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What changed in HELEN OF TROY LTD's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HELEN OF TROY LTD's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+402 added−443 removedSource: 10-K (2024-04-24) vs 10-K (2023-04-27)

Top changes in HELEN OF TROY LTD's 2024 10-K

402 paragraphs added · 443 removed · 299 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+15 added−11 removed37 unchanged
Biggest changeOur Products The following table summarizes the types of products we sell by business segment: Segment Product Category Primary Products Home & Outdoor Food Preparation, Baking and Storage Food preparation tools and gadgets including serving plates and bowls, utensils, scales, thermometers, measuring cups and spoons, timers, barware, cookware, bakeware, food storage containers and storage and organization products Coffee and Tea Coffee makers, grinders, manual pour overs and tea kettles Cleaning and Bath Household cleaning products, shower organization and bathroom accessories Infant and Toddler Feeding and drinking products, child seating, cleaning tools and nursery accessories Hot and Cold Beverage Containers and Food Transport and Storage Solutions Insulated hydration bottles, hydration packs, drinkware, mugs, food containers, lunch containers, insulated totes, soft coolers and accessories Backpacks, Daypacks, Luggage and Accessories Technical and outdoor sports packs, hydration and travel packs and accessories, bike packs and bags, daypacks and everyday packs, duffel bags and luggage Beauty & Wellness Hair Appliances and Accessories Mass, professional and prestige market hair appliances, grooming brushes, tools and decorative hair accessories Personal and Hair Care (1) Prestige market shampoos, liquid hair styling products, treatments and conditioners Wellness Devices Thermometers, blood pressure monitors, pulse oximeters, nasal aspirators, humidifiers, faucet mount water filtration systems and pitcher-based water filtration systems, air purifiers, heaters, and fans (1) During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Personal Care business, which included our mass channel liquid, powder and aerosol products.
Biggest changeOur Products The following table summarizes the types of products we sell by business segment: Segment Product Category Primary Products Home & Outdoor Home Solutions Food storage containers, kitchen utensils for cooking and preparing salads, fruits, vegetables and meats, graters, slicers and choppers, baking essentials, kitchen organization, bath, cleaning, infant and toddler products and coffee preparation tools and electronics Insulated Beverageware, Coolers and Food Storage Solutions Insulated beverageware including bottles, travel tumblers, drinkware, and mugs, food and lunch containers, insulated totes, soft coolers, outdoor kitchenware and accessories Technical, Outdoor, Travel, and Lifestyle Packs and Accessories Technical and outdoor sports packs, bike packs and bags, hydration and travel packs, duffel bags and luggage, lifestyle and everyday packs, kid carrier packs, and accessories Beauty & Wellness Hair Tools and Accessories Mass, professional and prestige hair appliances, brushes, grooming tools and accessories Hair Liquids Prestige shampoos, liquid hair styling products, treatments and conditioners Wellness Devices and Consumables Thermometers, blood pressure monitors, pulse oximeters, nasal aspirators, humidifiers, faucet mount and pitcher water filtration systems, air purifiers, heaters, fans, and humidification, thermometry, water filtration, and air purification consumables Our Trademarks We market products under a number of trademarks that we own and sell certain of our products under trademarks licensed from third parties.
We refer to these charges as “EPA compliance costs” throughout this Annual Report. 8 Table of Contents The following table provides a summary of EPA compliance costs incurred during the periods presented: Fiscal Years Ended Last Day of February (in thousands) 2023 2022 2021 Cost of goods sold $ 16,928 1 $ 17,728 2 $ — SG&A 6,645 14,626 — Total EPA compliance costs $ 23,573 $ 32,354 $ — (1) Includes a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2023.
We refer to these charges as “EPA compliance costs” throughout this Annual Report. 8 Table of Contents The following table provides a summary of EPA compliance costs incurred during the periods presented: Fiscal Years Ended Last Day of February (in thousands) 2024 2023 2022 Cost of goods sold $ — $ 16,928 1 $ 17,728 2 SG&A — 6,645 14,626 Total EPA compliance costs $ — $ 23,573 $ 32,354 (1) Includes a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2023.
ESG Initiatives We seek to maintain best-in-class level of corporate governance on behalf of our stakeholders, including our associates, customers, consumers, communities, and shareholders. We also recognize the importance of environmental and social factors related to how we operate our business.
ESG Initiatives We seek to maintain a best-in-class level of corporate governance on behalf of our stakeholders, including our associates, customers, consumers, communities, and shareholders. We also recognize the importance of environmental and social factors related to how we operate our business.
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.
Our fiscal 2022 consolidated, and Beauty & Wellness segment’s, net sales revenue, gross profit and operating income were materially and adversely impacted by the stop shipment actions and the time needed to execute repackaging and relabeling plans.
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging of our existing inventory of impacted products during fiscal 2023.
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023.
Consistent with our strategy of focusing resources on our Leadership Brands, during the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Beauty & Wellness segment's mass channel personal care business, which included liquid, powder and aerosol products under brands such as Pert, Brut, Sure and Infusium (“Personal Care”).
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”).
As part of these efforts and in order to strengthen our support of climate action, we became a signatory of We Mean Business, a coalition of organizations and businesses with a goal of catalyzing business action to accelerate the transition to a zero-carbon economy.
As part of these efforts, and in order to strengthen our support of climate action, we became a signatory of ‘We Mean Business’, a coalition of organizations and businesses with a goal of catalyzing business action to accelerate the transition to a zero-carbon economy.
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 number-one or number-two 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 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.
These facilities include our U.S. headquarters in El Paso, Texas, and distribution centers in Southaven, Mississippi, and Olive Branch, Mississippi, 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.
Information in our ESG Report 9 Table of Contents is not part of this Annual Report or any other report we file with, or furnish to, the Securities and Exchange Commission (“SEC”), except as expressly set forth by specific reference in such a filing .
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 .
Sales to our second largest customer, Target Corporation, accounted for approximately 10% in fiscal 2023 and 11% in both fiscal 2022 and 2021 of our consolidated net sales revenue.
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 top five customers accounted for approximately 43%, 49% and 52% of our consolidated net sales revenue in fiscal 2023, 2022 and 2021, respectively. Order Backlog When placing orders, our individual consumer, retail and wholesale customers usually request that we ship the related products within a short time frame.
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.
On March 25, 2022, we completed the sale of the Latin America and Caribbean Personal Care business to HRB 4 Table of Contents Brands LLC, for $1.8 million in cash and recognized a gain on the sale in SG&A totaling $1.3 million.
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.
Sales to our third largest customer, Walmart, Inc., including its worldwide affiliates, accounted for approximately 10%, 11% and 13% of our consolidated net sales revenue in fiscal 2023, 2022 and 2021, respectively. No other customers accounted for 10% or more of consolidated net sales revenue during these fiscal years.
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.
We are implementing a system to minimize negative impacts of our practices on the environment and continue to work on initiatives to reduce emissions in our supply chain and product use.
We are implementing a system that is designed to minimize negative impacts of our practices on the environment and we continue to work on initiatives to reduce emissions in our supply chain and product use.
(Remington), Coty Inc., Dyson Ltd, L'Oréal S.A., DevaCurl, Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands, Inc., Lasko Products, LLC, The Clorox Company (Brita), Zero Technologies, LLC, Vornado Air Circulation Systems, Unilever (Blueair), Guardian Technologies LLC.
(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.
We are advancing short- and long-term initiatives which include: leadership coaching and training to build awareness and sponsorship, recruitment actions to increase diversity of new hires, associate learning programs to develop skills that foster inclusion, business resource groups to further support inclusion, ongoing dialogue sessions with our associates and charitable donations to non-profit organizations whose mission and values align with our culture.
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.
Although, we are not aware of any fines or penalties related to this matter imposed against us by the EPA, there can be no assurances that such fines or penalties will not be imposed. We recorded charges to cost of goods sold to write-off obsolete packaging for the affected products in our inventory on-hand and in-transit.
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.
Additionally, some product lines within our Beauty & Wellness segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the U.S. Environmental Protection Agency (the “EPA”), U.S. Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.
Additionally, some of our product lines are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the U.S. Environmental Protection Agency (the “EPA”), U.S. Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.
Seasonality The following table illustrates the seasonality of our net sales revenue by fiscal quarter as a percentage of annual net sales revenue for the periods presented: Fiscal Quarters Ended Last Day of Month 2023 2022 2021 May 24.5 % 24.3 % 20.0 % August 25.2 % 21.4 % 25.3 % November 26.9 % 28.1 % 30.4 % February 23.4 % 26.2 % 24.3 % Our sales are seasonal due to different calendar events, holidays and seasonal weather patterns.
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.
Fiscal 3 Table of Contents 2020 began Phase II of our transformation, which was designed to drive the next five years of progress. The long-term objectives of Phase II include improved organic sales growth, continued margin expansion, and strategic and effective capital deployment.
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.
The personal and hair care category of the Beauty & Wellness segment sources most of its products from U.S. manufacturers. Finished goods manufactured by vendors in Asia comprised approximately 87%, 88%, and 80% of finished goods purchased in fiscal 2023, 2022, and 2021, respectively. We occupy owned and leased office and distribution space in various locations to support our operations.
The 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.
Our Associates As of February 28, 2023, we employed approximately 1,903 full-time associates worldwide. We also use temporary, part-time and seasonal associates as needed. None of our U.S. associates are covered by a collective bargaining agreement. Certain of our associates in Europe and Vietnam are covered by collective arrangements or works counsel in accordance with local practice.
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.
In June 2022, we published our second ESG Report, which aligns with relevant standards such as the SASB, the TCFD and the Global Reporting Initiative. Our ESG Report summarizes our ESG strategy and performance, including in the areas of climate change, DEI&B and human capital, and environmental and natural capital management.
