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HELEN OF TROY LTD

HELEN OF TROY LTDHELEEarnings & Financial Report

Nasdaq · Consumer Discretionary · Electric Housewares & Fans

Helen of Troy Limited is an American publicly traded designer, developer and worldwide marketer of consumer brand-name housewares, health and home, and beauty products under owned and licensed brands. It is the parent corporation of OXO International Ltd., Kaz, Inc., Steel Technology, LLC, and Idelle Labs, Ltd, among others. The company is headquartered in Hamilton, Bermuda, with U.S. operations headquartered in El Paso, Texas. The company is named after the mythic figure Helen of Troy.

What changed in HELEN OF TROY LTD's 10-K — 2024 vs 2025

Top changes in HELEN OF TROY LTD's 2025 10-K

459 paragraphs added · 400 removed · 306 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

53 edited+17 added−26 removed23 unchanged
Segment Information We currently operate in two business segments: • Home & Outdoor: Offers a broad range of outstanding world-class brands that help consumers enjoy everyday living inside their homes and outdoors. Our innovative products for home activities include food preparation and storage, cooking, cleaning, organization, and beverage service.
Segment Information We currently operate in two reportable business segments: • Home & Outdoor: Offers a broad range of outstanding world-class brands that help consumers enjoy everyday living inside their homes and outdoors. Our innovative products for home activities include food preparation and storage, cooking, cleaning, organization, and beverage service.
Our 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.
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 leading 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.
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.
An emerging trend with governmental and non-governmental organizations, consumers, shareholders, retail customers, communities, and other stakeholders is increased focus and expectations on sustainability 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 sustainability matters and greater demands on our packaging and products.
In Beauty, we deliver innovation through products such as hair styling appliances, grooming tools, and liquid and aerosol personal care products that help consumers look and feel more beautiful. In Wellness, we are there when you need us most with highly regarded humidifiers, thermometers, water and air purifiers, heaters, and fans.
In Beauty, we deliver innovation through products such as hair styling appliances, grooming tools, liquid and aerosol personal care products, and nail care solutions that help consumers look and feel more beautiful. In Wellness, we are there when you need us most with highly regarded humidifiers, thermometers, water and air purifiers, heaters, and fans.
Sales to our top five customers accounted for approximately 47%, 43% and 49% of our consolidated net sales revenue in fiscal 2024, 2023 and 2022, respectively. Order Backlog When placing orders, our individual consumer, retail and wholesale customers usually request that we ship the related products within a short time frame.
Sales to our top five customers accounted for approximately 49%, 47% and 43% of our consolidated net sales revenue in fiscal 2025, 2024 and 2023, 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.
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 Sustainability 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 .
During the fourth quarter of fiscal 2023, we made changes to the structure of our organization, which resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment, the creation of a North America RMO responsible for sales and go-to-market strategies, and further centralization of operations and finance functions under shared services to better support our business segments and RMOs.
During the fourth quarter of fiscal 2023, we made changes to the structure of our organization, which resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment, the creation of a North America Regional Market Organization (“RMO”) responsible for sales and go-to-market strategies, and further centralization of operations and finance functions under shared services to better support our business segments and RMOs.
Further, any failure to achieve our ESG goals or a perception of our failure to act responsibly or to effectively respond to new, or changes in, legal or regulatory requirements relating to ESG concerns could adversely affect our business, financial condition, results of operations and reputation.
Further, any failure to achieve our sustainability goals or a perception of our failure to act responsibly or to effectively respond to new, or changes in, legal or regulatory requirements relating to sustainability concerns could adversely affect our business, financial condition, results of operations and reputation.
We believe our community engagement and good corporate citizenship will lead to stronger communities and shared success for our Company. Available Information We maintain our main Internet site at: http://www.helenoftroy.com. The information contained on this website is not included as a part of, or incorporated by reference into, this Annual Report.
We believe our community engagement and good corporate citizenship will lead to stronger communities and shared success for our Company. 10 Table of Contents Available Information We maintain our main Internet site at: http://www.helenoftroy.com. The information contained on this website is not included as a part of, or incorporated by reference into, this Annual Report.
We are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. We believe these advantages allow us to bring our retailers a differentiated value proposition. 7 Table of Contents The following table summarizes our primary competitors by business segment: Segment Competitor Home & Outdoor Lifetime Brands, Inc.
We are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. We believe these advantages allow us to bring our retailers a differentiated value proposition. The following table summarizes our primary competitors by business segment: Segment Competitor Home & Outdoor Lifetime Brands, Inc.
(KitchenAid), Breville Group, Corning Incorporated (Pyrex), Progressive International (SnapLock), Meyer Corporation (Farberware), Newell Brands Inc., Simple Human LLC, Yeti Holdings, Inc., Bradshaw International (GoodCook), PMI Worldwide (Stanley), Patagonia, Gregory Mountain Products, Mystery Ranch, CamelBak, The North Face, Deuter, Cotopaxi, Thule Group Beauty & Wellness Conair, Spectrum Brands Holdings Inc.
(KitchenAid), Breville Group, Corning Incorporated (Pyrex), Progressive International (SnapLock), Meyer Corporation (Farberware), Newell Brands Inc., Simple Human LLC, Yeti Holdings, Inc., Bradshaw International (GoodCook), PMI Worldwide (Stanley), Patagonia, Gregory Mountain Products, CamelBak, The North Face, Deuter, Cotopaxi, Thule Group, Trove Brands, LLC Beauty & Wellness Conair, Spectrum Brands Holdings Inc.
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.
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. 5 Table of Contents Sales and Marketing We currently market our products in over 100 countries throughout the world.
Seasonality The following table illustrates the seasonality of our net sales revenue by fiscal quarter as a percentage of annual net sales revenue for the periods presented: Fiscal Quarters Ended Last Day of Month 2024 2023 2022 May 23.7 % 24.5 % 24.3 % August 24.5 % 25.2 % 21.4 % November 27.4 % 26.9 % 28.1 % February 24.4 % 23.4 % 26.2 % Our sales are seasonal due to different calendar events, holidays and seasonal weather and illness patterns.
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 2025 2024 2023 May 21.8 % 23.7 % 24.5 % August 24.9 % 24.5 % 25.2 % November 27.8 % 27.4 % 26.9 % February 25.5 % 24.4 % 23.4 % Our sales are seasonal due to different calendar events, holidays and seasonal weather and illness patterns.
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.
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 tools and accessories and nail consumables and grooming tools, as well as certain wellness product categories.
Sales within the U.S. comprised approximately 74% of total net sales revenue in both fiscal 2024 and 2023 and 78% of total net sales revenue in fiscal 2022.
Sales within the U.S. comprised approximately 71% of total net sales revenue in fiscal 2025 and 74% of total net sales revenue in both fiscal 2024 and 2023.
Our Associates As of February 29, 2024, we employed 1,927 full-time associates worldwide. We also use temporary, part-time and seasonal associates as needed. None of our U.S. associates are covered by a collective bargaining agreement. Certain of our associates in Europe and Vietnam are covered by collective arrangements or works counsel in accordance with local practice.
We 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.
The Beauty & Wellness segment relies on the continued use of trademarks licensed under various agreements for a significant portion of its net sales revenue. New product introductions under licensed trademarks require approval from the respective licensors. The licensors must also approve the product packaging.
The Beauty & Wellness segment relies on the continued use of trademarks licensed under various agreements for a significant portion of its net sales revenue. New product introductions under licensed trademarks require approval from the respective licensors. The licensors must also approve the product packaging. Some of our license agreements require us to pay minimum royalties.
Some of our license agreements require us to pay minimum royalties. 5 Table of Contents The following table lists our key trademarks by segment: Segment Owned Licensed Home & Outdoor OXO, Good Grips, Soft Works, OXO tot, OXO Brew, OXO Strive, OXO Outdoor, Hydro Flask, Osprey Beauty & Wellness Drybar, Hot Tools, Curlsmith, PUR Revlon, Bed Head, Honeywell, Braun, Vicks Patents and Other Intellectual Property We maintain utility and design patents in the U.S. and several foreign countries.
The following table lists our key trademarks by segment: Segment Owned Licensed Home & Outdoor OXO, Good Grips, Soft Works, OXO tot, OXO Brew, OXO Strive, OXO Outdoor, Hydro Flask, Osprey Beauty & Wellness Drybar, Hot Tools, Curlsmith, Olive & June, PUR Revlon, Bed Head, Honeywell, Braun, Vicks Patents and Other Intellectual Property We maintain utility and design patents in the U.S. and several foreign countries.
We are advancing short- and long-term initiatives which include: leadership coaching and training to build awareness and sponsorship, recruitment actions to ensure we have diversity of new hires, associate learning programs to develop skills that foster inclusion, associate resource groups to further support inclusion, ongoing dialogue sessions with our associates and charitable donations to non-profit organizations whose missions and values align with our culture.
We are advancing initiatives to foster inclusion which include: leadership coaching and training to build awareness and sponsorship, recruitment actions, associate learning programs to develop skills, associate resource groups, ongoing dialogue sessions with our associates and charitable donations to non-profit organizations whose missions and values align with our culture.
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.
During fiscal 2022 and 2023, 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.
Our Products The following table summarizes the types of products we sell by business segment: Segment Product Category Primary Products Home & Outdoor Home Solutions Food storage containers, kitchen utensils for cooking and preparing salads, fruits, vegetables and meats, graters, slicers and choppers, baking essentials, kitchen organization, bath, cleaning, infant and toddler products and coffee preparation tools and electronics Insulated Beverageware, Coolers and Food Storage Solutions Insulated beverageware including bottles, travel tumblers, drinkware, and mugs, food and lunch containers, insulated totes, soft coolers, outdoor kitchenware and accessories Technical, Outdoor, Travel, and Lifestyle Packs and Accessories Technical and outdoor sports packs, bike packs and bags, hydration and travel packs, duffel bags and luggage, lifestyle and everyday packs, kid carrier packs, and accessories Beauty & Wellness Hair Tools and Accessories Mass, professional and prestige hair appliances, brushes, grooming tools and accessories Hair Liquids Prestige shampoos, liquid hair styling products, treatments and conditioners Wellness Devices and Consumables Thermometers, blood pressure monitors, pulse oximeters, nasal aspirators, humidifiers, faucet mount and pitcher water filtration systems, air purifiers, heaters, fans, and humidification, thermometry, water filtration, and air purification consumables Our Trademarks We market products under a number of trademarks that we own and sell certain of our products under trademarks licensed from third parties.
The acquisition of Olive & June complements and broadens our existing Beauty portfolio beyond the hair care category and advances our Elevate for Growth Strategy to deploy accretive capital that leverages our capabilities and scale to accelerate growth, further expand margins, and drive greater earnings growth and free cash flow conversion. 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 Home Solutions Food storage containers, kitchen utensils for cooking and preparing salads, fruits, vegetables and meats, graters, slicers and choppers, baking essentials, kitchen organization, bath, cleaning, infant and toddler products and coffee preparation tools and electronics Insulated Beverageware, Coolers and Food Storage Solutions Insulated beverageware including bottles, travel tumblers, drinkware, and mugs, food and lunch containers, insulated totes, soft coolers, outdoor kitchenware and accessories Technical, Outdoor, Travel, and Lifestyle Packs and Accessories Technical and outdoor sports packs, bike packs and bags, hydration and travel packs, duffel bags and luggage, lifestyle and everyday packs, kid carrier packs, and accessories Beauty & Wellness Hair Tools and Accessories Mass, professional and prestige hair appliances, brushes, grooming tools and accessories Hair Liquids Prestige shampoos, liquid hair styling products, treatments and conditioners Nail Consumables and Grooming Tools Nail polish, press-on nails, manicure and pedicure systems, grooming tools and nail care essentials Wellness Devices and Consumables Thermometers, blood pressure monitors, pulse oximeters, nasal aspirators, humidifiers, faucet mount and pitcher water filtration systems, air purifiers, heaters, fans, and humidification, thermometry, water filtration, and air purification consumables Our Trademarks We market products under a number of trademarks that we own and sell certain of our products under trademarks licensed from third parties.
We have also incurred additional compliance costs comprised of obsolete packaging, storage and other charges from vendors, which were recognized in cost of goods sold and incremental warehouse storage costs and legal fees, which were recognized in SG&A.
We have also incurred additional compliance costs comprised of obsolete packaging, storage and other charges from vendors, which were recognized in cost of goods sold and incremental warehouse storage costs and legal fees, which were recognized in SG&A. We refer to these charges as “EPA compliance costs” throughout this Annual Report.
These facilities include our U.S. headquarters in El Paso, Texas, and distribution centers in Southaven and Olive Branch, Mississippi and Gallaway, Tennessee, which are used to support a significant portion of our domestic distribution.
These facilities include our U.S. headquarters in El Paso, Texas, and distribution centers in Southaven and Olive Branch, Mississippi and Gallaway, Tennessee, which are used to support a significant portion of our domestic distribution. See Note 4 to the accompanying consolidated financial statements for additional information.
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 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.
(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.
The costs recognized in cost of goods sold included a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2023.
We have built leading market positions through new product innovation, product quality and competitive pricing. We go to market under a number of brands, some of which are licensed. Our Leadership Brands are brands which have leading positions in their respective categories and include the OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools and Drybar brands.
We have built leading market positions through new product innovation, product quality and competitive pricing. We go to market under a number of brands, some of which are licensed. Our portfolio of brands includes OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon, and Olive & June, among others.
Sales to our third largest customer, Walmart, Inc., including its worldwide affiliates, accounted for approximately 9%, 10% and 11% of our consolidated net sales revenue in fiscal 2024, 2023 and 2022, respectively. No other customers accounted for 10% or more of consolidated net sales revenue during these fiscal years.
Sales to our second largest customer, Walmart, Inc., including its worldwide affiliates, accounted for approximately 11%, 9% and 10% of our consolidated net sales revenue in fiscal 2025, 2024 and 2023, respectively.
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.
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. Ongoing settlement discussions with the EPA related to this matter may result in the imposition of fines or penalties in the future.
The Elevate for Growth era includes an enhanced portfolio management strategy to invest in our brands and grow internationally based upon defined criteria with an emphasis on brand building, new product introductions and expanded distribution. We are continuing to execute our initiatives under Project Pegasus, which we expect to generate incremental investments in our brand portfolio and new capabilities.
The Elevate for Growth Strategy includes an enhanced portfolio management strategy to invest in our brands and grow internationally based upon defined criteria with an emphasis on brand building, new product introductions and expanded distribution.
During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area.
During fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area. This geographic consolidation and relocation aligns with our initiative to streamline and simplify the organization and was completed during fiscal 2025.
Our compensation processes support fair and equitable pay for all of our associates and is based on a ‘pay for performance’ philosophy. We believe our culture, fair pay, benefits, rewards and recognition, healthy-living initiatives, collaborative projects, and open communication between management and staff enables us to attract and retain talented associates.
Our compensation processes also support fair and equitable pay for all of our associates. We believe our culture, fair pay, benefits, rewards and recognition, healthy-living initiatives, collaborative projects, and open communication between management and staff enables us to attract and retain talented associates. Our Associates As of February 28, 2025, we employed 1,883 full-time associates worldwide.
We intend to further leverage our operational scale and assets, including our new state-of-the-art distribution center, improved go-to-market structure with our North America RMO, and our expanded shared services capabilities.
We are continuing to execute our initiatives under Project Pegasus, which we expect to generate incremental fuel to invest in our brand portfolio and new capabilities. We intend to further leverage our operational scale and assets, including our new state-of-the-art distribution center, improved go-to-market structure with our North America RMO, and our expanded shared services capabilities.
The hair liquids category of the Beauty & Wellness segment sources most of its products from U.S. manufacturers. Finished goods manufactured by vendors in Asia comprised approximately 79%, 87%, and 88% of finished goods purchased in fiscal 2024, 2023, and 2022, respectively. We occupy owned and leased office and distribution space in various locations to support our operations.
The hair liquids category of the Beauty & Wellness segment sources most of its products from U.S. manufacturers. Finished goods manufactured by vendors in Asia comprised approximately 79% of finished goods purchased in both fiscal 2025 and 2024 and 87% of finished goods purchased in fiscal 2023.
Perks and benefits vary by region and office. We also monitor our culture and associate engagement through a number of methods, including periodic culture surveys. We have a performance evaluation and feedback process for all of our associates. We encourage career planning at all levels of the Company.
We also monitor our culture and associate engagement through a number of methods, including periodic culture surveys. Our ability to attract, develop and retain top talent is critical to our continued success as a business. We have a performance evaluation and feedback process for all of our associates. We encourage career planning at all levels of the Company.
Research and development expenses consist primarily of salaries and employee benefits, contracted development and testing efforts, and third-party design agencies associated with the development of products.
We continually invest to strengthen our product design and research and development capabilities, including extensive studies to gain consumer insights. Research and development expenses consist primarily of salaries and employee benefits, contracted development and testing efforts, and third-party design agencies associated with the development of products.
See Note 4 to the accompanying consolidated financial statements for additional information. 6 Table of Contents Customers Sales to our largest customer, Amazon.com Inc., accounted for approximately 21%, 17% and 19% of our consolidated net sales revenue in fiscal 2024, 2023 and 2022, respectively.
Customers Sales to our largest customer, Amazon.com Inc ., accounted for approximately 22%, 21% and 17% of our consolidated net sales revenue in fiscal 2025, 2024 and 2023, respectively.
Sales to our second largest customer, Target Corporation, accounted for approximately 10% in both fiscal 2024 and 2023 and 11% in fiscal 2022 of our consolidated net sales revenue.
Sales to our third largest customer, Target Corporation, accounted for approximately 11% of our consolidated net sales 6 Table of Contents revenue in fiscal 2025 and 10% in both fiscal 2024 and 2023. No other customers accounted for 10% or more of consolidated net sales revenue during these fiscal years.
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.
During Phase II, we also initiated a global restructuring plan referred to as “Project Pegasus” intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs. 3 Table of Contents Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify cost of goods savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending and improve our cash flow and working capital, as well as other activities.
We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments.
These initiatives have created operating efficiencies, as well as provided a platform to fund growth investments.
(Remington), Coty Inc., Dyson Ltd, L'Oréal S.A., DevaCurl, SharkNinja, Inc., Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands, Inc., Lasko Products, LLC, Vesync Co., Ltd (Levoit), The Clorox Company (Brita), Zero Technologies, LLC, Vornado Air Circulation Systems, Unilever (Blueair), Guardian Technologies LLC.
(Remington), Coty Inc., Dyson Ltd, L'Oréal S.A., DevaCurl, SharkNinja, Inc., Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands, Inc., Lasko Products, LLC, Vesync Co., Ltd (Levoit), The Clorox Company (Brita), Zero Technologies, LLC, Vornado Air Circulation Systems, Unilever (Blueair), Wella Operations US LLC, KISS USA, Guardian Technologies LLC. 7 Table of Contents 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.
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.
Many of the products we sell are subject to product safety laws and regulations in various jurisdictions.
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.
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. 8 Table of Contents We believe that we are in material compliance with these laws, regulations and other reporting requirements.
See Note 11 to the accompanying consolidated financial statements for additional information. Fiscal 2025 begins our “Elevate for Growth” era, which provides our strategic roadmap through fiscal 2030. The long-term objectives of Elevate for Growth include continued organic sales growth, further margin expansion, and accretive capital deployment through strategic acquisitions, share repurchases and capital structure management.
The long-term objectives of Elevate for Growth include continued organic sales growth, further margin expansion, and accretive capital deployment through strategic acquisitions, share repurchases and capital structure management.
Although we have not been notified of any fines or penalties imposed against us by the EPA related to this matter, there can be no assurances that such fines or penalties will not be imposed in the future. We recorded charges to cost of goods sold to write-off obsolete packaging for the affected products in our inventory on-hand and in-transit.
Such potential fines or penalties cannot be reasonably estimated. 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.
The Corporate Governance Committee of our Board of Directors has oversight of ESG-related matters, including climate change risks and opportunities.
Our Board of Directors, through the Corporate Governance Committee, oversees sustainability-related matters and their implementation (including environmental, climate change and human rights).
Human Capital Overview We are committed to fostering a positive and engaging culture of inclusion, care, belonging, and support where all people throughout our global workforce can thrive. Resources provided to enhance associates' “total well-being” include learning and development opportunities, charitable leave policy, financial and retirement planning advice and employee stock purchase programs, health and wellness programs, and product discounts.
Human Capital Overview We are committed to fostering a positive and engaging culture of inclusion, care, belonging, and support where all people throughout our global workforce can thrive.
We market products principally through the use of outside sales representatives and our own internal sales staff, supported by our internal marketing, category management, engineering, creative services, and customer and consumer service staff. These groups work closely together to develop pricing and distribution strategies, to design packaging and to help develop product line extensions and new products.
We sell products principally through the use of outside sales representatives and our own internal sales associates, supported by our marketing center of excellence, brand marketing teams, category management, engineering, creative services, and customer and consumer service associates.
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.
We have never experienced a work stoppage, and we believe that we have satisfactory working relations with our associates. We believe that an inclusive workforce is essential to fostering innovation, driving growth and meeting the evolving needs of global consumers.
We strategically and effectively deployed capital to construct our new distribution facility in Gallaway, Tennessee, repurchased shares of our common stock, and repaid amounts outstanding under our long-term debt agreement. We began publishing an annual ESG Report, which summarizes our ESG strategy and performance, providing further transparency into our ESG efforts.
We completed the divestiture of our Personal Care business (as defined below) and extended our Revlon trademark license for a period of up to 100 years. We strategically and effectively deployed capital to construct our new distribution facility in Gallaway, Tennessee, repurchased shares of our common stock, and repaid amounts outstanding under our long-term debt agreement.
We also plan to complete the geographic consolidation of our Beauty & Wellness businesses, create a centralized marketing organization that embraces next-level data analytics and consumer insight capabilities, and further integrate our supply chain and finance functions within our shared services.
During fiscal 2025, we created an integrated marketing center of excellence led by our Global Chief Marketing Officer that embraces next-level data analytics and consumer insight capabilities, and further integrated our supply chain and finance functions within our shared services.
Fiscal 2020 began Phase II of our transformation, which was designed to drive the next five years of progress. The long-term objectives of Phase II included improved organic sales growth, continued margin expansion, and strategic and effective capital deployment.
Fiscal 2020 began Phase II of our transformation, which was designed to drive the next five years of progress. Fiscal 2024 concluded Phase II of our transformation strategy, which produced net sales growth and gross profit margin expansion. We expanded our portfolio of leading brands and international footprint with the acquisitions of Drybar, Osprey and Curlsmith.
Research and Development Our research and development activities focus on new, differentiated and innovative products designed to drive sustained organic growth. We continually invest to strengthen our product design and research and development capabilities, including extensive studies to gain consumer insights.
These groups work closely together leveraging marketing data and analytics to develop pricing and distribution strategies, to design packaging and to help develop product line extensions and new products. Research and Development Our research and development activities focus on new, differentiated and innovative products designed to drive sustained organic growth.
This geographic consolidation and relocation is the next step in our initiative to streamline and simplify the organization and is expected to be completed during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment.
We expect these changes to enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment. See Note 11 to the accompanying consolidated financial statements for additional information. Fiscal 2025 began our Elevate for Growth Strategy, which provides our strategic roadmap through fiscal 2030.
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Phase II included plans to continue to invest in our Leadership Brands, with a focus on growing them through consumer-centric innovation, expanding them more aggressively outside the U.S., and adding new brands through acquisition. We sought to build further shared service capability and operating efficiency, as well as focus on attracting, retaining, unifying and training the best people.
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We began publishing an annual Sustainability Report to provide transparency into our strategy and performance.
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Additionally, we strove to enhance and consolidate our Environmental, Social and Governance (“ESG”) efforts and accelerate programs related to Diversity, Equity, Inclusion, and Belonging (“DEI&B”) to support our Phase II transformation. 3 Table of Contents Fiscal 2024 concluded Phase II of our transformation strategy, which produced net sales and organic net sales growth and gross profit margin expansion.
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Additionally, we are committed to advancing our sustainability efforts as a core component of our Elevate for Growth Strategy, designing products that meet consumer expectations for quality, durability, and responsible production, while strengthening trust in our brands and enhancing their competitiveness in global markets.
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We expanded our Leadership Brands and international footprint with the acquisitions of Drybar, Osprey and Curlsmith. We completed the divestiture of our Personal Care business (as defined below) and extended our Revlon trademark license for a period of up to 100 years.
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On December 16, 2024, we completed the acquisition of Olive & June, LLC (“Olive & June”), an innovative, omni-channel nail care brand. The Olive & June brand and products were added to the Beauty & Wellness segment.
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During Phase II, we also initiated a global restructuring plan referred to as “Project Pegasus” intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs.
Added
The total purchase consideration consists of initial cash consideration of $229.4 million, net of cash acquired, which included a preliminary net working capital adjustment and is subject to certain customary closing adjustments, and contingent cash consideration of up to $15.0 million subject to Olive & June's performance during calendar years 2025, 2026, and 2027, payable annually.
Removed
Additionally, we are committed to fostering a winning culture and continuing our ESG efforts to support our Elevate for Growth era. On April 22, 2022, we completed the acquisition of Recipe Products Ltd., a producer of innovative prestige hair care products for all types of curly and wavy hair under the Curlsmith brand (“Curlsmith”).
Added
In fiscal 2024, we hired a Global Chief Marketing Officer to create and lead an integrated marketing center of excellence, which was established during fiscal 2025. The marketing center of excellence includes our consumer insights, experience planning, digital creative content and marketing data analytics associates, and supports our international and North American RMOs and brand marketing teams.
Removed
The Curlsmith brand and products were added to the Beauty & Wellness segment. The total purchase consideration was $147.9 million in cash, net of a final net working capital adjustment and cash acquired.
Added
Finished goods manufactured by vendors in China comprised approximately 63%, 62% and 73% of finished goods purchased in fiscal 2025, 2024 and 2023, respectively. We occupy owned and leased office and distribution space in various locations to support our operations.
Removed
The acquisition of Curlsmith added another prestige market brand of products to our Beauty & Wellness portfolio and further advanced our Phase II objective of continuing to expand margin. 4 Table of Contents On December 29, 2021, we completed the acquisition of Osprey Packs, Inc.
Added
During fiscal 2023, we incurred $23.6 million in EPA compliance costs, of which $16.9 million and $6.7 million were recognized in cost of goods sold and SG&A, respectively, in our consolidated statement of income.
Removed
(“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.
Added
In our product space, some requirements have already been mandated and we believe others may become required in the future.
Removed
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.
Added
Sustainability Initiatives We uphold rigorous corporate governance standards that support transparency, ethical business practices, and long-term value creation for our stakeholders, including associates, consumers, customers, shareholders and communities.
Removed
The acquisition of Osprey complemented our outdoor platform, accelerated our international strategy and added a 9th Leadership Brand to the Company.
Added
As we execute our Elevate for Growth Strategy, we seek to drive organic sales growth, expand margins and deploy capital strategically, with sustainability initiatives supporting these objectives critical to our operations and market success. This focus enhances our ability to adapt to evolving consumer expectations, mitigate risks and position us as a responsible global market participant.
Removed
Consistent with our Phase II transformation strategy of focusing resources on our Leadership Brands, during the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Beauty & Wellness segment's mass channel personal care business, which included liquid, powder and aerosol products under brands such as Pert, Brut, Sure and Infusium (“Personal Care”).
Added
Our Vice President of Regulatory, Sustainability, and Governance leads these initiatives to implement a strategic plan aligned with globally recognized frameworks, including the Sustainability Accounting Standards Board (“SASB”), Task Force on Climate-related Financial Disclosures (“TCFD”), and Global Reporting Initiative (“GRI”).
Removed
On June 7, 2021, we completed the sale of our North America Personal Care business to HRB Brands LLC, for $44.7 million in cash and recognized a gain on the sale in selling, general and administrative expense (“SG&A”) totaling $0.5 million.
Added
Our approach to product design and development prioritizes meeting growing consumer demand for products that are safe, durable, and responsibly made. We focus on innovation that incorporates principles of environmental stewardship, such as circularity, recyclability, and reducing packaging waste, ensuring alignment with consumer values and building trust in our brands.
Removed
On March 25, 2022, we completed the sale of the Latin America and Caribbean Personal Care business to HRB Brands LLC, for $1.8 million in cash and recognized a gain on the sale in SG&A totaling $1.3 million.
Added
Additionally, we conduct comprehensive supply chain audits to ensure compliance with ethical labor practices and responsible sourcing, reinforcing our reputation for quality and integrity. As part of our sustainability strategy, we report climate-related data to the Carbon Disclosure Project in alignment with TCFD guidelines, implement responsible climate policies and advance science-based emissions reduction targets.
