202 15,484 13,607 1.6 % 0.7 % 0.8 % * 13.8 % Net income $ 223,764 $ 253,946 $ 152,333 10.1 % 12.1 % 8.9 % (11.9) % 66.7 % (1) Fiscal 2022 includes approximately nine weeks of operating results from Osprey, acquired on December 29, 2021.
Fiscal Years Ended Last Day of February, % of Sales Revenue, net % Change (in thousands) 2023 (1)(2) 2022 (2) 2021 2023 2022 2021 23/22 22/21 Sales revenue by segment, net Home & Outdoor $ 915,685 $ 865,844 $ 727,354 44.2 % 38.9 % 34.7 % 5.8 % 19.0 % Beauty & Wellness 1,156,982 1,357,511 1,371,445 55.8 % 61.1 % 65.3 % (14.8) % (1.0) % Total sales revenue, net 2,072,667 2,223,355 2,098,799 100.0 % 100.0 % 100.0 % (6.8) % 5.9 % Cost of goods sold 1,173,316 1,270,168 1,171,497 56.6 % 57.1 % 55.8 % (7.6) % 8.4 % Gross profit 899,351 953,187 927,302 43.4 % 42.9 % 44.2 % (5.6) % 2.8 % SG&A 660,198 680,257 637,012 31.9 % 30.6 % 30.4 % (2.9) % 6.8 % Asset impairment charges — — 8,452 — % — % 0.4 % — % * Restructuring charges 27,362 380 350 1.3 % — % — % * 8.6 % Operating income 211,791 272,550 281,488 10.2 % 12.3 % 13.4 % (22.3) % (3.2) % Non-operating income, net 249 260 559 — % — % — % (4.2) % (53.5) % Interest expense 40,751 12,844 12,617 2.0 % 0.6 % 0.6 % * 1.8 % Income before income tax 171,289 259,966 269,430 8.3 % 11.7 % 12.8 % (34.1) % (3.5) % Income tax expense 28,016 36,202 15,484 1.4 % 1.6 % 0.7 % (22.6) % * Net income $ 143,273 $ 223,764 $ 253,946 6.9 % 10.1 % 12.1 % (36.0) % (11.9) % (1) Fiscal 2023 includes approximately forty-five weeks of operating results from Curlsmith, acquired on April 22, 2022.
Adjusted operating income decreased 23.3% to $85.9 million, or 11.0% of segment net sales revenue, compared to $111.9 million, or 12.6% of segment net sales revenue. Beauty Comparison of Fiscal 2022 to 2021 Operating income was $98.4 million, or 17.0% of segment net sales revenue, compared to $64.9 million, or 13.5% of segment net sales revenue.
Consolidated adjusted operating income decreased 15.3% to $300.9 million, or 14.5% of net sales revenue, compared to $355.1 million, or 16.0% of net sales revenue. Comparison of Fiscal 2022 to 2021 Consolidated operating income was $272.6 million, or 12.3% of net sales revenue, compared to $281.5 million, or 13.4% of net sales revenue.
Our Macau subsidiary generates income from the sale of the goods that it has sourced and procured. This subsidiary is responsible for the sourcing and procurement of a large portion of the products that we sell. We previously had an indefinite tax holiday in Macau conditioned on the subsidiary meeting certain employment and investment thresholds.
This subsidiary is responsible for the sourcing and procurement of a large portion of the products that we sell. We previously had an indefinite tax holiday in Macau conditioned on the subsidiary meeting certain employment and investment thresholds. The Macau Offshore Law and its supplementary regulations that grant tax incentives to approved offshore institutions was abolished on January 1, 2021.
For additional information see Note 7 to the accompanying consolidated financial statements. (2) Fiscal 2022 and 2021 include a full year of operating results from Drybar Products, acquired on January 23, 2020, compared to approximately five weeks of operating results in fiscal 2020. For additional information see Note 7 to the accompanying consolidated financial statements.
For additional information see Note 7 to the accompanying consolidated financial statements. (2) Fiscal 2023 includes approximately forty-five weeks of operating results from Curlsmith, acquired on April 22, 2022.