In June 2023, we published our third ESG Report, which aligns with relevant standards such as the SASB, the TCFD and the Global Reporting Initiative. Our ESG Report summarizes our ESG strategy and performance, including in the areas of climate change, DEI&B 9 Table of Contents and human capital, and environmental and natural capital management.
(KitchenAid), Breville Group, Corning Incorporated (Pyrex), Meyer Corporation (Farberware), Newell Brands Inc., Simple Human LLC, Yeti Holdings, Inc., Bradshaw International (GoodCook), Patagonia, Gregory Mountain Products, Mystery Ranch, CamelBak, The North Face, Deuter Beauty & Wellness Conair, Spectrum Brands Holdings Inc.
(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.
The acquisition of Osprey complements our outdoor platform, accelerates our international strategy and added a 9th Leadership Brand to the Company.
The acquisition of Osprey complemented our outdoor platform, accelerated our international strategy and added a 9th Leadership Brand to the Company.
Phase II includes continued investment in our Leadership Brands, with a focus on growing them through consumer-centric innovation, expanding them more aggressively outside the U.S., and adding new brands through acquisition. We are building further shared service capability and operating efficiency, as well as focusing on attracting, retaining, unifying and training the best people.
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.
Sales for the segment are primarily to retailers, distributors, beauty supply wholesalers and through our direct-to-consumer channel. For more segment and geographic information concerning our net sales revenue, long-lived assets and operating income, refer to Note 18 to the accompanying consolidated financial statements.
Sales for this global segment are primarily to online and brick & mortar retailers, distributors, and through our direct-to-consumer channel. For more segment and geographic information concerning our net sales revenue, long-lived assets and operating income, refer to Note 17 to the accompanying consolidated financial statements.
We are committed to cultivating an inclusive culture where all of our associates can thrive.
We are committed to cultivating an inclusive culture where all of our associates can thrive and feel accepted for who they are.
On December 29, 2021, we completed the acquisition of Osprey Packs, Inc. (“Osprey”), a longtime U.S. leader in technical and everyday packs, for $409.3 million in cash, net of a final net working capital adjustment and cash acquired.
(“Osprey”), 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.
During fiscal 2022, we sold our Pert, Sure and Infusium trademarks in connection with the sale of our North America Personal Care business. 5 Table of Contents The following table lists our key trademarks by segment: Segment Owned Licensed Home & Outdoor OXO, Good Grips, Hydro Flask, Soft Works, OXO tot, OXO Brew, OXO Strive, OXO Outdoor, Osprey Beauty & Wellness Drybar, Hot Tools, Curlsmith, PUR Revlon, Bed Head, Honeywell, Braun, Vicks Patents and Other Intellectual Property We maintain utility and design patents in the U.S. and several foreign countries.
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.
We believe that these changes better focus business segment resources on brand development, consumer-centric innovation and marketing, the RMOs on sales and go to market strategies, and shared services on their respective areas of expertise while also creating a more efficient and effective organizational structure. See Note 12 to the accompanying consolidated financial statements for additional information.
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.
We collaborate extensively with our retail customers and, in many instances, produce specific versions of our product lines with exclusive designs and packaging for their stores, which are appropriately priced for their respective customer bases.
We take a consumer-centric approach to assortment planning by fostering close collaborations with our retail customers. In many instances, we produce specific versions of our product lines with exclusive designs and packaging for our retail customers, which are appropriately priced for their respective customer bases.
We 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. 7 Table of Contents The following table summarizes our primary competitors by business segment: Segment Competitor Home & Outdoor Lifetime Brands, Inc.
During the second quarter of fiscal 2023, we focused on developing a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and reduce costs (referred to as “Project Pegasus”).
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.
Research and development expenses consist primarily of salary and employee benefit expenses and contracted development and testing efforts associated with development of products.
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 have a performance evaluation and feedback program for all of our associates. We encourage career planning at all levels of the Company. We have a formal system for identifying and developing talent and growth for associates within our organization and support the creation of development and succession plans across key positions in the Company.
We have a formal system for identifying and developing talent and growth for associates within our organization and support the creation of development and succession plans across key positions in the Company. Our senior leadership team develops and recommends to the Board of Directors succession plans for all of our senior management.
On April 22, 2022, we completed the acquisition of Recipe Products Ltd., a producer of innovative prestige hair care products for all types of curly and wavy hair under the Curlsmith brand (“Curlsmith”). The Curlsmith brand and products were added to the Beauty & Wellness segment.
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”).
Sales within the U.S. comprised approximately 74%, 78% and 79% of total net sales revenue in fiscal 2023, 2022 and 2021, respectively. Our segments primarily sell their products through mass merchandisers, drugstore chains, warehouse clubs, home improvement stores, grocery stores, specialty stores, beauty supply retailers, e-commerce retailers, wholesalers, and various types of distributors, as well as directly to consumers.
Our segments primarily sell their products through mass merchandisers, sporting goods retailers, department stores, drugstore chains, home improvement stores, grocery stores, specialty stores, prestige beauty chains, beauty supply retailers, e-commerce retailers, wholesalers, warehouse clubs, and various types of distributors, as well as directly to consumers.
Our senior leadership team develops and recommends to the Board of Directors succession plans for all of our senior management. 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 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.
We believe progress on our ESG initiatives will have a positive impact on our shareholders, consumers, customers, our talented worldwide associates and the communities in which we are proud to live and work. Human Capital Overview We are committed to fostering a positive and engaging culture of inclusion, care, and support where all people throughout our global workforce can thrive.
We believe progress on these ESG initiatives will have a positive impact on our shareholders, consumers, customers, our talented worldwide associates and the communities in which we are proud to live and work.
The total purchase consideration was $147.9 million in cash, net of a final net working capital adjustment and cash acquired. The acquisition of Curlsmith adds another prestige market brand of products to our Beauty & Wellness portfolio and further advances our Phase II objective of continuing to expand margin.
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.
We support our products with advertising, promotions and other marketing activities, as well as an extensive sales force in order to build awareness and to encourage new consumers to try our brands and products. We are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position.
We support our products with advertising, promotions, strategic partnerships with ambassadors and influencers, and other marketing activities, as well as an extensive sales force in order to build awareness and to encourage new consumers to try our brands and products.
We are continuing to enhance and consolidate our ESG efforts and accelerate programs related to DEI&B to support our Phase II transformation. The Corporate Governance Committee of our Board of Directors has oversight of ESG-related matters, including climate change risks and opportunities.
The Corporate Governance Committee of our Board of Directors has oversight of ESG-related matters, including climate change risks and opportunities.
In March 2023, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024. 6 Table of Contents Customers Sales to our largest customer, Amazon.com Inc., accounted for approximately 17%, 19% and 20% of our consolidated net sales revenue in fiscal 2023, 2022 and 2021, respectively.
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.
As part of our initiative focused on streamlining and simplifying the organization, we made further changes to the structure of our organization, which include the creation of a North America Regional Market Organization (“RMO”) responsible for sales and go to market strategies for all categories and channels in the U.S. and Canada, and further centralization of certain functions under shared services, particularly in operations and finance to better support our business segments and RMOs.
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.
Through our favorable partnerships with our licensors, we believe we have developed stable, enduring relationships that provide access to unique brands that complement our owned and internally developed trademarks. The Beauty & Wellness segment relies on the continued use of trademarks licensed under various agreements for a significant portion of its net sales revenue.
We believe our principal trademarks, both owned and licensed, have high levels of brand name recognition among retailers and consumers throughout the world. Through our favorable partnerships with our licensors, we believe we have developed stable, enduring relationships that provide access to unique brands that complement our owned and internally developed trademarks.
Resources provided to enhance associates' “total well-being” include learning and development opportunities, charitable leave policy, financial advice and stock purchase programs, health and wellness programs, and product discounts. Perks and benefits vary by region and office. We also monitor our culture and associate engagement through a number of methods, including periodic culture surveys.
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.
Additionally, we are continuing to enhance and consolidate our Environmental, Social and Governance (“ESG”) efforts and accelerate programs related to Diversity, Equity, Inclusion, and Belonging (“DEI&B”) to support our Phase II transformation. See “ESG Initiatives” and “Human Capital - DEI&B” for further discussion below of our initiatives in these areas.
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.
We currently operate in two business segments: • Home & Outdoor: Provides a broad range of innovative consumer products for home activities such as food preparation, cooking, cleaning, and organization; as well as products for outdoor and on the go activities such as hydration, food storage, backpacks, and travel gear.
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.
Removed
Segment Information During the fourth quarter of fiscal 2023, we made changes to the structure of our organization in connection with our global restructuring plan (as further described below) that resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment, which is referred to herein as “Beauty & Wellness.” In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our Chief Executive Officer (“CEO”), our chief operating decision maker, assesses performance and allocates resources.
Added
Our outdoor performance range, on-the-go food storage, and beverageware includes lifestyle hydration products, coolers and food storage solutions, backpacks, and travel gear. Sales for this global segment are primarily to online and brick & mortar retailers and through our direct-to-consumer channel. • Beauty & Wellness: Provides consumers with a broad range of outstanding world-class brands for beauty and wellness.
Removed
We believe that these changes better align internal resources and external go to market activities in order to create a more efficient and effective organizational structure.
Added
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.
Removed
There were no changes to the products or brands included within our Home & Outdoor reportable segment as part of these organizational changes nor to the way in which our CEO assesses performance and allocates resources for the Home & Outdoor segment.
Added
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.
Removed
As a result of these changes, our disclosures reflect two reportable segments, Home & Outdoor and Beauty & Wellness. Comparative prior period segment information in this Annual Report has been recast to conform to this change in our reportable segments.
Added
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.
Removed
Our external reportable segments will continue to align with our internal reporting to enable users of the financial statements to better understand our performance, better assess our future net cash flows, and make more informed judgements about the Company as a whole.