Removed
Our fiscal 2022 consolidated, and Beauty & Wellness segment’s, net sales revenue, gross profit and operating income were materially and adversely impacted by the stop shipment actions and the time needed to execute repackaging and relabeling plans.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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As a result, we are dependent upon the continued use of these trademarks. Additionally, we license certain owned trademarks to third parties in exchange for royalty income. It is possible that certain actions taken by us, our licensors, licensees, or other third parties might diminish greatly the value of any of our licensed trademarks.
As a result, we are dependent upon the continued use of these trademarks. Additionally, we license certain owned trademarks to third parties in exchange for royalty income. It is possible that certain actions taken by us, our licensors, licensees, or other third parties might greatly diminish the value of any of our licensed trademarks.
In addition, our variable rate debt and related interest swaps use the Secured Overnight Financing Rate (“SOFR”), a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate), as a benchmark for establishing interest rates.
In addition, our variable rate debt and related interest rate swaps use the Secured Overnight Financing Rate (“SOFR”), a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate), as a benchmark for establishing interest rates.
Financial Risks • Increased costs of raw materials, energy and transportation may adversely affect our operating results and cash flow. • If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets become impaired, we will be required to record impairment charges, which may be significant. • We face risks associated with foreign currency exchange rate fluctuations. • Our liquidity or cost of capital may be materially adversely affected by constraints or changes in the capital and credit markets, interest rates and limitations under our financing arrangements. • Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary by a material amount from our projections.
Financial Risks • Increased costs of raw materials, energy and transportation may adversely affect our operating results and cash flow. • If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets become impaired, we will be required to record additional impairment charges, which may be significant. • We face risks associated with foreign currency exchange rate fluctuations. • Our liquidity or cost of capital may be materially adversely affected by constraints or changes in the capital and credit markets, interest rates and limitations under our financing arrangements. • Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary by a material amount from our projections.
SOFR is a backward-looking measure, calculated based on short-term repurchase agreements, backed by U.S. Treasury securities. As such, if interest rates were to continue to increase, our debt service obligations on variable rate debt subject to SOFR would increase, which could negatively impact our net income, cash flows and financial condition.
SOFR is a backward-looking measure, calculated based on short-term repurchase agreements, backed by U.S. Treasury securities. As such, if interest rates were to increase, our debt service obligations on variable rate debt subject to SOFR would increase, which could negatively impact our net income, cash flows and financial condition.
As discussed elsewhere in this Annual Report, during fiscal 2022, we were in discussions with the EPA regarding the compliance of packaging claims on certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Beauty & Wellness segment that are sold in the U.S.
As discussed elsewhere in this Annual Report, during fiscal 2022 and 2023, 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.
If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets become impaired, we will be required to record impairment charges, which may be significant. A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a result of past acquisitions.
If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets become impaired, we will be required to record additional impairment charges, which may be significant. A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a result of past acquisitions.
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, 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 17 Table of Contents impact of changing economic conditions; and the availability and cost of raw materials and merchandise.
The recoverability of these non-current assets is dependent upon achievement of our projections and the continued execution of key initiatives related to revenue growth and profitability. The rates used in our projections are management’s estimate of the most likely results over time, given a wide range of potential outcomes.
The recoverability of these non-current assets is dependent upon achievement of our projections and the continued execution of key initiatives related to revenue growth and profitability. The net sales revenue and profitability growth rates used in our projections are management’s estimate of the most likely results over time, given a wide range of potential outcomes.
Events and changes in circumstances that may indicate there is impairment and which may indicate interim impairment testing is necessary include, but are not limited to: strategic decisions to exit a business or dispose of an asset made in response to changes in economic, political and competitive conditions; the impact of the economic environment on our customer base and on broad market conditions that drive valuation considerations by market participants; our internal expectations with regard to future revenue growth and the assumptions we make when performing our impairment reviews; a significant decrease in the market price of our assets; a significant adverse change in the extent or manner in which our assets are used; a significant adverse change in legal factors or the business climate that could affect our assets; an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset; and significant changes in the cash flows associated with an asset.
Events and changes in circumstances that may indicate there is impairment and which may indicate interim impairment testing is necessary include, but are not limited to: strategic decisions to exit a business or dispose of an asset made in response to changes in economic, political and competitive conditions; the impact of the economic environment on our customer base and on broad market conditions that drive valuation considerations by market participants; a sustained decline in our stock price; our internal expectations with regard to future revenue growth, operating results and the assumptions we make when performing our impairment reviews; a significant decrease in the market price of our assets; a significant adverse change in the extent or manner in which our assets are used; a significant adverse change in legal factors or the business climate that could affect our assets; an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset; and significant changes in the cash flows associated with an asset.
The increased focus on ESG matters may also lead to new or more regulations and customer, shareholder and consumer demands that could require us to incur additional costs or make changes to our operations to comply with new regulations or address these demands.
The increased focus on sustainability matters may also lead to new or more regulations and customer, shareholder and consumer demands that could require us to incur additional costs or make changes to our operations to comply with new regulations or address these demands.
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 22 Table of Contents 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.
Any alteration of trade agreements and terms between China, Mexico, Vietnam and the U.S., including limiting trade with China, Mexico and Vietnam, imposing additional tariffs on imports from China, Mexico or Vietnam and potentially imposing other restrictions on 23 Table of Contents imports from China, Mexico or Vietnam to the U.S. may result in further or higher tariffs, or retaliatory trade measures by China, Mexico or Vietnam, all of which could have a material adverse effect on our business and operating results.
Any alteration of trade agreements and terms between China, Mexico, Vietnam and the U.S., including limiting trade with China, Mexico and Vietnam, imposing additional tariffs on imports from China, Mexico or Vietnam and potentially imposing other restrictions on imports from China, Mexico or Vietnam to the U.S. may result in further or higher tariffs, or further retaliatory trade measures by China, Mexico or Vietnam, all of which could have a material adverse effect on our business and operating results.
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.
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 manufacturers, transport them to our distribution facilities, and store and deliver them to our customers on time and in the correct amounts.
Additionally, natural disasters (such as wildfires, hurricanes and ice storms), public health crises (such as pandemics and epidemics), or unusually severe winter weather may result in temporary unanticipated fluctuations in retail traffic and consumer demand, may impact our ability to staff our 19 Table of Contents distribution facilities or could otherwise impede timely transport and delivery of products to and from our distribution facilities.
Additionally, natural disasters (such as wildfires, hurricanes and ice storms), public health crises (such as pandemics and epidemics), or unusually severe winter weather may result in temporary unanticipated fluctuations in retail traffic and consumer demand, may impact our ability to staff our distribution facilities or could otherwise impede timely transport and delivery of products to and from our distribution facilities.
Third-parties may also attempt through phishing attacks or other forms of social engineering schemes or deceptive practices to fraudulently induce associates into disclosing sensitive information such as usernames, passwords or other information in order to gain access to customer or supplier data or our internal data, including intellectual property, financial, and other confidential business information.
Third-parties may also attempt through phishing attacks or other forms of social engineering schemes or deceptive practices to fraudulently induce associates into disclosing sensitive information 14 Table of Contents such as usernames, passwords or other information in order to gain access to customer or supplier data or our internal data, including intellectual property, financial, and other confidential business information.
You should carefully consider this summary with the more detailed descriptions of risks described below and all of the other information included in our Annual Report when deciding whether to invest in our securities or otherwise evaluating our business. Business, Operational and Strategic Risks Certain of our U.S. distribution facilities are geographically concentrated.
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 Certain of our U.S. distribution facilities are geographically concentrated.
We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate. Despite these efforts, a deterioration in the credit worthiness or bankruptcy filing of 16 Table of Contents a key customer could have a material adverse effect on our business, operating results and financial condition.
We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate. Despite these efforts, a deterioration in the credit worthiness or bankruptcy filing of a key customer could have a material adverse effect on our business, operating results and financial condition.
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.
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 filtration systems), product recalls, contract disputes, warranty disputes, employment and tax matters and other proceedings and litigation, including class actions.
Dollar will affect our sales and profitability and can result in 26 Table of Contents exchange losses because we have operations and assets located outside the U.S. We transact a portion of our international business in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses.
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”). Such transactions include sales and operating expenses.
Retailers place great emphasis on timely delivery of our products for specific selling seasons, especially during our third fiscal quarter, and on the fulfillment of consumer demand throughout the year. We cannot 17 Table of Contents control all of the various factors that might affect product delivery to retailers.
Retailers place great emphasis on timely delivery of our products for specific selling seasons, especially during our third fiscal quarter, and on the fulfillment of consumer demand throughout the year. We cannot control all of the various factors that might affect product delivery to retailers.
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.
For example, 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.
In addition, in the event of disruptions in the financial markets, current or future lenders may become unwilling or unable to continue to advance funds under any agreements in place, increase their commitments under existing credit arrangements or enter into new financing arrangements.
In addition, in the event of disruptions in the financial markets, current or 29 Table of Contents future lenders may become unwilling or unable to continue to advance funds under any agreements in place, increase their commitments under existing credit arrangements or enter into new financing arrangements.
The list of “relevant activities” in the respective statutes includes carrying on as a business any one or more of several enumerated activities, such as headquarters, shipping, distribution and service center, intellectual property and holding entities.
The list of “relevant activities” in the respective statutes includes carrying on as a business any one or more of several enumerated activities, such as 25 Table of Contents headquarters, shipping, distribution and service center, intellectual property and holding entities.
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.
As a result of such circumstances, we may be required to revise certain accounting estimates and judgments related to the 28 Table of Contents valuation of goodwill, indefinite-lived and definite-lived intangible assets and other long-lived assets, which could result in additional material impairment charges. Any such impairment charges could have a material adverse effect on our results of operations.
Without sufficient liquidity, we could be forced to curtail our operations, or we may not be able to pursue business opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash, and credit facilities. If our sources of liquidity do not satisfy our requirements, we may need to seek additional financing.
Without sufficient liquidity, we could be forced to curtail our operations, or we may not be able to pursue business opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash, and borrowings under our credit facility. If our sources of liquidity do not satisfy our requirements, we may need to seek additional financing.
Although we currently do not expect this tax enacted by Bermuda to have a material impact to our consolidated financial statements, we will continue to monitor and evaluate impact as further regulatory guidance becomes available.
Although we currently do not expect this Bermuda tax to have a material impact to our consolidated financial statements, we will continue to monitor and evaluate impacts as further regulatory guidance becomes available.
For example, we had reduced sales to Bed, Bath & Beyond during fiscal 2024 in comparison to the prior year as a result of its bankruptcy. Some of our customers' creditworthiness may be vulnerable to the impact of a prolonged economic downturn or a public health crisis.
For example, we had reduced sales to Bed, Bath & Beyond during fiscal 2024 and 2025 in comparison to prior years as a result of its bankruptcy. Some of our customers' creditworthiness may be vulnerable to the impact of a prolonged economic downturn or a public health crisis.
The ineffective or inadequate AI development or 14 Table of Contents deployment practices by any of our third-party manufacturers, vendors or service providers could result in unintended consequences and may intensify our cybersecurity risks.
The ineffective or inadequate AI development or deployment practices by any of our third-party manufacturers, vendors or service providers could result in unintended consequences and may intensify our cybersecurity risks.
Approximately 59% of our consolidated gross sales volume shipped from facilities in this region in fiscal 2024. Due to this geographical concentration, any disruption in our distribution process in any of these facilities, even for a few days, could adversely affect our business, operating results and financial condition.
Approximately 60% of our consolidated gross sales volume shipped from facilities in this region in fiscal 2025. 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.
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.
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.
Additionally, changes in consumer demand, retailer inventory management strategies, transportation lead times, supplier capacity, and raw material availability could make our inventory management and sales forecasting more difficult. Due to these factors, our future sales and net income could vary materially from our projections.
Additionally, changes in consumer 30 Table of Contents demand, retailer inventory management strategies, transportation lead times, supplier capacity, and raw material availability could make our inventory management and sales forecasting more difficult. Due to these factors, our future sales and net income could vary materially from our projections.
Our financial condition and operating results could suffer if we lost all or a portion of the sales to any one of these customers. In particular, sales to our two largest customers accounted for approximately 31% of our consolidated net sales revenue in fiscal 2024.
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 33% of our consolidated net sales revenue in fiscal 2025.
While we believe that the assumptions we use are reasonable at the time made, changes in business conditions or other unanticipated events and circumstances may occur that cause actual results to differ materially from projected results and this could potentially require future adjustments to our asset valuations.
While we believe that the estimates and assumptions we use are reasonable at the time made, changes in business conditions or other unanticipated events and circumstances may occur that cause actual results to differ materially from projected results and this could potentially require future adjustments to our asset valuations and recognition of additional impairment charges.
The global credit and financial markets have recently experienced volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict or other geopolitical events.
The global credit and financial markets continue to experience volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict or other geopolitical events.
In an economic downturn, we may also be unable to raise capital through debt or equity financings on terms acceptable 27 Table of Contents to us or at all.
In an economic downturn, we may also be unable to raise capital through debt or equity financings on terms acceptable to us or at all.
While only two customers individually accounted for 10% or more of our consolidated net sales revenue in fiscal 2024, sales to our top five customers in aggregate accounted for approximately 47% of fiscal 2024 consolidated net sales revenue. We expect that a small group of customers will continue to account for a significant portion of our net sales revenue.
While only three customers individually accounted for 10% or more of our consolidated net sales revenue in fiscal 2025, sales to our top five customers in aggregate accounted for approximately 49% of fiscal 2025 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.
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.
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.
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.
Any future similar incidents could cause us to fail to deliver products to our retailers in a timely and effective manner which could damage our reputation and brands and result in the loss of customers or reduced orders, which could have a material adverse effect on our business, operating results and financial condition.
Our operating results could be adversely affected by future increases in these costs. Additionally, the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, restricted transportation or increased freight costs, reduced workforce, or other manufacturing and distribution disruption could adversely impact our ability to meet our customers’ needs.
Additionally, the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, restricted transportation or increased freight costs, reduced workforce, or other manufacturing and distribution disruption could adversely impact our ability to meet our customers’ needs.
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.
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.
As a result, portions of our cash, trade accounts receivable and trade accounts payable are denominated in foreign currencies. Accordingly, foreign operations will continue to expose us to foreign currency exchange rate fluctuations, which may result in the recognition of foreign exchange losses upon remeasurement to U.S. Dollars.
As a result, portions of our cash, accounts receivable and accounts payable are denominated in foreign currencies. Accordingly, foreign operations will continue to expose us to foreign currency exchange rate fluctuations, which may result in the recognition of foreign exchange losses upon remeasurement to U.S. Dollars. Additionally, we purchase a substantial amount of our products from Chinese manufacturers in U.S.