The following tables summarize the impact that Core business and Non-Core (Personal Care) business had on our net sales revenue by segment: Fiscal Year Ended Last Day of February, (in thousands) Home & Outdoor Health & Wellness Beauty Total Fiscal 2021 sales revenue, net $ 727,354 $ 890,191 $ 481,254 $ 2,098,799 Core business 138,490 (113,111) 143,407 168,786 Non-Core business (Personal Care) — — (44,230) (44,230) Change in sales revenue, net 138,490 (113,111) 99,177 124,556 Fiscal 2022 sales revenue, net $ 865,844 $ 777,080 $ 580,431 $ 2,223,355 Total net sales revenue growth (decline) 19.0 % (12.7) % 20.6 % 5.9 % Core business 19.0 % (12.7) % 29.8 % 8.0 % Non-Core business (Personal Care) — % — % (9.2) % (2.1) % Fiscal Year Ended Last Day of February, (in thousands) Home & Outdoor Health & Wellness Beauty Total Fiscal 2020 sales revenue, net $ 640,965 $ 685,397 $ 381,070 $ 1,707,432 Core business 86,389 204,794 114,176 405,359 Non-Core business (Personal Care) — — (13,992) (13,992) Change in sales revenue, net 86,389 204,794 100,184 391,367 Fiscal 2021 sales revenue, net $ 727,354 $ 890,191 $ 481,254 $ 2,098,799 Total net sales revenue growth (decline) 13.5 % 29.9 % 26.3 % 22.9 % Core business 13.5 % 29.9 % 30.0 % 23.7 % Non-Core business (Personal Care) — % — % (3.7) % (0.8) % 46 Table of Contents 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) 2022 2021 2020 22/21 21/20 22/21 21/20 Leadership Brand sales revenue, net (1)(2) $ 1,810,249 $ 1,706,545 $ 1,360,059 $ 103,704 $ 346,486 6.1 % 25.5 % All other sales revenue, net 413,106 392,254 347,373 20,852 44,881 5.3 % 12.9 % Total sales revenue, net $ 2,223,355 $ 2,098,799 $ 1,707,432 $ 124,556 $ 391,367 5.9 % 22.9 % (1) Fiscal 2022 includes approximately nine weeks of operating results from Osprey, acquired on December 29, 2021.
The following tables summarize the impact that Core business and Non-Core (Personal Care) business had on our net sales revenue by segment: 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 Core business 49,841 (166,413) (116,572) Non-Core business (Personal Care) — (34,116) (34,116) 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) % Core business 5.8 % (12.3) % (5.2) % Non-Core business (Personal Care) — % (2.5) % (1.5) % Fiscal Year Ended Last Day of February, (in thousands) Home & Outdoor Beauty & Wellness Total Fiscal 2021 sales revenue, net $ 727,354 $ 1,371,445 $ 2,098,799 Core business 138,490 30,296 168,786 Non-Core business (Personal Care) — (44,230) (44,230) Change in sales revenue, net 138,490 (13,934) 124,556 Fiscal 2022 sales revenue, net $ 865,844 $ 1,357,511 $ 2,223,355 Total net sales revenue growth (decline) 19.0 % (1.0) % 5.9 % Core business 19.0 % 2.2 % 8.0 % Non-Core business (Personal Care) — % (3.2) % (2.1) % 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) 2023 2022 2021 23/22 22/21 23/22 22/21 Leadership Brand sales revenue, net (1) $ 1,753,734 $ 1,810,249 $ 1,706,545 $ (56,515) $ 103,704 (3.1) % 6.1 % All other sales revenue, net 318,933 413,106 392,254 (94,173) 20,852 (22.8) % 5.3 % Total sales revenue, net $ 2,072,667 $ 2,223,355 $ 2,098,799 $ (150,688) $ 124,556 (6.8) % 5.9 % (1) Fiscal 2023 includes a full year of operating results from Osprey, acquired on December 29, 2021, compared to approximately nine weeks of operating results in fiscal 2022.
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.
Dollars, as a percentage of net sales revenue, and as a year-over-year percentage change.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+3 added−4 removed8 unchanged
Biggest changeAs such, we are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense. We hedge against interest rate volatility by using interest rate swaps to hedge a portion of our outstanding floating rate debt.
Biggest changeAs 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 28, 2023, 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.
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 28, 2022 is based on variable floating interest rates.
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 28, 2023 is based on variable floating interest rates.
Refer to Note 16 to the accompanying consolidated financial statements for further information regarding these instruments. 64 Table of Contents 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.