Added
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.
Removed
This segment sells primarily to retailers as well as through our direct-to-consumer channel. • Beauty & Wellness: Provides beauty and wellness products including mass and prestige market beauty appliances, prestige market liquid-based hair and personal care products, and wellness devices including thermometers, water and air filtration systems, humidifiers, and fans.
Added
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.
Removed
This new structure, inclusive of the organizational structure changes described above resulting in the reportable segment change, will reduce the size of our global workforce by approximately 10%.
Added
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.
Removed
The net assets sold included intangible assets, inventory, certain net trade receivables, fixed assets and certain accrued sales discounts and allowances relating to our Personal Care business. As a result of these dispositions, we no longer have any assets or liabilities classified as held for sale.
Added
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.
Removed
At the beginning of fiscal 2023, we completed the sale of the Latin America and Caribbean Personal Care business. During fiscal 2022, we completed the sale of our North America Personal Care business. For additional information see Note 4 to the accompanying consolidated financial statements.
Added
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.
Removed
Our Trademarks We market products under a number of trademarks that we own and sell certain of our products under trademarks licensed from third parties. We believe our principal trademarks, both owned and licensed, have high levels of brand name recognition among retailers and consumers throughout the world.
Added
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.
Removed
New product introductions under licensed trademarks require approval from the respective licensors. The licensors must also approve the product packaging. Some of our license agreements require us to pay minimum royalties. At the beginning of fiscal 2023, we sold our Brut trademark in connection with the sale of our Latin America and Caribbean Personal Care business.
Added
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
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.
Added
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.
Added
We continued to enhance and consolidate our ESG efforts and accelerate programs related to DEI&B to support our Phase II transformation that concluded at the end of fiscal 2024, and we will continue these efforts as we enter our Elevate for Growth era.
Added
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+19 added−16 removed116 unchanged
Biggest changeBusiness, Operational and Strategic Risks • The occurrence of cyber incidents, or failure by us or our third-party service providers to maintain cybersecurity and the integrity of confidential internal or customer data could have a material adverse effect on our operations and profitability. • A cybersecurity breach, obsolescence or interruptions in the operation of our central global Enterprise Resource Planning systems and other peripheral information systems could have a material adverse effect on our operations and profitability. • The geographic concentration of certain of our U.S. distribution facilities increase our risk to disruptions that could affect our ability to deliver products in a timely manner. • To compete successfully, we must develop and introduce a continuing stream of innovative new products to meet changing consumer preferences. • Our operating results are dependent on sales to several large customers; furthermore, our large customers may take actions that adversely affect our gross profit and operating results. • We are dependent on third-party manufacturers, most of which are located in Asia, and any inability to obtain products from such manufacturers could have a material adverse effect on our business, operating results and financial condition. • Our ability to deliver products to our customers in a timely manner and to satisfy our customers’ fulfillment standards are subject to several factors, some of which are beyond our control. • Our operating results may be adversely affected by trade barriers, exchange controls, expropriations, and other risks associated with domestic and foreign operations including uncertainty and business interruptions resulting from political changes and actions in the U.S. and abroad, such as the current conflict between Russia and Ukraine, and volatility in the global credit and financial markets and economy. • We are subject to risks related to our dependence on the strength of retail economies and may be vulnerable in the event of a prolonged economic downturn, including a downturn from the effects of macroeconomic conditions, any public health crises or similar conditions. • We are subject to risks associated with the use of licensed trademarks from or to third parties. • Our business is subject to weather conditions, the duration and severity of the cold and flu season and other related factors. • We rely on our CEO and a limited number of other key senior officers to operate our business. 12 Table of Contents • We may be unsuccessful in executing and realizing expected synergies from strategic business initiatives such as acquisitions, divestitures and global restructuring plans, including Project Pegasus.
Biggest changeBusiness, 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.
Financial Risks • If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets become impaired, we will be required to record impairment charges, which may be significant. • Increased costs of raw materials, energy and transportation may adversely affect our operating results and cash flow. • Our liquidity or cost of capital may be materially adversely affected by constraints or changes in the capital and credit markets, interest rates and limitations under our financing arrangements. • We face risks associated with foreign currency exchange rate fluctuations. • Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary in a material amount from our projections.
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.
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 20 Table of Contents • 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; 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.
As a result of these packaging compliance discussions, we voluntarily implemented a temporary stop shipment action on the impacted products as we worked with the EPA towards an expedient resolution. We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging of our existing inventory of impacted products during fiscal 2023.
As a result of these packaging compliance discussions, we voluntarily implemented a temporary stop shipment action on the impacted products as we worked with the EPA towards an expedient resolution. We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023.
Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary in a material amount from our projections. From time to time, we may provide financial projections to our shareholders, lenders, investment community, and other stakeholders of our future sales and net income.
Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary by a material amount from our projections. From time to time, we may provide financial projections to our shareholders, lenders, investment community, and other stakeholders of our future sales and net income.
In addition, covenants in our debt agreements could restrict or delay our ability to obtain additional financing, potentially limiting our ability to adjust to rapidly changing market conditions or respond to business opportunities, or in the event of a failure to comply with such covenants, could result in an event of default, which if not cured or waived, could have a material adverse effect on us.
In addition, covenants in our debt agreement could restrict or delay our ability to obtain additional financing, potentially limiting our ability to adjust to rapidly changing market conditions or respond to business opportunities, or in the event of a failure to comply with such covenants, could result in an event of default, which if not cured or waived, could have a material adverse effect on us.
This concentration exposes us to risks associated with doing business globally, including among others: global public health crises (such as pandemics and epidemics); changing international political relations and conflicts; labor availability and cost; changes in laws, 16 Table of Contents including tax laws, regulations and treaties; changes in labor laws, regulations and policies; changes in customs duties, additional tariffs and other trade barriers; changes in shipping costs; currency exchange fluctuations; local political unrest; an extended and complex transportation cycle; the impact of changing economic conditions; and the availability and cost of raw materials and merchandise.
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.
Additionally, we may have heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements. Our workforce operates with a combination of remote work and flexible work schedules opening us up for cybersecurity threats and potential breaches as a result of increased employee usage of networks other than company-managed.
Additionally, we may have heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements. Our workforce operates with a combination of remote work and flexible work schedules opening us up for cybersecurity threats and potential breaches as a result of increased associate usage of networks other than company-managed networks.
The domestic and foreign risks of these changes include, among other things: • protectionist policies restricting or impairing the manufacturing, sales or import and export of our products; • new restrictions on access to markets; • lack of required infrastructure; • inflation (including hyperinflation) or recession; • changes in, and the burdens and costs of compliance with, a variety of U.S. and foreign laws and regulations, including environmental laws, occupational health and safety laws, tax laws, and accounting standards; • social, political or economic instability; • acts of war and terrorism; • natural disasters and public health crises, such as pandemics and epidemics (including COVID-19); • reduced protection of intellectual property rights in some countries; • increases in duties and taxation; • restrictions on transfer of funds or exchange of currencies; • currency devaluations; • expropriation of assets; and • other adverse changes in policies, including monetary, tax or lending policies, encouraging foreign investment or foreign trade by our host countries.
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 Federal Open Market Committee increased the benchmark interest rate 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 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.
If the IRS or a court determined that we were a CFC at any time during the tax year, then each of our U.S. shareholders as defined above 23 Table of Contents would be required to include in gross income for U.S. federal income tax purposes its pro rata share of our “subpart F income” (and the subpart F income of any of our subsidiaries determined to be a CFC) for the period during which we (and our non-U.S. subsidiaries) were deemed a CFC.
If the IRS or a court determined that we were a CFC at any time during the tax year, then each of our U.S. shareholders as defined above would be required to include in gross income for U.S. federal income tax purposes its pro rata share of our “subpart F income” (and the subpart F income of any of our subsidiaries determined to be a CFC) for the period during which we (and our non-U.S. subsidiaries) were deemed a CFC.
Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative or mitigation measures.
Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative or mitigating measures.
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 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 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.
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.
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.
Should any of these events occur, our ability to sell or export our products or repatriate profits could be impaired, we could experience a loss of sales and profitability from our domestic or international 18 Table of Contents operations, and/or we could experience a substantial impairment or loss of assets, any of which could materially and adversely affect our business, operating results and financial condition.
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.
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.
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.
Our financial condition and operating results could suffer if we lost all or a portion of the sales to any one of these customers. In particular, sales to our two largest customers accounted for approximately 27% of our consolidated net sales revenue in fiscal 2023.
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.
Although, we are not aware of any fines or penalties related to this matter imposed against us by the EPA, there can be no assurances that such fines or penalties will not be imposed. Additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today.
Although, we have not been notified of any fines or penalties imposed against us by the EPA related to this matter, there can be no assurances that such fines or penalties will not be imposed in the future. Additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today.
We are subject to risks related to our dependence on the strength of retail economies and may be vulnerable in the event of a prolonged economic downturn, including a downturn from the effects of macroeconomic conditions, any public health crises (including any lingering effects of new surges of COVID-19) or similar conditions.
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.
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. We expect that these trends will continue.
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.
Our security measures may also be breached in the future as a result of associate error, failure to implement appropriate processes and procedures, advances in computer and software capabilities and encryption technology, new tools and discoveries, malfeasance, third-party action, including cyber-attacks or other international misconduct by computer hackers or otherwise.
Our security measures may also be breached in the future as a result of associate error, failure to implement appropriate processes and procedures, advances in computer and software capabilities and encryption technology, new tools and discoveries, malfeasance, third-party action, including cyber-attacks, hacking, phishing attacks, malware (e.g., ransomware) or other misconduct by computer hackers or otherwise.
We cannot reasonably estimate the duration and severity of existing macroeconomic conditions, which have had and may continue to have a material impact on our business. Additionally, current global issues may affect our business and the global economy, including the geopolitical impact of Russia’s invasion of Ukraine and any related economic or other sanctions.