During fiscal 2024, most of our U.S. distribution, receiving and storage functions were consolidated into three distribution facilities in northern Mississippi and our new distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024. Our new distribution facility is in proximity 13 Table of Contents to our three distribution facilities in northern Mississippi.
During fiscal 2025, most of our U.S. distribution, receiving and storage functions were consolidated into two distribution facilities in northern Mississippi and our new distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024. Our three distribution facilities are in proximity to each other.
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.
These factors could have a material effect on our business, operating results and financial condition. 20 Table of Contents We rely on our CEO and a limited number of other key senior officers to operate our business. The loss of any of these individuals could have a material adverse effect on our business.
The Federal Open Market Committee increased the benchmark interest rate by 75 basis points during fiscal 2024 and by 450 basis points during fiscal year 2023. If interest rates continue to increase and adverse economic changes occur, our access to credit on favorable interest rate terms may be impacted.
The Federal Open Market Committee lowered the benchmark interest rate by 100 basis points during fiscal 2025 compared to an increase of 75 basis points and 450 basis points during fiscal years 2024 and 2023, respectively. If interest rates increase and adverse economic changes occur, our access to credit on favorable interest rate terms may be impacted.
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; 18 Table of Contents • 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.
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; • 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. 19 Table of Contents 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.
Our third-party manufacturing partners are not equipped to hold meaningful amounts of inventory and if shipping container capacity is limited or unavailable, they could pause manufacturing, which could ultimately impact our ability to meet consumer demand on a timely basis. Further, our delivery process must often accommodate special vendor requirements to use specific carriers and delivery schedules.
Our third-party manufacturing partners are not equipped to hold meaningful amounts of inventory and if shipping container capacity is limited or unavailable, they could pause manufacturing, which could ultimately impact our ability to meet consumer demand on a timely basis.
As a result, the failure to maintain the integrity of and protect customer or supplier data or our confidential internal data could result in unintended consequences such as reputational damage, legal liabilities or loss of business, which could have a material adverse effect on our business, operating results and financial condition.
As a result, the failure to maintain the integrity of and protect customer or supplier data or our confidential internal data could result in unintended consequences such as reputational damage, legal liabilities or loss of business, which could have a material adverse effect on our business, operating results and financial condition. 15 Table of Contents We rely on central global Enterprise Resource Planning (“ERP”) systems and other peripheral information systems.
Business, Operational and Strategic Risks • The geographic concentration of certain of our U.S. distribution facilities increases our risk to disruptions that could affect our ability to deliver products in a timely manner. • The occurrence of cyber incidents, or failure by us or our third-party service providers to maintain cybersecurity and the integrity of confidential internal or customer data could have a material adverse effect on our operations and profitability. • A cybersecurity breach, obsolescence or interruptions in the operation of our central global Enterprise Resource Planning systems and other peripheral information systems could have a material adverse effect on our operations and profitability. • To compete successfully, we must develop and introduce a continuing stream of innovative new products to meet changing consumer preferences. • Our operating results are dependent on sales to several large customers; furthermore, our large customers may take actions that adversely affect our gross profit and operating results. • We are dependent on third-party manufacturers, most of which are located in Asia, and any inability to obtain products from such manufacturers could have a material adverse effect on our business, operating results and financial condition. • Our ability to deliver products to our customers in a timely manner and to satisfy our customers’ fulfillment standards are subject to several factors, some of which are beyond our control. • Our operating results may be adversely affected by trade barriers, exchange controls, expropriations, and other risks associated with domestic and foreign operations including uncertainty and business interruptions resulting from political changes and events in the U.S. and abroad, and volatility in the global credit and financial markets and economy. • We are subject to risks related to our dependence on the strength of retail economies and may be vulnerable in the event of a prolonged economic downturn, including a downturn from the effects of macroeconomic conditions, any public health crises or similar conditions. • Our business is subject to weather conditions, the duration and severity of the cold and flu season and other related factors. • We rely on our CEO and a limited number of other key senior officers to operate our business. • We are subject to risks associated with the use of licensed trademarks from or to third parties. • We may be unsuccessful in executing and realizing expected synergies from strategic business initiatives such as acquisitions, divestitures and global restructuring plans, including Project Pegasus. 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. • All of our products are manufactured by unaffiliated manufacturers, most of which are located in China, Mexico and Vietnam; we face risks of significant tariffs or other restrictions being placed on imports from China, Mexico or Vietnam or any retaliatory trade measures taken by China, Mexico or Vietnam adversely impacting our business. • Under current U.S. federal income tax law, tax treatment of our non-U.S. income is dependent on whether we are classified as a “controlled foreign corporation” for U.S. federal income tax purposes. • Legislation enacted in Bermuda and Barbados in response to the European Union’s (“EU”) review of harmful tax competition could adversely affect our operations. • Our judgments regarding the accounting for tax positions and the resolution of tax disputes may impact our net earnings and cash flow. • We face risks associated with product recalls, product liability and other claims against us.
Business, Operational and Strategic Risks • The geographic concentration of certain of our U.S. distribution facilities increases our risk to disruptions that could affect our ability to deliver products in a timely manner. • The occurrence of cyber incidents, or failure by us or our third-party service providers to maintain cybersecurity and the integrity of confidential internal or customer data could have a material adverse effect on our operations and profitability. • A cybersecurity breach, obsolescence or interruptions in the operation of our central global Enterprise Resource Planning systems and other peripheral information systems could have a material adverse effect on our operations and profitability. • To compete successfully, we must develop and introduce a continuing stream of innovative new products to meet changing consumer preferences. • Our operating results are dependent on sales to several large customers; furthermore, our large customers may take actions that adversely affect our gross profit and operating results. • We are dependent on third-party manufacturers, most of which are located in Asia, and any inability to obtain products from such manufacturers could have a material adverse effect on our business, operating results and financial condition. • Our ability to deliver products to our customers in a timely manner and to satisfy our customers’ fulfillment standards are subject to several factors, some of which are beyond our control. • Our operating results may be adversely affected by trade barriers, exchange controls, expropriations, and other risks associated with domestic and foreign operations including uncertainty and business interruptions resulting from political changes and events in the U.S. and abroad, and volatility in the global credit and financial markets and economy. • We are subject to risks related to our dependence on the strength of retail economies and may be vulnerable in the event of a prolonged economic downturn, including a downturn from the effects of macroeconomic conditions, any public health crises or similar conditions. • Our business is subject to weather conditions, the duration and severity of the cold and flu season and other related factors. • We rely on our CEO and a limited number of other key senior officers to operate our business. • We are subject to risks associated with the use of licensed trademarks from or to third parties. • We may be unsuccessful in executing and realizing expected synergies from strategic business initiatives such as acquisitions, divestitures and global restructuring plans, including Project Pegasus. 12 Table of Contents Legal, Regulatory and Tax Risks • 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 continuing to be placed on imports from China, Mexico or Vietnam, including by the new U.S. presidential administration which has promoted and implemented plans to raise tariffs and pursue other trade policies intended to restrict imports.
We believe that we can source certain similar products outside of China and are moving towards a more diversified supplier base through continuously exploring the expansion of sourcing alternatives in other countries, making progress towards such capabilities during fiscal 2024. However, the relocation of any production capacity will continue to require more time and could require substantial costs.
We believe that we can source certain similar products outside of China and are moving towards a more diversified supplier base through continuously exploring the expansion of sourcing alternatives in other countries, making progress towards such capabilities during both fiscal 2025 and 2024.
Any failure to achieve our ESG goals or a perception of our failure to act responsibly or to effectively respond to new, or changes in, legal or regulatory requirements relating to ESG matters could adversely affect our business, financial condition, results of operations and reputation.
Any failure to achieve our sustainability goals or a perception of our failure to act responsibly or to effectively respond to new, or changes in, legal or regulatory requirements relating to sustainability matters could adversely affect our business, financial condition, results of operations and reputation. 23 Table of Contents Significant changes in or our compliance with regulations, interpretations or product certification requirements could adversely impact our operations.
Significant changes in or our compliance with regulations, interpretations or product certification requirements could adversely impact our operations. As a global company, we are subject to U.S. and foreign regulations, including environmental, health and safety laws, and industry-specific product certifications. Many of the products we sell are subject to product safety laws and regulations in various jurisdictions.
As a global company, we are subject to U.S. and foreign regulations, including environmental, health and safety laws, and industry-specific product certifications. Many of the products we sell are subject to product safety laws and regulations in various jurisdictions.
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.
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. Ongoing settlement discussions with the EPA related to this matter may result in the imposition of fines or penalties in the future.
For fiscal 2024, finished goods manufactured in Asia comprised approximately 79% of total finished goods purchased.
For fiscal 2025, finished goods manufactured in Asia comprised approximately 79% of total finished goods purchased, of which 63% was manufactured in China.
For additional information regarding our taxes, see Note 18 to the accompanying consolidated financial statements. Our business involves the potential for product recalls, product liability and other claims against us, which could materially and adversely affect our business, operating results and financial condition.
Our business involves the potential for product recalls, product liability and other claims against us, which could materially and adversely affect our business, operating results and financial condition.
In addition, any acquisition, divestiture or global restructuring plan, including Project Pegasus, involves numerous risks, including: • our ability to successfully complete the initiative in a timely manner, or at all; • the initiative may not advance our business strategy as expected; • challenges realizing anticipated cost savings, efficiencies, synergies, financial targets and other benefits; • difficulties in accurately predicting costs and future savings; • costs incurred in completing the initiative may be greater than anticipated; • the initiative may lead to increases in costs in other aspects of our business such as increased conversion, outsourcing or distribution costs; 20 Table of Contents • diversion of management's attention from other business concerns; • challenges in integrating or separating personnel and financial or other systems; • potential loss of key employees and/or reduced employee morale and productivity; and • difficulties in transitioning and preserving customer, contractor, supplier, and other important third-party relationships.
In addition, any acquisition, divestiture or global restructuring plan, including Project Pegasus, involves numerous risks, including: • our ability to successfully complete the initiative in a timely manner, or at all; • the initiative may not advance our business strategy as expected; • challenges realizing anticipated cost savings, efficiencies, synergies, financial targets and other benefits; • difficulties in accurately predicting costs and future savings; • costs incurred in completing the initiative may be greater than anticipated; • the initiative may lead to increases in costs in other aspects of our business such as increased conversion, outsourcing or distribution costs; • diversion of management's attention from other business concerns; • challenges in integrating or separating personnel and financial or other systems; • potential loss of key employees and/or reduced employee morale and productivity; and • difficulties in transitioning and preserving customer, contractor, supplier, and other important third-party relationships. 21 Table of Contents Acquisitions pose additional risks, including: • difficulties in the assimilation of the operations, technologies, and products; • challenges in integrating distribution channels; • changes in cash flows or other market-based assumptions or conditions that cause the value of acquired assets to fall below book value; • risks associated with subsequent losses or operating asset write-offs, contingent liabilities and impairment of related acquired intangible assets including goodwill; and • risks of entering markets in which we have no or limited experience.
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.
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 sustainability matters and greater demands on our packaging and products.
Large customers may take actions that adversely affect our gross profit and operating results . With the continuing trend towards retail trade consolidation, we are increasingly dependent upon key customers whose bargaining strength is substantial and growing.
With the continuing trend towards retail trade consolidation, we are increasingly dependent upon key customers whose bargaining strength is substantial and growing.
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. 24 Table of Contents Our judgments regarding the accounting for tax positions and the resolution of tax disputes may impact our net earnings and cash flow.
However, we cannot predict the effect of Bermuda’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 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.
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 are dependent on discretionary spending, which is affected by, among other things, economic and political conditions, consumer confidence, interest, inflation and tax rates, a public health crisis (such as pandemics and epidemics), and financial and housing markets, which are all outside of our control. 28 Table of Contents Consequently, these and other potential impacts we are not currently aware of could also cause future sales and net income to vary materially from our projections.
We are dependent on discretionary spending, which is affected by, among other things, economic and political conditions, consumer confidence, interest, inflation and tax rates, a public health crisis (such as pandemics and epidemics), and financial and housing markets, which are all outside of our control.
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.
Legal, Regulatory and Tax Risks If significant tariffs or other restrictions continue to be 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.
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 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.
In the past, disruptions in the global supply chain and freight networks increased our cost of goods sold and certain operating expenses and any future disruptions could have a material adverse impact on our costs. 25 Table of Contents The cost of raw materials, energy and transportation, in the aggregate, represents a significant portion of our cost of goods sold and certain operating expenses, which we may not be able to pass on to our customers.
The cost of raw materials, energy and transportation, in the aggregate, represents a significant portion of our cost of goods sold and certain operating expenses, which we may not be able to pass on to our customers. Our operating results could be adversely affected by future increases in these costs.
There are numerous uncertainties inherent in successfully developing and commercializing new products on a continuing basis and new product launches may not deliver expected growth in sales or operating income. If we are unable to develop and introduce a continuing stream of competitive new products, it may have an adverse effect on our business, operating results and financial condition.
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.
In addition, natural disasters or other extraordinary events may disrupt our 15 Table of Contents information systems and other infrastructure, and our data recovery processes may not be sufficient to protect against loss. To compete successfully, we must develop and introduce a continuing stream of innovative new products to meet changing consumer preferences.
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.
Significant judgment is required to determine our effective tax rate and evaluate our tax positions. We provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement criteria prescribed by applicable accounting standards.
We provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement criteria prescribed by applicable accounting standards. Fluctuations in federal, state, local and foreign taxes or a change to uncertain tax positions, including related interest and penalties, may impact our effective tax rate and financial results.
Additionally, we purchase a substantial amount of our products from Chinese manufacturers in U.S. Dollars, who source a significant portion of their labor and raw materials in Chinese Renminbi. The Chinese Renminbi has fluctuated against the U.S. Dollar in recent years.
Dollars, who source a significant portion of their labor and raw materials in Chinese Renminbi. The Chinese Renminbi has fluctuated against the U.S. Dollar in recent years. During fiscal 2025, the average exchange rate of the Chinese Renminbi weakened against the U.S. dollar by approximately 1% compared to the average rate during fiscal 2024.
We record impairment charges to the extent the carrying values of these assets are not recoverable in accordance with the applicable accounting standards.
We record impairment charges to the extent the carrying values of these assets are not recoverable in accordance with the applicable accounting standards. During the second quarter of fiscal 2025, we concluded that a goodwill impairment triggering event had occurred primarily due to a sustained decline in our stock price.