Refer to Note 16 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.
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, certain inventory purchases and operating expenses. As a result of such transactions, portions of our cash, trade accounts receivable and trade accounts payable are denominated in foreign currencies.
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, trade accounts receivable and trade accounts payable are denominated in foreign currencies.
Additionally, our cash and short-term investments generate interest income that will vary based on changes in short-term interest. As of February 28, 2022 and February 28, 2021, a hypothetical adverse 10% change in interest rates would reduce the carrying and fair values of the interest rate swaps by $0.4 million and $0.1 million on a pre-tax basis, respectively.
Additionally, our cash and short-term investments generate interest income that will vary based on changes in short-term interest. As of February 28, 2023 and February 28, 2022, a hypothetical adverse 10% change in interest rates would reduce the carrying and fair values of the interest rate swaps by $4.3 million and $0.4 million on a pre-tax basis, respectively.
Approximately 10%, 12%, and 14% of our net sales revenue was denominated in foreign currencies during fiscal 2022, 2021 and 2020, respectively. These sales were primarily denominated in Euros, Canadian Dollars, British Pounds, and Mexican Pesos. We make most of our inventory purchases from manufacturers in Asia and primarily use the U.S. Dollar for such purchases.
Approximately 13%, 10%, and 12% of our net sales revenue was denominated in foreign currencies during fiscal 2023, 2022 and 2021, 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.
As of February 28, 2022 and February 28, 2021, a hypothetical adverse 10% change in foreign currency exchange rates would reduce the carrying and fair values of our derivatives by $10.3 million and $14.2 million on a pre-tax basis, respectively.
As of February 28, 2023 and February 28, 2022, a hypothetical adverse 10% change in foreign currency exchange rates would reduce the carrying and fair values of our derivatives by $8.8 million and $10.3 million on a pre-tax basis, respectively.
Dollar in recent years and in fiscal 2022 the average rate of the Chinese Renminbi strengthened against the U.S. Dollar by approximately 5.0% compared to the average rate during fiscal 2021. 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.
Dollar in recent years and in fiscal 2023 the average exchange rate of the Chinese Renminbi weakened against the U.S. Dollar by approximately 6.0% compared to the average rate during fiscal 2022. 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.
Refer to Notes 14 and 16 to the accompanying consolidated financial statements for further information regarding our interest rate sensitive assets and liabilities.
Refer to Notes 14 68 Table of Contents and 16 to the accompanying consolidated financial statements for further information regarding our interest rate sensitive assets and liabilities.
For additional information, 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. 65 Table of Contents
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. 69 Table of Contents
We mitigate certain foreign currency exchange rate risk by using a series of forward contracts designated as cash flow hedges and mark-to-market cross-currency debt swaps to protect against the foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies.
Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars. 67 Table of Contents 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.
We recorded in SG&A foreign currency exchange rate net losses of $0.2 million and $0.6 million during fiscal 2022 and 2021, respectively, and net gains of $2.2 million during fiscal 2020. We identify foreign currency risk by regularly monitoring our foreign currency denominated transactions and balances.
We recorded in SG&A foreign currency exchange rate net losses of $1.7 million, $0.2 million and $0.6 million during fiscal 2023, 2022 and 2021, 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.
Removed
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.
Added
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.
Removed
LIBOR, which is the interest rate benchmark used as a reference rate on our variable rate debt and related interest rate swaps, began being phased out at the beginning of calendar year 2022, with the one-month LIBOR, which we utilize as a reference rate, scheduled to cease immediately after June 30, 2023.
Added
As of February 28, 2023 and February 28, 2022, a hypothetical 1% increase in interest rates would increase our annual interest expense, net of the effect of our interest rate swaps, by approximately $5.1 million and $6.9 million, respectively.
Removed
A reference rate based on the Secured Overnight Financing Rate SOFR, and other alternative benchmark rates, are replacing LIBOR.
Added
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.
Removed
We intend to amend our variable rate debt agreements and related interest rate swaps, to replace LIBOR with an agreed upon replacement index, such as Bloomberg’s Short-Term Bank Yield Index (“BSBY”) or similar index, prior to the one-month LIBOR ceasing, which could result in higher interest rates and adversely affect our interest expense.

Other HELE 10-K year-over-year comparisons