We cannot reasonably estimate the duration and severity of existing macroeconomic conditions, which have had and may continue to have a material impact on our business. Additionally, global issues may affect our business and the global economy, including the geopolitical impact of military conflict and any related economic or other sanctions.
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.
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.
While only three customers individually accounted for 10% or more of our consolidated net sales revenue in fiscal 2023, sales to our top five customers in aggregate accounted for approximately 43% of fiscal 2023 consolidated net sales revenue. We expect that a small group of customers will continue to account for a significant portion of our net sales revenue.
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.
Furthermore, due to geopolitical tensions related to the current conflict between Russia and Ukraine, the risk of cyber-attacks may be elevated. This could result in one or more third-parties obtaining unauthorized access to our customer or supplier data or our internal data, including personally identifiable information, intellectual property and other confidential business information.
Furthermore, due to geopolitical tensions around the world, the risk of cyber-attacks may be elevated. This could result in one or more third-parties obtaining unauthorized access to our customer or supplier data or our internal data, including personally identifiable information, intellectual property and other confidential business information.
We believe that we can source certain similar products outside of China and are moving towards a more diversified supplier base through continuously exploring the expansion of sourcing alternatives in other countries. However, the relocation of any production capacity could require substantial time and costs.
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.
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.
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.
The Chinese Renminbi has fluctuated against the U.S. Dollar in recent years. During fiscal 2023, the average exchange rate of the Chinese Renminbi weakened against the U.S. dollar by approximately 6% compared to the average rate during fiscal 2022. Chinese Renminbi currency fluctuations have the potential to add volatility to our product costs over time.
During fiscal 2024, the average exchange rate of the Chinese Renminbi weakened against the U.S. dollar by approximately 5% compared to the average rate during fiscal 2023. Chinese Renminbi currency fluctuations have the potential to add volatility to our product costs over time.
For fiscal 2023, finished goods manufactured in Asia comprised approximately 87% of total finished goods purchased.
For fiscal 2024, finished goods manufactured in Asia comprised approximately 79% of total finished goods purchased.
A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a result of past acquisitions. We do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that their carrying value may not be recoverable.
We do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that their carrying value may not be recoverable.
Third-parties may also attempt to fraudulently induce associates into disclosing sensitive information such as user names, 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 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.
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 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.
Without sufficient liquidity, we could be forced to curtail 26 Table of Contents our operations, or we may not be able to pursue business opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash, credit facilities, and other debt arrangements.
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.
We record impairment charges to the extent the carrying values of these assets are not recoverable in accordance with the applicable accounting standards. 25 Table of Contents Considerable management judgment is necessary in reaching a conclusion regarding the reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external conditions, considering the resulting operating changes and their impact on estimated future cash flows, determining the appropriate discount factors to use, and selecting and weighting appropriate comparable market level inputs.
Considerable management judgment is necessary in reaching a conclusion regarding the reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external conditions, considering the resulting operating changes and their impact on estimated future cash flows, determining the appropriate discount factors to use, and selecting and weighting appropriate comparable market level inputs.
Further, if we were found to be noncompliant with applicable laws and regulations in these or other areas, we could be subject to governmental or regulatory actions, including fines, import detentions, injunctions, product withdrawals or recalls or asset seizures, any of which could have a material adverse effect on our business, results of operations and financial condition. 22 Table of Contents Additionally, some product lines within our Beauty & Wellness segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S.
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.
Our third party manufacturing partners are not equipped to hold meaningful amounts of inventory and if shipping container capacity is limited or unavailable, they could pause manufacturing, 17 Table of Contents which could ultimately impact our ability to meet consumer demand on a timely basis.
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.
We and our third-party service providers have experienced and expect to continue to experience actual or attempted cyber-attacks of our information systems or networks; however, none of these actual or attempted cyber-attacks had a material impact on our operations or financial condition.
We and our third-party service providers have experienced and expect to continue to experience actual or attempted cyber-attacks of our information systems or networks. We do not believe we have experienced any material system security breach that to date has had a material impact on our operations or financial condition.
Additionally, during fiscal 2021 and 2022, the impact of COVID-19, including the related surges in demand and shifts in shopping patterns, as well as other factors, strained the global supply chain network resulting in higher inbound freight costs and surges in prices for raw materials, components and semiconductor chips, which adversely impacted our operating costs.
Additionally, any surges in demand and shifts in shopping patterns, as well as other factors, can strain the global supply chain network resulting in higher inbound freight costs and surges in prices for raw materials, components and semiconductor chips, which could adversely impact our operating costs.
We cannot predict the effect of Bermuda’s or Barbados’s current or future economic substance requirements on our business, which may impact the manner and jurisdictions in which we operate, and which could adversely affect our business, financial condition or results of operations.
We cannot predict the effect of Bermuda’s or Barbados’s current or future economic substance requirements on our business, which may impact the manner and jurisdictions in which we operate, and which could adversely affect our business, financial condition or results of operations. 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.
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.
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.
Additionally, an unauthorized disclosure or use of information could cause interruptions in our operations and might require us to spend significant management time and other resources investigating the event and dealing with local and federal law enforcement.
Additionally, an unauthorized disclosure or use of information could cause interruptions in our operations and might require us to spend significant management time and other resources investigating the event and coordinating with local and federal law enforcement. Regardless of the merits and ultimate outcome of these matters, we may be required to devote time and expense to their resolution.
We have initiated, and may initiate in the future, global restructuring plans, such as Project Pegasus, to achieve strategic objectives and improve financial results. Any acquisition, divestiture or global restructuring plan, if not favorably received by consumers, shareholders, analysts, and others in the investment community, could have a material adverse effect on the price of our common stock.
Any acquisition, divestiture or global restructuring plan, if not favorably received by consumers, shareholders, analysts, and others in the investment community, could have a material adverse effect on the price of our common stock.
As a result of these and other differences, there can be no assurance that SOFR will perform in the same way as LIBOR would have at any time, and there is no guarantee that it is a comparable substitute for LIBOR. 27 Table of Contents Our operating results may be adversely affected by foreign currency exchange rate fluctuations. The U.S.
As a result of these and other differences, there can be no assurance that SOFR will perform in the same way as LIBOR would have at any time, and there is no guarantee that it is a comparable substitute for LIBOR.
Sales in our Beauty & Wellness segment are influenced by weather conditions. Sales volumes for thermometers and humidifiers and heating appliances are higher during, and subject to the severity of, the cold weather months, while sales of fans are higher during, and subject to weather conditions in, spring and summer months.
Sales volumes for thermometers and humidifiers and heating appliances are higher during, and subject to the severity of, the cold weather months, while sales of fans are higher during, and subject to weather conditions in, spring and summer months. Weather conditions can also more broadly impact sales across the organization.
With the continuing trend towards retail trade consolidation, we are increasingly dependent upon key customers whose bargaining strength is substantial and growing.
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.
Sanctions imposed by the U.S. and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability.
Sanctions imposed by the U.S. and other countries in response to such conflicts may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.
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.
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.
In addition, they also purchase significant amounts of electricity to supply the energy required in their production processes. Global political instabilities and tensions and many other factors may drive up fuel prices resulting in higher transportation prices and product costs. We are heavily dependent on inbound sea, rail and truck freight.
Our suppliers purchase significant amounts of metals and plastics to manufacture our products. In addition, they also purchase significant amounts of electricity to supply the energy required in their production processes. Global political instabilities and tensions and many other factors may increase fuel prices resulting in higher transportation prices and product costs.
These factors described above could cause delays in the delivery of our products that could have a material and adverse effect on our business, operating results and financial condition. To compete successfully, we must develop and introduce a continuing stream of innovative new products to meet changing consumer preferences.
These factors described above could cause delays in the delivery of our products that could have a material and adverse effect on our business, operating results and financial condition.
If we, or our licensees, were unable to sell products under these licensed trademarks, or one or more of our license agreements were terminated or the value of the trademarks were diminished, the effect on our business, operating results and financial condition could be both negative and material. 19 Table of Contents Our business is subject to weather conditions, the duration and severity of the cold and flu season and other related factors, which can cause our operating results to vary from quarter to quarter and year to year.
If we, or our licensees, were unable to sell products under these licensed trademarks, or one or more of our license agreements were terminated or the value of the trademarks were diminished, the effect on our business, operating results and financial condition could be both negative and material.
Our operating results may be adversely affected by trade barriers, exchange controls, expropriations, and other risks associated with domestic and foreign operations. The economies of foreign countries important to our operations, including countries in Asia, EMEA and Latin America, could suffer slower economic growth or economic, social and/or political instability or hyperinflation in the future.
The economies of foreign countries important to our operations, including countries in Asia, EMEA and Latin America, could suffer slower economic growth or economic, social and/or political instability or hyperinflation in the future.
This factor increases our risk that disruptions could occur and significantly affect our ability to deliver products to our customers in a timely manner. Such disruptions could have a material adverse effect on our business. During fiscal 2023, most of our U.S. distribution, receiving and storage functions were consolidated into three distribution facilities in northern Mississippi.
This factor increases our risk that disruptions could occur and significantly affect our ability to deliver products to our customers in a timely manner. Such disruptions could have a material adverse effect on our business.
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.
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 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 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.
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.
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.
There are numerous uncertainties 15 Table of Contents inherent in successfully developing and commercializing new products on a continuing basis and new product launches may not deliver expected growth in sales or operating income.
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.
As a result, these types of claims could have a material adverse effect on our business, operating results and financial condition. Financial Risks If our goodwill, indefinite-lived and definite-lived intangible assets, or other long-lived assets become impaired, we will be required to record impairment charges, which may be significant.
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.