Whether, and to what extent, Pillar Two is adopted or enacted by the other jurisdictions in which we operate is uncertain and could increase the cost and complexity of compliance and may adversely affect our global effective tax rate, financial condition and results of operations. 21 Table of Contents 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.
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.
Where operating conditions permit, we seek to reduce foreign currency risk by purchasing most of our inventory with U.S. Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars. We use derivative financial instruments including forward contracts and cross-currency debt swaps to mitigate certain foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies.
Chinese Renminbi currency fluctuations have the potential to add volatility to our product costs over time. Where operating conditions permit, we seek to reduce foreign currency risk by purchasing most of our inventory with U.S. Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars.
Global legal developments regarding privacy and data security could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business. As a global company, we are subject to global privacy and data security laws, regulations, and codes of conduct that apply to our various business units.
As a global company, we are subject to global privacy and data security laws, regulations, and codes of conduct that apply to our various business units. These laws and regulations may be inconsistent across jurisdictions and are subject to evolving and differing interpretations.
As a result, our business, results of operations and financial condition could be adversely and materially impacted in ways that we are not able to predict today. For additional information refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including “EPA Compliance Costs” in this Annual Report.
For additional information refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including “EPA Compliance Costs” in this Annual Report. 24 Table of Contents Global legal developments regarding privacy and data security could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business.
Changes in such laws, regulations or oversight could cause us to incur material capital or operating expenditures in the future to comply with applicable laws and regulations, increase our effective income tax rate, delay or interrupt distribution of our products, or make them more costly to produce, all of which could have a material adverse impact on our business.
Changes in such laws, regulations or oversight could cause us to incur material capital or operating expenditures in the future to comply with applicable laws and regulations, increase our effective income tax rate, delay or interrupt distribution of our products, or make them more costly to produce, all of which could have a material adverse impact on our business. 22 Table of Contents For example, the Organisation for Economic Co-operation and Development (“OECD”) has introduced a framework to implement a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Certain countries in which we operate have enacted Pillar Two legislation and continue to modify their rules and guidance, often to align with ongoing OECD interpretive guidance on the “Model Rules.” Meanwhile, additional countries are in the process of introducing legislation to implement Pillar Two, even as the OECD continues to modify its administrative guidance.
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.
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. In fiscal 2025, our Beauty & Wellness segment's net sales revenue was adversely impacted by an illness season below historical averages globally.
During fiscal 2024, inbound freight costs have continued to decline from the higher costs we experienced from the COVID-19 pandemic and related global supply chain disruptions and have begun to approach levels seen prior to the impact of such factors.
While we witnessed declines in inbound freight costs during fiscal 2024 from the higher costs we experienced as a result of the COVID-19 pandemic and related global supply chain disruptions, there was minimal volatility in our inbound freight costs during fiscal 2025.
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 by our management. Some of the inherent estimates and assumptions used in determining the fair value of these non-current assets are outside of the control of management, including interest rates, cost of capital, tax rates, strength of retail economies and industry growth.
In cases where audits are conducted and issues are raised, a number of years may elapse before such issues are finally resolved. Unfavorable resolution of any tax matter could increase the effective tax rate, which could have an adverse effect on our operating results and cash flow.
Unfavorable resolution of any tax matter could increase the effective tax rate, which could have an adverse effect on our operating results and cash flow. For additional information regarding our taxes, see Note 18 to the accompanying consolidated financial statements.
Our final analysis may be different from provisional amounts, which could materially affect our tax obligations, effective tax rate and operating results in the period completed. Increased focus and expectations on climate change and other ESG matters could have a material adverse effect on our business, financial condition and results of operations and damage our reputation.
Increased focus and expectations on climate change and other sustainability matters could have a material adverse effect on our business, financial condition and results of operations and damage our reputation. Increased focus and expectations on sustainability are emerging trends with governmental and non-governmental organizations, consumers, shareholders, retail customers, communities, and other stakeholders.
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.
In fiscal 2026, we are planning to replace our financial consolidation, planning and reporting system and supply chain planning system, as further described below. Our ERP system is subject to continually evolving cybersecurity and technological risks, including risks associated with cloud data storage.
The EU agreed to implement Pillar Two starting in 2024. In response to Pillar Two, the government of Bermuda enacted a 15% corporate income tax in December 2023 that will become effective for us in fiscal 2026.
Although we currently do not expect the Barbados DMTT to have a material impact to our consolidated financial statements, we will continue to monitor and evaluate impacts as further regulatory guidance becomes available. Like Barbados, the government of Bermuda enacted a 15% corporate income tax that will become effective for us in fiscal 2026.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Under the IRP, a dedicated information security coordinator is responsible for implementing the IRP, as well as: • identifying the IRT and any appropriate sub-teams to address specific cybersecurity incidents, or categories of cybersecurity incidents; • coordinating IRT activities, including developing, maintaining, and following appropriate procedures to respond to, communicate, and document identified cybersecurity incidents; • conducting post-incident reviews to gather feedback on cybersecurity incident response procedures and address any identified gaps in security measures; 29 Table of Contents • providing training and conducting periodic exercises to promote associate and stakeholder preparedness and awareness of the IRP; and • reviewing the IRP at least annually, or whenever there is a material change in our business practices that may reasonably affect our cyber incident response procedures.
Under the IRP, a dedicated information security coordinator is responsible for implementing the IRP, as well as: • identifying the IRT and any appropriate sub-teams to address specific cybersecurity incidents, or categories of cybersecurity incidents; • coordinating IRT activities, including developing, maintaining, and following appropriate procedures to respond to, communicate, and document identified cybersecurity incidents; • conducting post-incident reviews to gather feedback on cybersecurity incident response procedures and address any identified gaps in security measures; • providing training and conducting periodic exercises to promote associate and stakeholder preparedness and awareness of the IRP; and • reviewing the IRP at least annually, or whenever there is a material change in our business practices that may reasonably affect our cyber incident response procedures.
We also maintain a cyber incident response plan (“IRP”) with the objective of (1) providing a structured and systematic incident response process for cybersecurity threats that affect any of our electronic information systems and networks, (2) timely and effectively identifying, resolving and communicating cybersecurity incidents and (3) managing internal and external communications and reporting.
We also maintain a cyber incident response plan (“IRP”) with the objective of (1) providing a structured and systematic incident response process for cybersecurity threats that affect any of our electronic information systems and networks, (2) timely and effectively identifying, resolving and communicating 31 Table of Contents cybersecurity incidents and (3) managing internal and external communications and reporting.
Our current interim CIO and Director of Cybersecurity and IT Compliance also have experience in cybersecurity, information security, policy, architecture, engineering and incident response. The CIO works with other functions within the Company to implement controls, procedures and practices to help minimize the Company's risks, as well as to introduce security by design.
Our current SVP-IT and Director of Cybersecurity and IT Compliance also have experience in cybersecurity, information security, policy, architecture, engineering and incident response. The SVP-IT works with other functions within the Company to implement controls, procedures and practices to help minimize the Company's risks, as well as to introduce security by design.
Our Chief Legal Officer working with the CIO and other senior management is responsible for determining and coordinating reports and updates to the Audit Committee or the Board of Directors, or as requested by the Audit Committee or the Board of Directors.
Our Chief Legal Officer working with the SVP-IT and other senior management is responsible for determining and coordinating reports and updates to the Audit Committee or the Board of Directors, or as requested by the Audit Committee or the Board of Directors.
Our CIO provides regular updates on cybersecurity matters to our senior management. The Audit Committee assists the Board of Directors in its oversight of risks related to cybersecurity and directly oversees risk management relating to cybersecurity.
Our SVP-IT provides regular updates on cybersecurity matters to our senior management. The Audit Committee assists the Board of Directors in its oversight of risks related to cybersecurity and directly oversees risk management relating to cybersecurity.
The Board of Directors receives an update on the Company’s risk management processes and the risk trends related to cybersecurity at least annually.
The Board of Directors receives an update on the Company’s risk management processes and the risk trends related to cybersecurity at least annually. 32 Table of Contents
The Company has a dedicated role in the Director of Cybersecurity and IT Compliance, who reports to our Chief Information Officer (“CIO”). Our current interim CIO has significant experience in information technology across a variety of industries, including consumer goods, automotive, manufacturing and outsourcing.
The Company has a dedicated role in the Director of Cybersecurity and IT Compliance, who reports to our Senior Vice President of Information Technology (“SVP-IT”). Our current SVP-IT has significant experience in information technology across a variety of industries, including consumer goods, automotive, manufacturing and outsourcing.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties As of February 29, 2024, we own, lease or otherwise utilize through third-party management service agreements various properties worldwide for sales, procurement, research and development, administrative and distribution facilities.
Item 2. Properties As of February 28, 2025, 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 also lease one distribution facility in Olive Branch, Mississippi. Our distribution facilities in Gallaway, Tennessee and 30 Table of Contents Southaven, Mississippi currently service our Home & Outdoor segment. Our distribution facilities in Olive Branch, Mississippi currently service our Beauty & Wellness segment. We believe our facilities are adequate to conduct our business.
Our distribution facilities in Gallaway, Tennessee and Southaven, Mississippi currently service our Home & Outdoor segment and Beauty & Wellness segment, respectively. Our distribution facility in Olive Branch, Mississippi currently services both of our segments. We believe our facilities are adequate to conduct our business. See Note 4 to the accompanying consolidated financial statements for additional information.
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See Note 4 to the accompanying consolidated financial statements for additional information.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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.
EPA Regulatory Matter During fiscal 2022 and 2023, 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 33 Table of Contents humidifier products within the Beauty & Wellness segment that are sold in the U.S.
The Company intervened in the CAFC Appeal, but as of the filing date of this Form 10-K, no hearings have been scheduled. The Patent Litigation remains stayed for the time being.
The Company intervened in the CAFC Appeal, but as of the filing date of this Form 10-K, oral argument has not been scheduled. The Patent Litigation remains stayed for the time being.
Additionally, 31 Table of Contents 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.
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. Ongoing settlement discussions with the EPA related to this matter may result in the imposition of fines or penalties in the future.
Although we have not been notified of any fines or penalties imposed against us by the EPA related to this matter, there can be no assurances that such fines or penalties will not be imposed in the future. See Note 12 to the accompanying consolidated financial statements for further discussion. Item 4.
Such potential fines or penalties cannot be reasonably estimated. See Note 12 to the accompanying consolidated financial statements for further discussion. Item 4. Mine Safety Disclosures Not applicable. 34 Table of Contents PART II
Removed
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.
Removed
Mine Safety Disclosures Not applicable. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Any change in dividend policy will depend upon future conditions, including earnings and financial condition, general business conditions, any applicable contractual limitations, and other factors deemed relevant by our Board of Directors. Issuer Purchases of Equity Securities In August 2021, our Board of Directors authorized the repurchase of up to $500 million of our outstanding common stock.
Any change in dividend policy will depend upon future conditions, including earnings and financial condition, general business conditions, any applicable contractual limitations, and other factors deemed relevant by our Board of Directors. Issuer Purchases of Equity Securities In August 2024, our Board of Directors authorized the repurchase of up to $500 million of our outstanding common stock.
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] 35 Table of Contents
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] 37 Table of Contents
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the NASDAQ Global Select Market under symbol: HELE. Approximate Number of Equity Security Holders of Record Our common stock is our only class of equity security outstanding at February 29, 2024.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the NASDAQ Global Select Market under symbol: HELE. Approximate Number of Equity Security Holders of Record Our common stock is our only class of equity security outstanding at February 28, 2025.
For additional information, see Note 10 to the accompanying consolidated financial statements. 34 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, 2019. The Peer Group Index is the Dow Jones U.S. Personal Products Index.
For additional information, see Note 10 to the accompanying consolidated financial statements. 36 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 29, 2020. The Peer Group Index is the Dow Jones U.S. Personal Products Index.
The authorization became effective August 25, 2021, for a period of three years, and replaced our former repurchase authorization, of which approximately $79.5 million remained. These repurchases may include open market purchases, privately negotiated transactions, block trades, accelerated stock repurchase transactions, or any combination of such methods.
The authorization became effective August 20, 2024, for a period of three years, and replaced our former repurchase authorization, of which approximately $245.3 million remained. These repurchases may include open market purchases, privately negotiated transactions, block trades, accelerated stock repurchase transactions, or any combination of such methods.
As of April 18, 2024, there were 102 holders of record of our common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders whose shares are held of record by banks, brokers and other financial institutions.
As of April 17, 2025, there were 99 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.
Net exercises are treated as purchases and retirements of shares. 33 Table of Contents Share repurchase activity during the three-month period ended February 29, 2024, was as follows: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (2) December 1 through December 31, 2023 21 $ 107.33 21 $ 348,780 January 1 through January 31, 2024 5 121.43 5 348,779 February 1 through February 29, 2024 3,208 117.83 3,208 348,401 Total 3,234 $ 117.77 3,234 (1) The number of shares includes shares of common stock acquired from associates who tendered shares to: (i) satisfy the tax withholding on equity awards as part of our long-term incentive plans or (ii) satisfy the exercise price on stock option exercises.
Net exercises are treated as purchases and retirements of shares. 35 Table of Contents Share repurchase activity during the three-month period ended February 28, 2025, 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, 2024 14 $ 69.19 14 $ 499,941 January 1 through January 31, 2025 23 64.77 23 499,940 February 1 through February 28, 2025 193 58.39 193 499,928 Total 230 $ 59.69 230 (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.

Item 7. Management's Discussion & Analysis

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

139 edited+97 added−57 removed81 unchanged
While we believe that the assumptions we use are reasonable at the time made, changes in business conditions or other unanticipated events and circumstances may occur that cause actual results to differ materially from projected results and this could potentially require future adjustments to our asset valuations.
While we believe that the estimates and assumptions we use are reasonable at the time made, changes in business conditions or other unanticipated events and circumstances may occur that cause actual results to differ materially from projected results and this could potentially require future adjustments to our asset valuations.
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.
Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify 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.
During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area.
During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area.
Goodwill is recorded as the difference, if any, between the aggregate consideration paid and the fair value of the net tangible and intangible assets received in the acquisition of a business. Our intangible assets acquired primarily include trade names and customer relationships.
Goodwill is recorded as the difference, if any, between the aggregate consideration paid and the fair value of the net tangible and intangible assets acquired in the acquisition of a business. Our intangible assets acquired primarily include trade names and customer relationships.
This includes statements made in this Annual Report, in other filings with the SEC, in press releases, and in certain other oral and written presentations. Generally, the words “anticipates”, “believes”, “expects”, “plans”, “may”, “will”, “might”, “would”, “should”, “seeks”, “estimates”, “project”, “predict”, “potential”, “currently”, “continue”, “intends”, “outlook”, “forecasts”, “targets”, “could”, and other similar words identify forward-looking statements.