Our international operations in countries in Asia, EMEA and Latin America, including manufacturing and sourcing operations (and the international operations of our customers), are subject to inherent risks which could adversely affect us.
Our international operations in countries in Asia, EMEA and Latin America, including manufacturing and sourcing operations (and the international operations of our customers), are subject to inherent risks which could adversely affect us. Additionally, there may be uncertainty and business interruptions resulting from political changes and events in the U.S. and abroad, ongoing terrorist activity, and other global events.
For additional information regarding our taxes, see Note 19 to the accompanying consolidated financial statements. 24 Table of Contents If significant tariffs or other restrictions are placed on imports from China, Mexico or Vietnam or any retaliatory trade measures are taken by China, Mexico or Vietnam, our business and results of operations could be materially and adversely affected.
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.
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.
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 continue to look for strategic business opportunities to drive long-term growth and operating efficiencies, which may include acquisitions, divestitures and/or global restructuring plans. We frequently evaluate our brand portfolio and product portfolio and may consider acquisitions that complement our business or divestitures, or exits of businesses, that we no longer believe to be an appropriate strategic fit.
We frequently evaluate our brand portfolio and product portfolio and may consider acquisitions that complement our business or divestitures, or exits of businesses, that we no longer believe to be an appropriate strategic fit. We have initiated, and may initiate in the future, global restructuring plans, such as Project Pegasus, to achieve strategic objectives and improve financial results.
New regulation, evolving industry standards, and the interpretation of both, may cause us to incur additional expense in complying with any new data security requirements. As a result, the failure to maintain the integrity of and protect customer or supplier data or our confidential internal data could 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.
Accordingly, foreign operations will continue to expose us to foreign currency exchange rate fluctuations, which may result in the recognition of foreign exchange losses upon remeasurement to U.S. Dollars. Additionally, we purchase a substantial amount of our products from Chinese manufacturers in U.S. Dollars, who source a significant portion of their labor and raw materials in Chinese Renminbi.
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.
As additional tax or financial regulatory guidance is issued by the applicable authorities and accounting treatment is clarified, we perform additional analysis on the application of the law and we refine our 21 Table of Contents estimates.
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.
We transact a portion of our international business in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses. As a result, portions of our cash, trade accounts receivable and trade accounts payable are denominated in foreign currencies.
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 is the functional currency for the Company and all of its subsidiaries. Changes in the relation of other foreign currencies to the U.S. Dollar will affect our sales and profitability and can result in exchange losses because we have operations and assets located outside the U.S.
Our operating results may be adversely affected by foreign currency exchange rate fluctuations. The U.S. Dollar is the functional currency for the Company and all of its subsidiaries. Changes in the relation of other foreign currencies to the U.S.
You should carefully consider this summary with the more detailed descriptions of risks described below and all of the other information included in our Annual Report when deciding whether to invest in our securities or otherwise evaluating our business. 13 Table of Contents Business, Operational and Strategic Risks The occurrence of cyber incidents, or failure by us or our third-party service providers to maintain cybersecurity and the integrity of confidential internal or customer data could have a material adverse effect on our operations and profitability.
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.
In addition, natural disasters or other extraordinary events may disrupt our information systems and other infrastructure, and our data recovery processes may not be sufficient to protect against loss. Certain of our U.S. distribution facilities are geographically concentrated.
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.
Increased costs of raw materials, energy and transportation may adversely affect our operating results and cash flow. Significant increases in the costs and availability of raw materials, energy and transportation may negatively affect our operating results. Our suppliers purchase significant amounts of metals and plastics to manufacture our products.
As a result, these types of claims could have a material adverse effect on our business, operating results and financial condition. Financial Risks Increased costs of raw materials, energy and transportation may adversely affect our operating results and cash flow. Significant increases in the costs and availability of raw materials, energy and transportation may negatively affect our operating results.
Measures imposed, or that may be imposed, by national, state and local authorities in response to any new surges of COVID-19 (or any future public health crises) may have impacts of uncertain severity and duration on domestic and foreign economies. The effectiveness of economic stabilization efforts, including government payments and loans to affected citizens and industries, is uncertain.
Consumer purchases of discretionary items tend to decline during recessionary periods, when disposable income is lower, and may impact sales of our products. Measures imposed, or that may be imposed, by national, state and local authorities in response to any public health crises may have impacts of uncertain severity and duration on domestic and foreign economies.
Approximately 56% of our consolidated gross sales volume shipped from facilities in this region in fiscal 2023. Further, in March 2023, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024 and is in proximity to our three existing distribution facilities in northern Mississippi.
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.
All of our products are manufactured by unaffiliated manufacturers, most of which are located in China, Mexico, Vietnam and the U.S. This concentration exposes us to risks associated with doing business globally, including changes in tariffs.
This concentration exposes us to risks associated with doing business globally, including changes in tariffs.
Expectations regarding recent or future acquisitions, divestitures, or global restructuring plans (such as Project Pegasus), including our ability to realize related synergies, along with our ability to successfully execute these strategic business initiatives, may adversely affect the price of our common stock.
We may be unsuccessful in executing and realizing expected synergies from strategic business initiatives such as acquisitions, divestitures, and global restructuring plans (including Project Pegasus), which may adversely affect the price of our common stock. We continue to look for strategic business opportunities to drive long-term growth and operating efficiencies, which may include acquisitions, divestitures and/or global restructuring plans.
Regardless of the 14 Table of Contents merits and ultimate outcome of these matters, we may be required to devote time and expense to their resolution. In addition, the increase in the number and the scope of data security incidents has increased regulatory and industry focus on security requirements and heightened data security industry practices.
In addition, the increase in the number and the scope of data security incidents has increased regulatory and industry focus on security requirements and heightened data security industry practices. The rapid evolution and increased adoption of complex AI technologies has amplified this focus and continues to influence and impact data security industry requirements and practices.
Some of our customers creditworthiness may be vulnerable to the impact of a prolonged economic downturn or a public health crisis. We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate.
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.
Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.
Additionally, some of our product lines are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S. Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.
Removed
Legal, Regulatory and Tax Risks • Changes in laws and regulations, including environmental, employment and health and safety and tax laws, and the costs and complexities of compliance with such laws could have a material adverse impact on our business. • We face risks associated with the increased focus and expectations on climate change and other environmental, social and governance matters. • Significant changes in or our compliance with regulations, interpretations or product certification requirements could adversely impact our operations. • We face risks associated with global legal developments regarding privacy and data security that could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business. • Under current 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. • All of our products are manufactured by unaffiliated manufacturers, most of which are located in China, Mexico and Vietnam; we face risks of significant tariffs or other restrictions being placed on imports from China, Mexico or Vietnam or any retaliatory trade measures taken by China, Mexico or Vietnam adversely impacting our business. • We face risks associated with product recalls, product liability and other claims against us.
Added
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.
Removed
If we are unable to develop and introduce a continuing stream of competitive new products, it may have an adverse effect on our business, operating results and financial condition. Large customers may take actions that adversely affect our gross profit and operating results .
Added
In addition, attacks upon information technology systems are increasing in their frequency, level of sophistication, persistence and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn March 2023, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024 and currently services our Home & Outdoor segment. We believe our facilities are adequate to conduct our business.
Biggest changeWe 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.
Item 2. Properties As of February 28, 2023, we own, lease or otherwise utilize through third-party management service agreements various properties worldwide for sales, procurement, research and development, administrative and distribution facilities.
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.
Our U.S. headquarters is located in El Paso, Texas, and we own two main distribution facilities in Southaven and Olive Branch, Mississippi, and lease one distribution facility in Olive Branch, Mississippi, which service both of our segments.
We lease our U.S. headquarters, which is located in El Paso, Texas, and we own three main distribution facilities, two of which are located in Southaven and Olive Branch, Mississippi. We completed the construction in March 2023 of our third main distribution facility in Gallaway, Tennessee, which became operational during the first quarter of fiscal 2024.
Added
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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Biggest changeOn February 28, 2023, the ITC issued an Initial Determination in the ITC Action, tentatively ruling against Kaz USA, Inc. and the other respondents.
Biggest changeOn February 28, 2023, the ITC issued an Initial Determination in the ITC Action, tentatively ruling against the Company and the other unrelated respondents. The ITC has a guaranteed review process, and thus all respondents, including the Company, filed a petition with the ITC for a full review of the Initial Determination.
In the Patent Litigation, Brita LP seeks monetary damages and injunctive relief relating to the alleged infringement. Brita LP simultaneously filed a complaint with the United States International Trade Commission (“ITC”) against Kaz USA, Inc., Helen of Troy Limited and five other companies that sell water filtration systems (the “ITC Action”).
In the Patent Litigation, Brita LP seeks monetary damages and injunctive relief relating to the alleged infringement. Brita LP simultaneously filed a complaint with the United States International Trade Commission (“ITC”) against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration systems (the “ITC Action”).
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging of our existing inventory of impacted products during fiscal 2023.
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023.
This action seeks injunctive relief to prevent entry of certain accused PUR products (and certain other products) into the U.S. and cessation of marketing and sales of existing inventory that is already in the U.S. On January 25, 2022, the ITC instituted the investigation requested by the ITC Action.
This action sought injunctive relief to prevent entry of certain accused PUR products (and certain other products) into the U.S. and cessation of marketing and sales of existing inventory that is already in the U.S. On January 25, 2022, the ITC instituted the investigation requested by the ITC Action.
The complaint in the ITC Action also alleges patent infringement by the Company with respect to a limited set of PUR gravity-fed water filtration systems. In the ITC Action, Brita LP requested the ITC to initiate an unfair import investigation relating to such filtration systems.
The complaint in the ITC Action also alleged patent infringement by the Company with respect to a limited set of PUR gravity-fed water filtration systems. In the ITC Action, Brita LP requested the ITC to initiate an unfair import investigation relating to such filtration systems.
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, 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.
We cannot predict the outcome of these proceedings, the amount or range of any potential loss, when the proceedings will be resolved, or 29 Table of Contents customer acceptance of any replacement water filter.
We cannot predict the outcome of these legal proceedings, the amount or range of any potential loss, when the proceedings will be resolved, or customer acceptance of any replacement water filter.
Although, we are not aware of any fines or penalties related to this matter imposed against us by the EPA, there can be no assurances that such fines or penalties will not be imposed. See Note 13 to the accompanying consolidated financial statements for further discussion. Item 4. Mine Safety Disclosures Not applicable. 30 Table of Contents PART II
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.
Removed
The ITC has a guaranteed review process, and thus all respondents, including Kaz USA, Inc., filed a petition with the ITC for a full review of the Initial Determination prior to the ITC making any final decision in this matter. We are now awaiting a decision by the ITC regarding whether it will review any portion of the Initial Determination.
Added
On September 19, 2023, the ITC issued its Final Determination in the Company’s favor. The ITC determined there was no violation by the Company and terminated the investigation. Brita LP is appealing the ITC's decision to the Federal Circuit (“CAFC Appeal”) and filed its Notice of Appeal on October 24, 2023.
Removed
The final decision in the ITC Action is expected by June 28, 2023. The Patent Litigation has been stayed pending resolution of the ITC Action.
Added
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.
Removed
While we intend to continue to vigorously pursue our claims and defenses in these proceedings, we have also implemented mitigation plans to help minimize the expected potential impact to the Company, its customers and consumers of a negative ITC decision.
Added
Mine Safety Disclosures Not applicable. 32 Table of Contents PART II
Removed
These mitigation plans include the introduction of an alternative replacement water filter that could be distributed to customers promptly following a potentially adverse ITC decision at the end of June.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNet exercises are treated as purchases and retirements of shares. 31 Table of Contents Share repurchase activity during the three-month period ended February 28, 2023, was as follows: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (2) December 1 through December 31, 2022 20 $ 178.83 20 $ 403,634 January 1 through January 31, 2023 13 127.03 13 403,632 February 1 through February 28, 2023 88 113.03 88 403,623 Total 121 $ 125.41 121 (1) The number of shares includes shares of common stock acquired from associates who tendered shares to: (i) satisfy the tax withholding on equity awards as part of our long-term incentive plans or (ii) satisfy the exercise price on stock option exercises.
Biggest changeNet 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.
The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. See Note 11 to the accompanying consolidated financial statements for additional information.
The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. See Note 10 to the accompanying consolidated financial statements for additional information.
For additional information, see Note 11 to the accompanying consolidated financial statements. 32 Table of Contents Performance Graph The graph below compares the cumulative total return of our Company to the NASDAQ Composite Index and a Peer Group Index, assuming $100 was invested on February 28, 2018. The Peer Group Index is the Dow Jones U.S. Personal Products Index.
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.
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the NASDAQ Global Select Market under symbol: HELE. Approximate Number of Equity Security Holders of Record Our common stock is our only class of equity security outstanding at February 28, 2023.
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.
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.
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
As of April 21, 2023, there were 111 holders of record of our common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders whose shares are held of record by banks, brokers and other financial institutions.
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.

Item 7. Management's Discussion & Analysis

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

142 edited+64 added−113 removed71 unchanged
Biggest changeThe following tables summarize the impact that Core business and Non-Core (Personal Care) business had on our net sales revenue by segment: Fiscal Year Ended Last Day of February, (in thousands) Home & Outdoor Beauty & Wellness Total Fiscal 2022 sales revenue, net $ 865,844 $ 1,357,511 $ 2,223,355 Core business 49,841 (166,413) (116,572) Non-Core business (Personal Care) — (34,116) (34,116) Change in sales revenue, net 49,841 (200,529) (150,688) Fiscal 2023 sales revenue, net $ 915,685 $ 1,156,982 $ 2,072,667 Total net sales revenue growth (decline) 5.8 % (14.8) % (6.8) % Core business 5.8 % (12.3) % (5.2) % Non-Core business (Personal Care) — % (2.5) % (1.5) % Fiscal Year Ended Last Day of February, (in thousands) Home & Outdoor Beauty & Wellness Total Fiscal 2021 sales revenue, net $ 727,354 $ 1,371,445 $ 2,098,799 Core business 138,490 30,296 168,786 Non-Core business (Personal Care) — (44,230) (44,230) Change in sales revenue, net 138,490 (13,934) 124,556 Fiscal 2022 sales revenue, net $ 865,844 $ 1,357,511 $ 2,223,355 Total net sales revenue growth (decline) 19.0 % (1.0) % 5.9 % Core business 19.0 % 2.2 % 8.0 % Non-Core business (Personal Care) — % (3.2) % (2.1) % Leadership Brand and Other Net Sales Revenue The following table summarizes our Leadership Brand and other net sales revenue: Fiscal Years Ended Last Day of February, $ Change % Change (in thousands) 2023 2022 2021 23/22 22/21 23/22 22/21 Leadership Brand sales revenue, net (1) $ 1,753,734 $ 1,810,249 $ 1,706,545 $ (56,515) $ 103,704 (3.1) % 6.1 % All other sales revenue, net 318,933 413,106 392,254 (94,173) 20,852 (22.8) % 5.3 % Total sales revenue, net $ 2,072,667 $ 2,223,355 $ 2,098,799 $ (150,688) $ 124,556 (6.8) % 5.9 % (1) Fiscal 2023 includes a full year of operating results from Osprey, acquired on December 29, 2021, compared to approximately nine weeks of operating results in fiscal 2022.
Biggest changeNet sales revenue from internally developed brands or product lines is considered Organic business activity. 46 Table of Contents Leadership Brand and Other Net Sales Revenue The following table summarizes our Leadership Brand and other net sales revenue: Fiscal Years Ended Last Day of February, $ Change % Change (in thousands) 2024 2023 2022 24/23 23/22 24/23 23/22 Leadership Brand sales revenue, net (1) $ 1,707,964 $ 1,753,734 $ 1,810,249 $ (45,770) $ (56,515) (2.6) % (3.1) % All other sales revenue, net 297,086 318,933 413,106 (21,847) (94,173) (6.9) % (22.8) % Total sales revenue, net $ 2,005,050 $ 2,072,667 $ 2,223,355 $ (67,617) $ (150,688) (3.3) % (6.8) % (1) Fiscal 2024 and 2023 include a full year of operating results from Osprey, acquired on December 29, 2021, compared to approximately nine weeks of operating results in fiscal 2022.
Additionally, changes in consumer demand, retailer inventory management strategies, transportation lead times, supplier capacity and raw material availability could make our inventory management and reserves more difficult to estimate. Goodwill and Indefinite-Lived Intangibles and Related Impairment Testing A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a result of past acquisitions.
Additionally, changes in consumer demand, retailer inventory management strategies, transportation lead times, supplier capacity and raw material availability could make our inventory management and reserves more difficult to estimate. Acquisitions, Goodwill and Indefinite-Lived Intangibles, and Related Impairment Testing A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a result of past acquisitions.
Our ability to sell to retailers is predicated on their ability to sell to the end consumer. During fiscal year 2023, we experienced an adverse impact on orders from customers as they aimed to rebalance their inventory levels due to lower consumer demand and shifts in consumer spending patterns.
Our ability to sell to retailers is predicated on their ability to sell to the end consumer. During fiscal year 2023, we experienced an adverse impact on orders from retail customers as they aimed to rebalance their inventory levels due to lower consumer demand and shifts in consumer spending patterns.
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.
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.
As part of our initiative focused on streamlining and simplifying the organization, we made further changes to the structure of our organization, which include the creation of a North America RMO responsible for sales and go to market strategies for all categories and channels in the U.S. and Canada, and further centralization of certain functions under shared services, particularly in operations and finance to better support our business segments and RMOs.
As part of our initiative focused on streamlining and simplifying the organization, we made further changes to the structure of our organization, which included the creation of a North America RMO responsible for sales and go-to-market strategies for all categories and channels in the U.S. and Canada, and further centralization of certain functions under shared services, particularly in operations and finance to better support our business segments and RMOs.
See Note 13 to the accompanying consolidated financial statements for additional information and Item 1A., “Risk Factors” in this Annual Report for additional information on our related material risks. Potential Impact of Tariffs Since 2019, the Office of the U.S. Trade Representative (“USTR”) has imposed, and in certain cases subsequently reduced or suspended, additional tariffs on products imported from China.
See Note 12 to the accompanying consolidated financial statements for additional information and Item 1A., “Risk Factors” in this Annual Report for additional information on our related material risks. Potential Impact of Tariffs Since 2019, the Office of the U.S. Trade Representative (“USTR”) has imposed, and in certain cases subsequently reduced or suspended, additional tariffs on products imported from China.
We may also elect to repurchase additional shares of common stock under our Board of Directors' authorization, subject to limitations contained in our debt agreements and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities.
We may also elect to repurchase additional shares of common stock under our Board of Directors' authorization, subject to limitations contained in our debt agreement and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities.
Litigation is inherently unpredictable, and the resolution or disposition of these proceedings could, if adversely determined, have a material and adverse impact on our financial position and results of operations. For additional information regarding the Patent Litigation and the ITC Action, see Item 3., “Legal Proceedings” and Note 13 to the accompanying consolidated financial statements.
Litigation is inherently unpredictable, and the resolution or disposition of these proceedings could, if adversely determined, have a material and adverse impact on our financial position and results of operations. For additional information regarding the Patent Litigation and the ITC Action, see Item 3., “Legal Proceedings” and Note 12 to the accompanying consolidated financial statements.
Additionally, if future taxable income varies from projected taxable income, we may be required to adjust our valuation allowance in future years. In addition, the calculation of our tax liabilities requires us to account for uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on the two-step process prescribed within GAAP.