This includes statements made in this Annual Report, in other filings with the SEC, in press releases, and in certain other oral and written presentations. Generally, the words “anticipates”, “assumes”, “believes”, “expects”, “plans”, “may”, “will”, “might”, “would”, “should”, “seeks”, “estimates”, “project”, “predict”, “potential”, “currently”, “continue”, “intends”, “outlook”, “forecasts”, “targets”, “reflects”, “could”, and other similar words identify forward-looking statements.
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 60 Table of Contents to manage our underlying business.
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 61 Table of Contents assumptions require significant judgement and are consistent with the plans and estimates we are using to manage our underlying business.
This new structure reduced the size of our global workforce by approximately 10%. We believe that these changes better focus business segment resources on brand development, consumer-centric innovation and marketing, the RMOs on sales and go-to-market strategies, and shared services on their respective areas of expertise while also creating a more efficient and effective organizational structure.
This new structure reduced the size of 40 Table of Contents our global workforce by approximately 10%. We believe that these changes better focus business segment resources on brand development, consumer-centric innovation and marketing, the RMOs on sales and go-to-market strategies, and shared services on their respective areas of expertise while also creating a more efficient and effective organizational structure.
Credit Agreement and Other Debt Agreements Credit Agreement and Prior Credit Agreement On February 15, 2024, we entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders. The Credit Agreement replaces our prior credit agreement (the “Prior Credit Agreement”), which terminated on February 15, 2024 and is further described below.
Credit Agreement Credit Agreement and Prior Credit Agreement On February 15, 2024, we entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders. The Credit Agreement replaces our prior credit agreement (the “Prior Credit Agreement”), which terminated on February 15, 2024 and is further described below.
Note 1 describes several other policies that are important to the preparation of our consolidated financial statements, but do not meet the SEC's definition of critical accounting estimates. Information Regarding Forward-Looking Statements Certain written and oral statements in this Annual Report may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995.
Note 1 describes several 67 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. Information Regarding Forward-Looking Statements Certain written and oral statements in this Annual Report may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995.
We expect continued uncertainty in our business and the global economy due to inflation and changes in consumer spending patterns. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
We expect continued uncertainty in our business and the global economy due to inflation, changes in consumer spending patterns and increased competition. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
Reemergence of these global supply chain disruptions and related inflationary cost trends could have negative impacts to our business, results of operations and financial condition. EPA Compliance Costs Some of our product lines are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S.
Reemergence of 43 Table of Contents these global supply chain disruptions and related inflationary cost trends could have negative impacts to our business, results of operations and financial condition. EPA Compliance Costs Some of our product lines are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S.
The fair value of our trade names and customer relationships acquired involved significant estimates and assumptions, including revenue growth rates, gross profit and operating profit margins, discount rates and royalty and customer attrition rates (as 61 Table of Contents applicable).
The fair value of our trade names and customer relationships acquired involved significant estimates and assumptions, including revenue growth rates, 62 Table of Contents gross profit and operating profit margins, discount rates and royalty and customer attrition rates (as applicable).
Consumer purchases of discretionary items, including the products that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. Dynamic changes in consumer spending and shopping patterns are also having an impact on retailer inventory levels.
Consumer purchases of discretionary items, including the products that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. 42 Table of Contents Dynamic changes in consumer spending and shopping patterns are also having an impact on retailer inventory levels.
Proceeds can be used for working capital and other general corporate purposes, including funding permitted acquisitions. At the closing date of the Credit Agreement, we borrowed $457.5 million under the revolving credit facility and $250.0 million under the term loan facility and utilized the proceeds to repay all debt outstanding under the Prior Credit Agreement.
Proceeds can be used for working capital and other general corporate purposes, including funding permitted acquisitions. At the closing date of the Credit Agreement, we borrowed $457.5 million under the revolving credit facility and 58 Table of Contents $250.0 million under the term loan facility and utilized the proceeds to repay all debt outstanding under the Prior Credit Agreement.
As of February 29, 2024, we were in compliance with all covenants as defined under the terms of the Credit Agreement. 59 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 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, 2025, we were in compliance with all covenants as defined under the terms of the Credit Agreement. 60 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 Currently Allowed: 4.50 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.
Highlights from Fiscal 2024 • We received proceeds of $49.5 million from the sale of our distribution and office facilities in El Paso, Texas and made investments in capital and intangible asset expenditures of $36.6 million, of which $19.3 million related to expenditures, primarily equipment, for our new two million square foot distribution facility.
Highlights from Fiscal 2024 • We received proceeds of $49.5 million from the sale of our distribution and office facilities in El Paso, Texas and made investments in capital and intangible asset expenditures of $36.6 million, of which $19.3 million related to expenditures, primarily equipment, for our new distribution facility.
T he term loans are payable at the end of each fiscal quarter in equal installments of 0.625% through February 28, 2025, 0.9375% through February 28, 2026, and 1.25% thereafter of the original principal balance of the term loans, beginning in the first quarter of fiscal 2025, with the remaining balance due at the maturity date.
T he term loans are payable at the end of each fiscal quarter in equal installments of 0.625% through February 28, 2025, 0.9375% through February 28, 2026, and 1.25% thereafter of the original principal balance of the term loans, which began in the first quarter of fiscal 2025, with the remaining balance due at the maturity date.
We may finance share repurchases with available cash, additional debt or other sources of financing. For additional information, see Item 5., “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in this Annual Report. Operating Activities Comparison of Fiscal 2024 to 2023 Operating activities provided net cash of $306.1 million compared to $208.2 million.
We may finance share repurchases with available cash, additional debt or other sources of financing. For additional information, see Item 5., “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in this Annual Report. Operating Activities Comparison of Fiscal 2025 to 2024 Operating activities provided net cash of $113.2 million compared to $306.1 million.
Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term SOFR (as defined in the Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.125% and 1.0% to 2.125% for Base Rate and Term SOFR borrowings, respectively.
Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term SOFR (as defined in the Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.125% and 1.0% to 2.125% for Base Rate and Term SOFR borrowings, respectively, pursuant to the below table.
During fiscal 2024 and 2023, we incurred $18.7 million and $27.4 million of pre-tax restructuring costs, respectively, in connection with Project Pegasus, which were recorded as “Restructuring charges” in the consolidated statements of income.
During fiscal 2025, 2024 and 2023, we incurred $14.8 million, $18.7 million and $27.4 million of pre-tax restructuring costs, respectively, in connection with Project Pegasus, which were recorded as “Restructuring charges” in the consolidated statements of income.
These non-GAAP financial measures are discussed further and reconciled to their applicable GAAP-based financial measures contained in this MD&A beginning on page 50. 36 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.
These non-GAAP financial measures are discussed further and reconciled to their applicable GAAP-based financial measures contained in this MD&A beginning on page 51. 38 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.
Expectations regarding our Project Pegasus initiatives and our ability to realize targeted savings, including expectations concerning costs and savings, are based on management’s estimates available at the time and are subject to a number of assumptions that could materially impact our estimates.
Expectations regarding our Project Pegasus initiatives and our ability to realize targeted savings are based on management’s estimates available at the time and are subject to a number of assumptions that could materially impact our estimates.
Additionally, we expensed $0.3 million of third-party fees in fiscal 2024 related to debt under the Credit 57 Table of Contents Agreement treated as a modification, which was recognized within interest expense.
Additionally, we expensed $0.3 million of third-party fees in fiscal 2024 related to debt under the Credit Agreement treated as a modification, which was recognized within interest expense.
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.
(4) As defined in the Credit Agreement. Critical Accounting Policies and Estimates The SEC defines critical accounting estimates as those made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a company's financial condition or results of operations.
Approximately 74% of our consolidated net sales revenue in both fiscal 2024 and 2023 was from U.S. shipments compared to 78% of consolidated net sales revenue in fiscal 2022. Among other things, high levels of inflation and interest rates may negatively impact consumer disposable income, credit availability and spending.
Approximately 71% of our consolidated net sales revenue in fiscal 2025 was from U.S. shipments compared to 74% of consolidated net sales revenue in both fiscal 2024 and 2023. Among other things, high levels of inflation and interest rates may negatively impact consumer disposable income, credit availability and spending.
All statements that address operating results, events or developments that we expect or anticipate may 63 Table of Contents 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.
All statements that address operating results, events or developments that we expect or anticipate 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.
See further discussion below within “Significant Trends Impacting the Business,” under “Project Pegasus” and Note 11 to the accompanying consolidated financial statements. Fiscal 2025 begins our Elevate for Growth era, which provides our strategic roadmap through fiscal 2030.
See further discussion below within “Significant Trends Impacting the Business,” under “Project Pegasus” and Note 11 to the accompanying consolidated financial statements. Fiscal 2025 began our Elevate for Growth Strategy, which provides our strategic roadmap through fiscal 2030.
The financial markets, the global economy and global supply chain 40 Table of Contents may also be adversely affected by the current or anticipated impact of military conflicts or other geopolitical events.
The financial markets, the global economy and global supply chain may also be adversely affected by the current or anticipated impact of military conflicts or other geopolitical events.
In the above tables, Organic business refers to our net sales revenue associated with product lines or brands after the first twelve months from the date the product line or brand was acquired, excluding the impact that foreign currency remeasurement had on reported net sales revenue.
In the above table, Organic business refers to our net sales revenue associated with product lines or brands after the first twelve months from the date the product line or brand was acquired, excluding the 47 Table of Contents impact that foreign currency remeasurement had on reported net sales revenue.
See further discussion below under “Consumer Spending and Changes in Shopping Preferences.” We expect continued uncertainty in our business and the global economy due to pressure from inflation, volatility in employment trends and consumer confidence, any of which may adversely impact our results.
See further discussion below under “Consumer Spending and Changes in Shopping Preferences.” We expect continued uncertainty in our business and the global economy due to pressure from inflation and consumer confidence, both of which may adversely impact our results.
The increase in interest expense was primarily due to a higher average effective interest rate, partially offset by lower average borrowings outstanding compared to the prior year. Income Tax Expense The period-over-period comparison of our effective tax rate is often impacted by the mix of income in our various tax jurisdictions.
The decrease in interest expense was primarily due to lower average borrowings outstanding, partially offset by a higher average effective interest rate inclusive of the impact of our interest rate swaps compared to the prior year. Income Tax Expense The period-over-period comparison of our effective tax rate is often impacted by the mix of income in our various tax jurisdictions.
The most significant currencies affecting our operating results are the Euro, British Pound and Canadian Dollar. Changes in foreign currency exchange rates had a favorable impact on consolidated U.S.
The most significant currencies affecting our operating results are the Euro, British Pound and Canadian Dollar. Changes in foreign currency exchange rates had an unfavorable impact on consolidated U.S.
Refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2023 Annual Report on Form 10-K, filed with the SEC on April 27, 2023, for an analysis and discussion of the fiscal year 2023 results of operations as compared to fiscal year 2022, which such discussion is hereby incorporated by reference.
Refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 202 4 Annual Report on Form 10-K, filed with the SEC on April 2 4 , 202 4 , for an analysis and discussion of our fiscal year 202 4 financial condition and results of operations as compared to fiscal year 202 3 , which such discussion is hereby incorporated by reference.
The floating interest rates on our borrowings under the Credit Agreement and Prior Credit Agreement are hedged with interest rate swaps to effectively fix interest rates on $500 million and $425 million of the outstanding principal balance under the revolving loans as of February 29, 2024 and February 28, 2023, respectively.
The floating interest rates on our borrowings under the Credit Agreement and Prior Credit Agreement are hedged with interest rate swaps to effectively fix interest rates on $550 million and $500 million of the outstanding principal balance under the Credit Agreement as of February 28, 2025 and February 29, 2024, respectively.
We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments. During the fourth quarter of fiscal 2023, we made changes to the structure of our organization, which resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment.
These initiatives have created operating efficiencies, as well as provided a platform to fund growth investments. During the fourth quarter of fiscal 2023, we made changes to the structure of our organization, which resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment.
For fiscal 2024, 2023 and 2022, our net sales to pure-play online retailers and retail customers fulfilling end-consumer online orders, as well as our own online sales directly to consumers comprised approximately 28%, 23% and 24%, respectively, of our total consolidated net sales revenue and grew approximately 14.3% in fiscal 2024, while decreasing approximately 8.9% and 1.3% in fiscal 2023 and 2022, respectively, over the prior fiscal year periods.
For fiscal 2025, 2024 and 2023, our net sales to pure-play online retailers and retail customers fulfilling end-consumer online orders, as well as our own online sales directly to consumers comprised approximately 27%, 28% and 23%, respectively, of our total consolidated net sales revenue and decreased approximately 5.5% in fiscal 2025, grew approximately 14.3% in fiscal 2024 and decreased approximately 8.9% in fiscal 2023 over the prior fiscal year periods.
Dollar reported net sales revenue of approximately $6.8 million, or 0.3% for fiscal 2024, an unfavorable impact of approximately $17.0 million, or 0.8% for fiscal 2023 and a favorable impact of approximately $6.8 million, or 0.3% for fiscal 2022.
Dollar reported net sales revenue of approximately $2.5 million , or 0.1% for fiscal 2025, a favorable impact of approximately $6.8 million, or 0.3% for fiscal 2024 and an unfavorable impact of approximately $17.0 million, or 0.8% for fiscal 2023.
We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments. During fiscal 2024 and 2023, we incurred $18.7 million and $27.4 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the consolidated statements of income.
These initiatives have created operating efficiencies, as well as provided a platform to fund future growth investments. During fiscal 2025, 2024 and 2023, we incurred $14.8 million, $18.7 million, and $27.4 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the consolidated statements of income.
We may finance acquisition activity with available cash, the issuance of shares of common stock, additional debt, or other sources of financing, depending upon the size and nature of any such transaction and the status of the capital markets at the time of such acquisition.
We continue to evaluate acquisition opportunities on a regular basis. We may finance acquisition activity with available cash, the issuance of shares of common stock, additional debt, or other sources of financing, depending upon the size and nature of any such transaction and the status of the capital markets at the time of such acquisition.
During fiscal 2023, we made total cash restructuring payments of $20.8 million and had a remaining liability of $6.6 million as of February 28, 2023. 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 acquisition-related expenses, Bed, Bath & Beyond bankruptcy, EPA compliance costs, gain from insurance recoveries, gain on sale of distribution and office facilities, restructuring charges, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on operating income and operating margin for each segment and in total for the periods presented below.