Additionally, if future taxable income varies from projected taxable income, we may be required to adjust our valuation allowance in future years. In addition, the calculation of our tax liabilities requires us to account for uncertainties in the application of complex and evolving tax regulations. We recognize liabilities for uncertain tax positions based on the two-step process prescribed within GAAP.
Actual results may differ materially due to a number of factors, including those discussed in Item 1A.,“Risk Factors,” and in the section entitled “Information Regarding Forward-Looking Statements” following this MD&A, and in Item 7A., “Quantitative and Qualitative Disclosures About Market Risk.” Throughout this MD&A, we refer to our Leadership Brands, which are brands that have number-one and number-two positions in their respective categories and include OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools and Drybar.
Actual results may differ materially due to a number of factors, including those discussed in Item 1A.,“Risk Factors,” and in the section entitled “Information Regarding Forward-Looking Statements” following this MD&A, and in Item 7A., “Quantitative and Qualitative Disclosures About Market Risk.” Throughout this MD&A, we refer to our Leadership Brands, which are brands that have leading positions in their respective categories and include OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools and Drybar.
In projecting future taxable income, we begin with historical results and incorporate assumptions including future operating income, the reversal 63 Table of Contents of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgement and are consistent with the plans and estimates we are using to manage our underlying business.
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.
These awards may be subject to attainment of certain service conditions, performance conditions and/or market conditions. We grant PSAs and PSUs to certain officers and associates, which cliff vest after P3Y and are contingent upon meeting one or more defined operational performance metrics over the three year performance period (“Performance Condition Awards”).
These awards may be subject to attainment of certain service conditions, performance conditions and/or market conditions. We grant PSAs and PSUs to certain officers and associates, which cliff vest after three years and are contingent upon meeting one or more defined operational performance metrics over the three year performance period (“Performance Condition Awards”).
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging of our existing inventory of impacted products during fiscal 2023.
We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023.
As a result, as of February 28, 2023, we no longer have outstanding debt related to the MBFC Loan and the MBFC Loan terminated pursuant to its terms. The loan agreement was entered into in connection with the issuance by MBFC of taxable industrial development revenue bonds.
As a result, as of February 28, 2023, we no longer had outstanding debt related to the MBFC Loan and the MBFC Loan terminated pursuant to its terms. The loan agreement was entered into in connection with the issuance by MBFC of taxable industrial development revenue bonds.
Our adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS are not prepared in accordance with GAAP, are not an alternative to GAAP financial information and may be calculated differently than non-GAAP financial information disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP information.
Our adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS are not prepared in accordance with GAAP, are not an alternative to GAAP financial measures and may be calculated differently than non-GAAP financial measures disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP financial measures.
During fiscal 2023, we received proceeds of $46.0 million from our insurance carriers related to this incident which are included in cash flows from operating activities in our consolidated statement of cash flows for the fiscal year ended February 28, 2023.
During fiscal 2023, we received proceeds of $46.0 million from our insurance carriers related to this incident which were included in cash flows from operating activities in our consolidated statement of cash flows for the fiscal year ended February 28, 2023.
On March 30, 2022, a third-party facility that we utilize for inventory storage incurred severe damage from a weather-related incident. The inventory that was stored at this facility primarily related to our Beauty & Wellness segment.
On March 30, 2022, a third-party facility that we utilized for inventory storage incurred severe damage from a weather-related incident. The inventory that was stored at this facility primarily related to our Beauty & Wellness segment.
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 companies that sell water filtration systems.
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.
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, supply chain disruptions, 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, volatility in employment trends and consumer confidence, any of which may adversely impact our results.
The charges for the damaged inventory and the expected insurance recoveries are included in cost of goods sold in our consolidated statement of income for the fiscal year ended February 28, 2023.
The charges for the damaged inventory and the expected insurance recoveries were included in cost of goods sold in our consolidated statement of income for the fiscal year ended February 28, 2023.
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 37 Table of Contents well as other activities.
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.
As of February 28, 2023, we were in compliance with all covenants as defined under the terms of the Credit Agreement. 62 Table of Contents The table below provides the formulas currently in effect for certain key financial covenants as defined under our Credit Agreement: Applicable Financial Covenant Credit Agreement Minimum Interest Coverage Ratio EBIT (1) ÷ Interest Expense (1) Minimum Required: 3.00 to 1.00 Maximum Leverage Ratio Total Current and Long Term Debt (2) ÷ EBITDA (1) + Pro Forma Effect of Transactions Maximum Allowed as of February 28, 2023: 4.00 to 1.00 (3) Key Definitions: EBIT: Earnings + Interest Expense + Taxes + Non-Cash Charges (4) + Certain Allowed Addbacks (4) - Certain Non-Cash Income (4) EBITDA: EBIT + Depreciation and Amortization Expense Pro Forma Effect of Transactions: For any acquisition, pre-acquisition EBITDA of the acquired business is included so that the EBITDA of the acquired business included in the computation equals its twelve month trailing total.
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.
The complaint in the ITC Action also alleges patent infringement by the Company with respect to a limited set of PUR gravity-fed water filtration systems. This action seeks injunctive relief to prevent entry of certain accused PUR products (and certain other products) into the U.S. and cessation of marketing and sales of existing inventory that is already in the U.S.
The complaint in the ITC Action also alleged patent infringement by the Company with respect to a limited set of PUR gravity-fed water filtration systems. This action sought injunctive relief to prevent entry of certain accused PUR products (and certain other products) into the U.S. and cessation of marketing and sales of existing inventory that is already in the U.S.
Highlights from Fiscal 2023 • We paid $147.9 million, net of cash acquired, to acquire Curlsmith and made investments in capital and intangible asset expenditures of $174.9 million, of which $147.0 million was for construction expenditures inclusive of capitalized interest related to a new 2 million square foot distribution facility.
Highlights from Fiscal 2023 • We paid $147.9 million, net of cash acquired, to acquire Curlsmith and made investments in capital and intangible asset expenditures of $174.9 million, of which $147.0 million was for construction expenditures inclusive of capitalized interest related to our new two million square foot distribution facility.
Approximately 74% of our consolidated net sales revenue in fiscal 2023 was from U.S. shipments compared to 78% and 79% of consolidated net sales revenue in fiscal 2022 and 2021, respectively. Among other things, high levels of inflation and interest rates may negatively impact consumer disposable income, credit availability and spending.
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.
Following the amendment, borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term SOFR, plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively, plus a credit spread of 0.10% for Term SOFR borrowings.
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.
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.
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.
We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments. During fiscal 2023, we incurred $27.4 million of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the consolidated statement of income.
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.
We may finance share repurchases with available cash, additional debt or other sources of financing. For additional information, see Item 5., “Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities” in this Annual Report. Operating Activities Comparison of Fiscal 2023 to 2022 Operating activities provided net cash of $208.2 million compared to $140.8 million.
We 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.
These measures may be considered non-GAAP financial information as set forth in SEC Regulation G, Rule 100. The tables reconcile these measures to their corresponding GAAP-based measures presented in our consolidated statements of income.
These measures may be considered non-GAAP financial measures as defined by SEC Regulation G, Rule 100. The tables reconcile these measures to their corresponding GAAP-based financial measures presented in our consolidated statements of income.
For both goodwill and indefinite-lived intangible assets, the recoverability of these amounts 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 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.
Consolidated operating income for fiscal 2022 included pre-tax restructuring charges of $0.4 million, pre-tax EPA compliance costs of $32.4 million, and pre-tax acquisition-related expenses of $2.4 million. • Consolidated adjusted operating income decreased 15.3%, or $54.2 million, to $300.9 million, compared to $355.1 million for the same period last year.
Consolidated operating income for fiscal 2022 included pre-tax restructuring charges of $0.4 million, pre-tax EPA compliance costs of $32.4 million, and pre-tax acquisition-related expenses of $2.4 million. • Consolidated adjusted operating income decreased 15.3%, or $54.2 million, to $300.9 million in fiscal 2023, compared to $355.1 million in fiscal 2022.
We believe these measures provide management and investors with important information that is useful in understanding our business results, trends and the covenants in our Credit Agreement.
We believe these measures provide management and investors with important information that is useful in understanding our business results and trends.
Following the effective date of the amendment, borrowings under the MBFC Loan bore interest at either the Base Rate or Term SOFR (both as defined in the loan agreement), plus a margin based on the Net Leverage Ratio (as defined in the loan agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively, plus a credit spread of 0.10% for Term SOFR borrowings.
Borrowings under the MBFC Loan bore interest at either the Base Rate or Term SOFR (both as defined in the loan agreement), plus a margin based on the Net Leverage Ratio (as defined in the loan agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively.
We refer to these charges as “EPA compliance costs” throughout this Annual Report. 41 Table of Contents The following table provides a summary of EPA compliance costs incurred during the periods presented: Fiscal Years Ended Last Day of February (in thousands) 2023 2022 2021 Cost of goods sold $ 16,928 1 $ 17,728 2 $ — SG&A 6,645 14,626 — Total EPA compliance costs $ 23,573 $ 32,354 $ — (1) Includes a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2023.
The following table provides a summary of EPA compliance costs incurred during the periods presented: Fiscal Years Ended Last Day of February (in thousands) 2024 2023 2022 Cost of goods sold $ — $ 16,928 1 $ 17,728 2 SG&A — 6,645 14,626 Total EPA compliance costs $ — $ 23,573 $ 32,354 (1) Includes a $4.4 million charge to write-off the obsolete packaging for the affected additional humidifier products and affected additional air filtration products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2023.
Consolidated operating margin decreased 2.1 percentage points to 10.2%, compared to 12.3% for the same period last year. Consolidated operating income for fiscal 2023 includes pre-tax restructuring charges of $27.4 million related to Project Pegasus, pre-tax EPA compliance costs of $23.6 million, a pre-tax gain from insurance recoveries of $9.7 million, and pre-tax acquisition-related expenses of $2.8 million.