During fiscal 2024, we made total cash restructuring payments of $18.7 million and had a remaining liability of $4.8 million as of February 29, 2024. 50 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 acquisition-related expenses, asset impairment charges, Bed, Bath & Beyond bankruptcy, gain on sale of distribution and office facilities, restructuring charges, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on operating income and operating margin for each segment and in total for the periods presented below.
We believe that these non-GAAP financial measures, in combination with our financial results calculated in accordance with GAAP, provide investors with additional perspective regarding the impact of such charges and benefits on applicable income, margin and earnings per share measures. We also believe that these non-GAAP measures facilitate a more direct comparison of our performance to our competitors.
We 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.
In the past, we have utilized a combination of available cash and existing, or additional, sources of financing to fund strategic acquisitions, share repurchases and capital investments. We generated $306.1 million in cash from operations during fiscal 2024 and had $18.5 million in cash and cash equivalents at February 29, 2024.
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 $113.2 million in cash from operations during fiscal 2025 and had $18.9 million in cash and cash equivalents at February 28, 2025.
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.
During fiscal 2022 and 2023, 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.
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.
Fiscal 2024 We incurred $18.7 million of pre-tax restructuring costs related primarily to professional fees and severance and employee related costs under Project Pegasus.
Restructuring Charges Fiscal 2024 We incurred $18.7 million of pre-tax restructuring costs related primarily to professional fees and severance and employee related costs under Project Pegasus. During fiscal 2024, we made total cash restructuring payments of $18.7 million and had a remaining liability of $4.8 million as of February 29, 2024.
Restructuring Charges Fiscal 2025 We incurred $14.8 million of pre-tax restructuring costs related primarily to severance and employee related costs, professional fees and contract termination costs under Project Pegasus. During fiscal 2025, we made total cash restructuring payments of $11.9 million and had a remaining liability of $7.7 million as of February 28, 2025.
Based on our qualitative assessment performed during the fourth quarter of fiscal 2024 and fiscal 2023, we determined that it is not more likely than not that the fair value of each reporting unit and indefinite-lived intangible asset is lower than its carrying value; therefore, quantitative impairment testing was not required. Our quantitative impairment test methodology primarily uses DCF Models.
We performed our annual impairment testing of our goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal 2024 and 2023 and determined based on our qualitative assessment that it is not more likely than not that the fair value of each reporting unit and indefinite-lived intangible asset is lower than its carrying value.
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.
Significant Trends Impacting the Business Project Pegasus As discussed above, during fiscal 2023, we initiated Project Pegasus, which includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify 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.
Adjusted operating income decreased 1.5% to $158.2 million, or 17.3% of segment net sales revenue, compared to $160.6 million, or 17.5% of segment net sales revenue. 51 Table of Contents Beauty & Wellness Comparison of Fiscal 2024 to 2023 Operating income was $117.9 million, or 10.8% of segment net sales revenue, compared to $77.7 million, or 6.7% of segment net sales revenue.
Adjusted operating income decreased 10.3% to $141.9 million, or 15.7% of segment net sales revenue, compared to $158.2 million, or 17.3% of segment net sales revenue. 52 Table of Contents Beauty & Wellness Comparison of Fiscal 2025 to 2024 Operating income was $23.1 million, or 2.3% of segment net sales revenue, compared to $117.9 million, or 10.8% of segment net sales revenue.
For additional information see Note 6 to the accompanying consolidated financial statements. 50 Table of Contents Consolidated Operating Income Comparison of Fiscal 2024 to 2023 Consolidated operating income was $260.6 million, or 13.0% of net sales revenue, compared to $211.8 million, or 10.2% of net sales revenue.
For additional information see Note 6 to the accompanying consolidated financial statements. 51 Table of Contents Consolidated Operating Income Comparison of Fiscal 2025 to 2024 Consolidated operating income was $142.7 million, or 7.5% of net sales revenue, compared to $260.6 million, or 13.0% of net sales revenue.
Considerable management judgment is necessary, in determining the fair value of goodwill and intangible assets (initially acquired and as part of our impairment testing), including the reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external conditions, considering the resulting operating changes and their impact on estimated future cash flows, determining the appropriate discount factors to use, and selecting and weighting appropriate comparable market level inputs.
We utilize a constant growth model to determine the residual growth rates which are based upon long-term industry growth expectations and long-term expected inflation. 63 Table of Contents Considerable management judgment is necessary in determining the fair value of goodwill and intangible assets (initially acquired and as part of our impairment testing), including the reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external conditions, considering the resulting operating changes and their impact on estimated future cash flows, determining the appropriate discount factors to use, and selecting and weighting appropriate comparable market level inputs.
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 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.
(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.
The costs recognized in cost of goods sold included a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2023.
This geographic consolidation and relocation is the next step in our initiative to streamline and simplify the organization and is expected to be completed during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment.
This geographic consolidation and relocation aligns with our initiative to streamline and simplify the organization and was completed during the third quarter of fiscal 2025. We expect these changes to enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment.
In addition, during fiscal 2024 we had lower personnel costs as a result of our Project Pegasus role reductions; however, they were offset by higher annual incentive compensation expense, annual merit increases, and share-based compensation expense.
In addition, during fiscal 2024 we had lower personnel costs as a result of our Project Pegasus role reductions; however, they were offset by higher annual incentive compensation expense, annual merit increases, and share-based compensation expense. During fiscal 2023, we implemented plans to reduce inventory levels, increase inventory turns, and improve cash flow and working capital.
Any alteration of trade agreements and terms between China and the U.S., including limiting trade with China, imposing additional tariffs on imports from China and potentially imposing other restrictions on imports from China to the U.S. may result in further or higher tariffs or retaliatory trade measures by China.
Any alteration of trade agreements and terms between China and the U.S., including limiting trade with China, imposing additional tariffs on imports from China and potentially 44 Table of Contents imposing other restrictions on imports from China to the U.S. may result in further or higher tariffs or retaliatory trade measures by China (for example, China announced a reciprocal 125% tariff on imports from the U.S. effective April 11, 2025).
Impact of Macroeconomic Trends The Federal Open Market Committee increased the benchmark interest rate by 75 basis points during fiscal 2024 and 450 basis points during fiscal 2023. As a result, during fiscal 2024 and 2023, we incurred higher average interest rates compared to previous periods.
Impact of Macroeconomic Trends The Federal Open Market Committee lowered the benchmark interest rate by 100 basis points during fiscal 2025 compared to an increase of 75 basis points and 450 basis points during fiscal 2024 and 2023, respectively. As a result, during fiscal 2025, we incurred lower average interest rates compared to the prior year.
Adjusted income decreased $14.2 million, or 6.2%, to $213.5 million compared to $227.7 million. Adjusted diluted EPS decreased 5.7% to $8.91 compared to $9.45. Liquidity and Capital Resources We principally rely on our cash flow from operations and borrowings under our Credit Agreement to finance our operations, capital and intangible asset expenditures, acquisitions and share repurchases.
Adjusted income decreased $48.1 million, or 22.5%, to $165.4 million compared to $213.5 million. Adjusted diluted EPS decreased 19.5% to $7.17 compared to $8.91. 55 Table of Contents Liquidity and Capital Resources We principally rely on our cash flow from operations and borrowings under our Credit Agreement to finance our operations, capital and intangible asset expenditures, acquisitions and share repurchases.
Accordingly, during fiscal 2024, we recorded a deferred tax asset of $9.3 million for the Bermuda net operating losses generated from fiscal 2021 through 2024 with an offsetting valuation allowance of $9.3 million.
The Bermuda corporate income tax allows for a beginning net operating loss balance related to the five years preceding the effective date. Accordingly, during fiscal 2024, we recorded a deferred tax asset of $9.3 million for the Bermuda net operating losses generated from fiscal 2021 through 2024 with an offsetting valuation allowance of $9.3 million.
In addition, we implemented plans to reduce inventory levels, increase inventory turns, and improve cash flow and working capital during the second quarter of fiscal 2023. Improvements related to these initiatives began in the second half of fiscal 2023 and continued during fiscal 2024, enabling us to repay amounts outstanding under our long-term debt agreement and reduce our interest expense.
Improvements related to these initiatives began in the second half of fiscal 2023 and continued during fiscal 2024, enabling us to repay amounts outstanding under our long-term debt agreement and reduce our interest expense during fiscal 2024.
We have the following expectations regarding Project Pegasus savings: • We continue to expect targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million, which began in fiscal 2024 and which we now expect to be substantially achieved by the end of fiscal 2027. • We have updated our expectations regarding the estimated cadence of the recognition of the savings to be approximately 25% in fiscal 2024, which was achieved, approximately 35% in fiscal 2025, approximately 25% in fiscal 2026, and approximately 15% in fiscal 2027.
We continue to have the following expectations regarding Project Pegasus savings: • Targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million, which began in fiscal 2024 and we expect to be substantially achieved by the end of fiscal 2027. • Estimated cadence of the recognition of the savings will be approximately 25% and 35% in fiscal 2024 and 2025, respectively, which were both achieved, and approximately 25% and 15% in fiscal 2026 and 2027, respectively. • Total profit improvements to be realized approximately 60% through reduced cost of goods sold and 40% through lower SG&A.
The proceeds from the term loans were used to repay revolving loans under the Prior Credit Agreement. The maturity date of the term loans and the revolving loans under the Prior Credit Agreement was March 13, 2025.
In June 2022, we exercised the accordion under the Prior Credit Agreement and borrowed $250 million as term loans. The proceeds from the term loans were used to repay revolving loans under the Prior Credit Agreement. The maturity date of the term loans and the revolving loans under the Prior Credit Agreement was March 13, 2025.
For additional information see Note 6 to the accompanying consolidated financial statements. * Calculation is not meaningful. 44 Table of Contents Fiscal 2024 Financial Results • Consolidated net sales revenue decreased 3.3%, or $67.6 million, to $2,005.1 million compared to $2,072.7 million for the same period last year. • Consolidated operating income increased 23.0%, or $48.8 million, to $260.6 million, compared to $211.8 million for the same period last year.
For additional information see Note 6 to the accompanying consolidated financial statements. * Calculation is not meaningful. 46 Table of Contents Comparison of Fiscal 2025 to Fiscal 2024 Financial Results • Consolidated net sales revenue decreased 4.9%, or $97.4 million, to $1,907.7 million compared to $2,005.1 million for the same period last year. • Consolidated operating income decreased 45.2%, or $117.8 million, to $142.7 million, compared to $260.6 million for the same period last year.
Fiscal 2024 concluded Phase II of our transformation strategy, which produced net sales and organic net sales growth and gross profit margin expansion. We expanded our Leadership Brands and international footprint with the acquisitions of Drybar, Osprey and Curlsmith.
Fiscal 2020 began Phase II of our transformation, which was designed to drive the next five years of progress. Fiscal 2024 concluded Phase II of our transformation strategy, which produced net sales growth and gross profit margin expansion. We expanded our portfolio of leading brands and international footprint with the acquisitions of Drybar, Osprey and Curlsmith.
The Elevate for Growth era includes an enhanced portfolio management strategy to invest in our brands and grow internationally based upon defined criteria with an emphasis on brand building, new product introductions and expanded distribution. We are continuing to execute our initiatives under Project Pegasus, which we expect to generate incremental investments in our brand portfolio and new capabilities.
The Elevate for Growth Strategy includes an enhanced portfolio management strategy to invest in our brands and grow internationally based upon defined criteria with an emphasis on brand building, new product introductions and expanded distribution.
Consolidated operating margin increased 2.8 percentage points to 13.0%, compared to 10.2% for the same period last year. Consolidated operating income for fiscal 2024 includes a pre-tax gain on sale of distribution and office facilities of $34.2 million, pre-tax restructuring charges of $18.7 million related to Project Pegasus, and a pre-tax Bed, Bath & Beyond bankruptcy charge of $4.2 million.
Consolidated operating income for fiscal 2024 included a pre-tax gain on sale of distribution and office facilities of $34.2 million, pre-tax restructuring charges of $18.7 million related to Project Pegasus and a pre-tax Bed, Bath & Beyond bankruptcy charge of $4.2 million. • Consolidated adjusted operating income decreased 16.3%, or $49.2 million, to $252.3 million, compared to $301.5 million for the same period last year.
This MD&A, including the tables under the headings “Operating Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment” and “Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP),” reports operating income, operating margin, net income and diluted earnings per share (“EPS”) without the impact of acquisition-related expenses, a charge for uncollectible receivables due to the bankruptcy of Bed, Bath & Beyond (“Bed, Bath & Beyond bankruptcy”), EPA compliance costs, gain from insurance recoveries, gain on sale of distribution and office facilities, restructuring charges, amortization of intangible assets, and non-cash share-based compensation for the periods presented, as applicable.
This MD&A, including the tables under the headings “Operating Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment” and “Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP),” reports operating income, operating margin, net income and diluted earnings per share (“EPS”) without the impact of acquisition-related expenses, asset impairment charges, a discrete tax charge to revalue existing deferred tax liabilities due to Barbados enacting domestic corporate income tax legislation (“Barbados tax reform”), a charge for uncollectible receivables due to the bankruptcy of Bed, Bath & Beyond (“Bed, Bath & Beyond bankruptcy”), gain on sale of distribution and office facilities, a transitional income tax benefit resulting from the recognition of a deferred tax asset in connection with the reorganization of our intangible assets (“intangible asset reorganization”), restructuring charges, amortization of intangible assets, and non-cash share-based compensation for the periods presented, as applicable.
Our anticipated material cash requirements in fiscal 2025 include the following: • operating expenses, primarily SG&A and working capital predominately for inventory purchases and to carry normal levels of accounts receivable on our balance sheet; • repayment of a current maturity of long term debt of $6.3 million; • estimated interest payments of approximately $47.4 million based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 29, 2024; • minimum operating lease payments under existing obligations of approximately $10.6 million; • minimum royalty payments under existing license agreements of approximately $6.3 million; • restructuring payments under Project Pegasus of approximately $11.7 million (refer to Note 11 for additional information); and • capital and intangible asset expenditures between approximately $30 million to $35 million to support ongoing operations and future infrastructure needs. 55 Table of Contents Our anticipated material cash requirements beyond fiscal 2025 include the following: • operating expenses, primarily SG&A and working capital predominately for inventory purchases and to carry normal levels of accounts receivable on our balance sheet; • outstanding long-term debt obligations maturing between fiscal 2026 and fiscal 2029, in an aggregate principal value of approximately $665.7 million, with $631.3 million of that amount maturing in fiscal 2029 (refer to Note 13 for additional information); • estimated interest payments of approximately $50.0 million, $48.9 million, $48.1 million, and $45.4 million in fiscal 2026, fiscal 2027, fiscal 2028, and fiscal 2029, respectively, based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 29, 2024 (refer to Note 13 for additional information); • minimum operating lease payments of approximately $45.9 million over the term of our existing operating lease arrangements (refer to Note 3 for additional information); • minimum royalty payments of approximately $20.3 million over the term of the existing license agreements (refer to Note 12 for additional information); and • capital and intangible asset expenditures to support ongoing operations and future infrastructure needs.
Our anticipated material cash requirements in fiscal 2026 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 $9.4 million; • estimated interest payments of approximately $55.4 million based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 28, 2025; • minimum operating lease payments under existing obligations of approximately $8.2 million; • minimum royalty payments under existing license agreements of approximately $6.3 million; • restructuring payments under Project Pegasus of approximately $7.7 million (refer to Note 11 for additional information); and • capital and intangible asset expenditures between approximately $25 million to $30 million to support ongoing operations and future infrastructure needs, including investments to transfer sourcing of certain products.
Capital and intangible asset expenditures also included expenditures for 56 Table of Contents computer, furniture and other equipment and tooling, molds, and other production equipment. In addition, we invested $9.6 million in U.S. Treasury Bills.
Capital and intangible asset expenditures also included expenditures for computer, furniture and other equipment and tooling, molds, and other production equipment. In addition, we invested $9.6 million in U.S. Treasury Bills. 57 Table of Contents Financing Activities Financing activities provided cash of $150.2 million and used cash of $322.1 million in fiscal 2025 and 2024.
Water Filtration Patent Litigation On December 23, 2021, Brita LP filed the Patent Litigation, alleging patent infringement by the Company relating to its PUR gravity-fed water filtration systems. Brita LP simultaneously filed the ITC Action against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration systems.
Brita LP simultaneously filed the ITC Action against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration systems. The complaint in the ITC Action also alleged patent infringement by the Company with respect to a limited set of PUR gravity-fed water filtration systems.
The increase was primarily driven by higher cash earnings, decreases in payments for inventory, inbound freight, annual incentive compensation, income taxes and restructuring activities, partially offset by increases in cash used primarily for accounts receivable and interest payments. Investing Activities Investing activities provided cash of $5.4 million in fiscal 2024 and used cash of $319.3 million in fiscal 2023.
The decrease was primarily driven by increases in payments for inventory, annual incentive compensation and income taxes, as well as a decrease in cash earnings, partially offset by decreases in cash used for restructuring activities and interest payments. Investing Activities Investing activities used cash of $263.1 million in fiscal 2025 and provided cash of $5.4 million in fiscal 2024.
Consolidated adjusted operating income increased 0.2% to $301.5 million, or 15.0% of net sales revenue, compared to $300.9 million, or 14.5% of net sales revenue. Home & Outdoor Comparison of Fiscal 2024 to 2023 Operating income was $142.7 million, or 15.6% of segment net sales revenue, compared to $134.1 million, or 14.6% of segment net sales revenue.
Consolidated adjusted operating income decreased 16.3% to $252.3 million, or 13.2% of net sales revenue, compared to $301.5 million, or 15.0% of net sales revenue. Home & Outdoor Comparison of Fiscal 2025 to 2024 Operating income was $119.6 million, or 13.2% of segment net sales revenue, compared to $142.7 million, or 15.6% of segment net sales revenue.
We intend to further leverage our operational scale and assets, including our new state-of-the-art distribution center, improved go-to-market structure with our North America RMO, and our expanded shared services capabilities.
We are continuing to execute our initiatives under Project Pegasus, which we expect to generate incremental fuel to invest in our brand portfolio and new capabilities. We intend to further leverage our operational scale and assets, including our new state-of-the-art distribution center, improved go-to-market structure with our North America RMO, and our expanded shared services capabilities.
Fiscal 2024 income tax expense as a percentage of income before income tax was 19.3% compared to income tax expense of 16.4% for fiscal 2023, primarily due to shifts in the mix of income in our various tax jurisdictions and tax expense recognized for the gain on the sale of our distribution and office facilities in El Paso, Texas during fiscal 2024. 53 Table of Contents Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP) In order to provide a better understanding of the impact of certain items on our income and diluted EPS, the tables that follow report the comparative after-tax impact of acquisition-related expenses, Bed, Bath & Beyond bankruptcy, EPA compliance costs, gain from insurance recoveries, gain on sale of distribution and office facilities, restructuring charges, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on income and diluted EPS for the periods presented below.
Fiscal 2025 income tax benefit as a percentage of income before income tax was 35.0% compared to income tax expense of 19.3% for fiscal 2024, primarily due to the transitional tax benefit resulting from the intangible asset reorganization, a tax benefit related to a resolution of an uncertain tax position, the comparative impact of tax expense recognized in the prior year for the gain on the sale of the El Paso facility, partially offset by the Barbados tax legislation described above, including a discrete tax charge of $6.0 million during fiscal 2025 to revalue deferred tax liabilities, and shifts in the mix of income in our various tax jurisdictions. 54 Table of Contents Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP) In order to provide a better understanding of the impact of certain items on our income and diluted EPS, the tables that follow report the comparative after-tax impact of acquisition-related expenses, asset impairment charges, Barbados tax reform, Bed, Bath & Beyond bankruptcy, gain on sale of distribution and office facilities, intangible asset reorganization, restructuring charges, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on income and diluted EPS for the periods presented below.
Fiscal 2024 includes a pre-tax Bed, Bath & Beyond bankruptcy charge of $4.2 million, a pre-tax gain on sale of distribution and office facilities of $34.2 million and pre-tax restructuring charges of $18.7 million, compared to pre-tax acquisition-related expenses of $2.8 million, pre-tax EPA compliance costs of $23.6 million, pre-tax gain from insurance recoveries of $9.7 million, and pre-tax restructuring charges of $27.4 million in fiscal 2023.
Fiscal 2025 includes pre-tax acquisition-related expenses of $3.0 million, pre-tax asset impairment charges of $51.5 million, and pre-tax restructuring charges of $14.8 million, compared to a pre-tax Bed, Bath & Beyond bankruptcy charge of $4.2 million, a pre-tax gain on sale of distribution and office facilities of $34.2 million and pre-tax restructuring charges of $18.7 million in fiscal 2024.
We used the proceeds from the sale to repay amounts outstanding under our long-term debt agreement. During fiscal 2022 and fiscal 2023, we divested our Personal Care business.
We used the proceeds from the sale to repay amounts outstanding under our long-term debt agreement.
During fiscal 2023, as consumer demand slowed in reaction to a highly inflationary economic environment, global supply chain capacity improved and freight costs began to recede from their previous peaks. During fiscal 2024, inbound freight costs have continued to decline and have begun to approach levels seen prior to the impact of COVID-19.
Global Supply Chain and Related Cost Inflation Trends During fiscal 2023, after experiencing a strained global supply chain network and higher inbound freight costs in the prior year as a result of COVID-19, consumer demand slowed in reaction to a highly inflationary economic environment, global supply chain capacity improved and freight costs began to recede from their previous peaks.
Curlsmith sales prior to the first annual anniversary of the acquisition are reported in Acquisition for the Beauty & Wellness segment in fiscal 2024 and fiscal 2023 and consist of approximately seven weeks and forty-five weeks of incremental operating results, respectively. For additional information see Note 6 to the accompanying consolidated financial statements.
Olive & June sales are reported in Acquisition for the Beauty & Wellness segment in fiscal 2025 and consist of approximately eleven weeks of operating results. For additional information see Note 6 to the accompanying consolidated financial statements.
(3) In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.50 to 1.00 for the first four fiscal quarters after the qualified acquisition is consummated. (4) As defined in the Credit Agreement.
(3) In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.50 to 1.00 for the first four fiscal quarters after the qualified acquisition is consummated. During fiscal 2025, we provided a qualified acquisition notice and, as a result, the maximum leverage ratio is 4.50 to 1.00 through November 30, 2025 and 3.50 to 1.00 thereafter.
We experienced some improvement in replenishment orders from certain retail customers in certain product categories during fiscal 2024. If orders from our retail customers continue to be adversely impacted, our sales, results of operations and cash flows may continue to be adversely impacted.
We experienced some improvement in replenishment orders from certain retail customers in certain product categories during fiscal 2024. However, during fiscal 2025, we experienced reduced replenishment orders from retail customers in line with softer consumer demand and discretionary spending, which adversely impacted our sales, results of operations and cash flows.
Adjusted operating income increased 2.2% to $143.4 million, or 13.2% of segment net sales revenue, compared to $140.3 million, or 12.1% of segment net sales revenue. Interest Expense Comparison of Fiscal 2024 to 2023 Interest expense was $53.1 million, compared to $40.8 million.
Adjusted operating income decreased 23.0% to $110.4 million, or 11.0% of segment net sales revenue, compared to $143.4 million, or 13.2% of segment net sales revenue. Interest Expense Comparison of Fiscal 2025 to 2024 Interest expense was $51.9 million, compared to $53.1 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

14 edited+1 added−0 removed10 unchanged
In our consolidated statements of income, foreign currency exchange rate gains and losses resulting from the remeasurement of foreign income taxes receivables and payables, and deferred income tax assets and liabilities are recognized in income tax expense, and all other foreign currency exchange rate gains and losses are recognized in SG&A.
In our consolidated statements of income, foreign currency exchange rate gains and losses resulting from the remeasurement of foreign income tax receivables and payables, and deferred income tax assets and liabilities are recognized in income tax (benefit) expense, and all other foreign currency exchange rate gains and losses are recognized in SG&A.
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. 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. 70 Table of Contents
Approximately 14%, 13%, and 10% of our net sales revenue was denominated in foreign currencies during fiscal 2024, 2023 and 2022, respectively. These sales were primarily denominated in Euros, British Pounds and Canadian Dollars. We make most of our inventory purchases from manufacturers in Asia and primarily use the U.S. Dollar for such purchases.
Approximately 14%, 14% and 13% of our net sales revenue was denominated in foreign currencies during fiscal 2025, 2024 and 2023, 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.
Dollar in recent years and in fiscal 2024 the average exchange rate of the Chinese Renminbi weakened against the U.S. Dollar by approximately 5.0% compared to the average rate during fiscal 2023. If China’s currency continues to fluctuate against the U.S. Dollar in the short-to-intermediate term, we cannot accurately predict the impact of those fluctuations on our results of operations.
Dollar in recent years and in fiscal 2025 the average exchange rate of the Chinese Renminbi weakened against the U.S. Dollar by approximately 1.0% compared to the average rate during fiscal 2024. 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.
As of February 29, 2024 and February 28, 2023, a hypothetical 1% increase in interest rates would increase our annual interest expense, net of the effect of our interest rate swaps, by approximately $1.7 million and $5.1 million, respectively.
As of February 28, 2025 and February 29, 2024, a hypothetical 1% increase in interest rates would increase our annual interest expense, net of the effect of our interest rate swaps, by approximately $3.7 million and $1.7 million, respectively.
Refer to Notes 13 and 15 to the accompanying consolidated financial statements for further information regarding our interest rate sensitive assets and liabilities.
Refer to Notes 13 69 Table of Contents and 15 to the accompanying consolidated financial statements for further information regarding our interest rate sensitive assets and liabilities.
As of February 29, 2024 and February 28, 2023, a hypothetical adverse 10% change in foreign currency exchange rates would reduce the carrying and fair values of our derivatives by $8.3 million and $8.8 64 Table of Contents million on a pre-tax basis, respectively.
As of February 28, 2025 and February 29, 2024, a hypothetical adverse 10% change in foreign currency exchange rates would reduce the carrying and fair values of our derivatives by $7.9 million and $8.3 million on a pre-tax basis, respectively.
Accordingly, there can be no assurance that foreign exchange rates will be stable in the future or that fluctuations in Chinese foreign currency markets will not have a material adverse effect on our business, results of operations and financial condition. Interest Rate Risk Interest on our outstanding debt as of February 29, 2024 is based on variable floating interest rates.
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.
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.
Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars. 68 Table of Contents We mitigate certain foreign currency exchange rate risk by using a series of forward contracts to protect against the foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies.
We recorded in income tax expense foreign currency exchange rate net gains of $0.3 million during fiscal 2024 and net losses of $0.4 million and $0.5 million during fiscal 2023 and 2022, respectively. We recorded in SG&A foreign currency exchange rate net losses of $0.5 million, $1.7 million and $0.2 million during fiscal 2024, 2023 and 2022, respectively.
We recorded in income tax (benefit) expense a foreign currency exchange rate net loss of $0.7 million during fiscal 2025, a net gain of $0.3 million during fiscal 2024 and a net loss of $0.4 million during fiscal 2023.
Additionally, our cash and short-term investments generate interest income that will vary based on changes in short-term interest. As of February 29, 2024 and February 28, 2023, a hypothetical adverse 10% change in interest rates would reduce the carrying and fair values of the interest rate swaps by $2.7 million and $4.3 million on a pre-tax basis, respectively.
As of February 28, 2025 and February 29, 2024, a hypothetical adverse 10% change in interest rates would reduce the carrying and fair values of the interest rate swaps by $2.2 million and $2.7 million on a pre-tax basis, respectively.
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.
Uncertainty as to SOFR or changes to SOFR may affect the interest rate of certain borrowings under the Credit Agreement. We hedge against interest rate volatility by using interest rate swaps to hedge a portion of our outstanding floating rate debt. Additionally, our cash and short-term investments generate interest income that will vary based on changes in short-term interest.
We identify foreign currency risk by regularly monitoring our foreign currency denominated transactions and balances. Where operating conditions permit, we reduce our foreign currency risk by purchasing most of our inventory with U.S. Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars.
We recorded in SG&A foreign currency exchange rate net losses of $1.5 million, $0.5 million and $1.7 million during fiscal 2025, 2024 and 2023, 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.
As such, we are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense. As of February 29, 2024, certain borrowings under the Credit Agreement bore interest at an adjusted Term SOFR (as defined in the Credit Agreement). SOFR began in April 2018 and it therefore has a limited history.
As of February 28, 2025 and February 29, 2024, certain borrowings under the Credit Agreement bore interest at an adjusted Term SOFR (as defined in the Credit Agreement). SOFR began in April 2018 and it therefore has a limited history. The future performance of SOFR cannot reliably be predicted based on hypothetical or limited historical performance data.
Added
Interest Rate Risk Interest on our outstanding debt as of February 28, 2025 and February 29, 2024 is based on variable floating interest rates. As such, we are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense.

Other HELE 10-K year-over-year comparisons