Consolidated operating margin decreased 2.1 percentage points to 10.2% in fiscal 2023, compared to 12.3% in fiscal 2022. Consolidated operating income for fiscal 2023 included pre-tax restructuring charges of $27.4 million related to Project Pegasus, pre-tax EPA compliance costs of $23.6 million, a pre-tax gain from insurance recoveries of $9.7 million, and pre-tax acquisition-related expenses of $2.8 million.
All statements that address operating results, events or developments that may occur in the future, including statements related to sales, expenses, EPS results, and statements expressing general expectations about future operating results, are forward-looking statements and are based upon our current expectations and various assumptions.
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.
The 2022-2023 cough/cold/flu season was above historical averages, primarily early in the season, as respiratory infections surged in both children and adults and COVID-19 continued to be prevalent.
The 2023-2024 cough/cold/flu season was below historical averages seen prior to the impact of COVID-19. The 2022-2023 cough/cold/flu season was above historical averages, primarily early in the season, as respiratory infections surged in both children and adults and COVID-19 continued to be prevalent.
In the past, we have utilized a combination of available cash and existing, or additional, sources of financing to fund strategic acquisitions, share repurchases and capital investments. We generated $208.2 million in cash from operations during fiscal 2023 and had $29.1 million in cash and cash equivalents at February 28, 2023.
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.
For additional information see Note 7 to the accompanying consolidated financial statements. (2) Fiscal 2022 includes approximately nine weeks of operating results from Osprey, acquired on December 29, 2021, and fiscal 2023 includes a full year of operating results.
For additional information see Note 6 to the accompanying consolidated financial statements. (2) Fiscal 2024 and 2023 include a full year of operating results from Osprey, acquired on December 29, 2021, compared to approximately nine weeks of operating results in fiscal 2022.
The increase in interest expense was primarily due to higher average levels of debt outstanding, including borrowings to fund the acquisition of Osprey, partially offset by lower average interest rates compared to the prior year. 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 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.
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 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.
Dollar reported net sales revenue of approximately $17.0 million, or 0.8% for fiscal 2023, a favorable impact of approximately $6.8 million, or 0.3% for fiscal 2022 and an unfavorable impact of approximately $0.4 million, or less than 0.1% for fiscal 2021.
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.
Osprey sales prior to the first annual anniversary of the acquisition are reported in Acquisition for the Home & Outdoor segment in fiscal 2023 and consist of approximately forty-three weeks of incremental operating results. For additional information see Note 7 to the accompanying consolidated financial statements.
(2) On December 29, 2021, we completed the acquisition of Osprey. Osprey sales prior to the first annual anniversary of the acquisition are reported in Acquisition for the Home & Outdoor segment in fiscal 2023 and consist of approximately forty-three weeks of incremental operating results. For additional information see Note 6 to the accompanying consolidated financial statements.
These estimates 64 Table of Contents entail a significant amount of inherent subjectivity and uncertainty. As a result, these estimates could vary significantly from the amounts that we may ultimately realize upon the sale of inventories if future economic conditions, product demand, product discontinuances, competitive conditions or other factors differ from our estimates and expectations.
As a result, these estimates could vary significantly from the amounts that we may ultimately realize upon the sale of inventories if future economic conditions, product demand, product discontinuances, competitive conditions or other factors differ from our estimates and expectations.
The weighted average interest rate on borrowings outstanding under the Credit Agreement was 6.6% at February 28, 2023. As of February 28, 2023, the amount available for revolving loans under the Credit Agreement was $541.8 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur.
The weighted average interest rate on borrowings outstanding under the Credit Agreement was 6.0% at February 29, 2024. As of February 29, 2024, the amount available for revolving loans under the Credit Agreement was $562.6 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur.
During fiscal 2021, we made total cash restructuring payments of $1.1 million and had a remaining liability of $0.1 million as of February 28, 2021. 51 Table of Contents Operating Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment In order to provide a better understanding of the impact of certain items on our operating income, the tables that follow report the comparative pre-tax impact of asset impairment charges, acquisition-related expenses, EPA compliance costs, gain from insurance recoveries, restructuring charges, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on operating income and operating margin for each segment and in total for the periods presented below.
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.
For additional information see Note 7 to the accompanying consolidated financial statements. (2) Fiscal 2023 includes approximately forty-five weeks of operating results from Curlsmith, acquired on April 22, 2022.
For additional information see Note 6 to the accompanying consolidated financial statements. (2) Fiscal 2024 includes a full year of operating results from Curlsmith, acquired on April 22, 2022, compared to approximately forty-five weeks of operating results in fiscal 2023.
Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $6.2 million, or 0.5%. Consolidated Gross Profit Margin Comparison of Fiscal 2023 to 2022 Consolidated gross profit margin increased 0.5 percentage points to 43.4%, compared to 42.9%.
Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately $3.7 million, or 0.3%. Consolidated Gross Profit Margin Comparison of Fiscal 2024 to 2023 Consolidated gross profit margin increased 3.9 percentage points to 47.3%, compared to 43.4%.
In March 2023, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024 and includes state-of-the-art automation.
In March 2023, we completed the construction of an additional distribution facility in Gallaway, Tennessee that became operational during the first quarter of fiscal 2024 and includes state-of-the-art automation suited to fulfill direct-to-consumer and online channel orders.
Considerable management judgment is necessary in reaching a conclusion regarding the reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external conditions, considering the resulting operating changes and their impact on estimated future cash flows, determining the appropriate discount factors to use, and selecting and weighting appropriate comparable market level inputs.
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.
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.
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.
We further believe that including the excluded charges and benefits would not accurately reflect the underlying performance of our operations for the period in which the charges and benefits are incurred, even though such charges and benefits may be incurred and reflected in our GAAP financial results in the near future.
We further believe that including the excluded charges and benefits would not accurately reflect the underlying performance of our operations for the period in which the charges and benefits were incurred and reflected in our GAAP financial results.
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.
For additional information see Note 7 to the accompanying consolidated financial statements. 52 Table of Contents Consolidated Operating Income Comparison of Fiscal 2023 to 2022 Consolidated operating income was $211.8 million, or 10.2% of net sales revenue, compared to $272.6 million, or 12.3% of net sales revenue.
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.
Economic Useful Lives of Intangible Assets We amortize intangible assets, such as licenses, trademarks, customer lists and distribution rights over their economic useful lives, unless those assets' economic useful lives are indefinite. If an intangible asset’s economic useful life is deemed indefinite, that asset is not amortized.
Economic Useful Lives of Intangible Assets We amortize intangible assets, such as trademark licenses, trade names, customer relationships and lists, patents and non-compete agreements over their economic useful lives, unless those assets' economic useful lives are indefinite. If an intangible asset’s economic useful life is deemed indefinite, that asset is not amortized.
Our anticipated material cash requirements beyond fiscal 2024 include the following: • operating expenses, primarily SG&A and working capital predominately for inventory purchases and to carry normal levels of accounts receivable on our balance sheet; • outstanding long-term debt obligations maturing between fiscal 2025 and fiscal 2026, in an aggregate principal value of approximately $930.6 million, with $924.4 million of that amount maturing in fiscal 2026 (refer to Note 14 for additional information); • estimated interest payments of approximately $62.7 million and $3.9 million in fiscal 2025 and fiscal 2026, respectively, based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 28, 2023 (refer to Note 14 for additional information); • minimum operating lease payments of approximately $53.7 million over the term of our existing operating lease arrangements (refer to Note 3 for additional information); • minimum royalty payments of approximately $20.4 million over the term of the existing license agreements (refer to Note 13 for additional information); and • capital and intangible asset expenditures to support ongoing operations and future infrastructure needs.
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.
This MD&A, including the tables under the headings “Operating Income, Operating Margin, Adjusted Operating Income (non-GAAP), and Adjusted Operating Margin (non-GAAP) by Segment” and “Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP),” reports operating income, operating margin, net income and diluted earnings per share (“EPS”) without the impact of asset impairment charges, acquisition-related expenses, EPA compliance costs, gain from insurance recoveries, restructuring charges, tax reform, 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, 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.
At February 28, 2022, the Credit Agreement bore floating interest at either the Base Rate or the London Interbank Offered Rate (“LIBOR”), plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and LIBOR borrowings, respectively.
Borrowings under the Prior Credit Agreement bore floating interest at either the Base Rate or Term SOFR (as defined in the Prior Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Prior Credit Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively.
The financial markets, the global economy and global supply chain may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between Russia and Ukraine, or other geopolitical events.
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.
For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Fiscal Year Ended February 28, 2023 (in thousands) Home & Outdoor (1) Beauty & Wellness (2) Total Operating income, as reported (GAAP) $ 134,053 14.6 % $ 77,738 6.7 % $ 211,791 10.2 % Acquisition-related expenses 117 — % 2,667 0.2 % 2,784 0.1 % EPA compliance costs — — % 23,573 2.0 % 23,573 1.1 % Gain from insurance recoveries — — % (9,676) (0.8) % (9,676) (0.5) % Restructuring charges 8,689 0.9 % 18,673 1.6 % 27,362 1.3 % Subtotal 142,859 15.6 % 112,975 9.8 % 255,834 12.3 % Amortization of intangible assets 7,020 0.8 % 11,302 1.0 % 18,322 0.9 % Non-cash share-based compensation 10,751 1.2 % 16,002 1.4 % 26,753 1.3 % Adjusted operating income (non-GAAP) $ 160,630 17.5 % $ 140,279 12.1 % $ 300,909 14.5 % Fiscal Year Ended February 28, 2022 (in thousands) Home & Outdoor (1) Beauty & Wellness Total Operating income, as reported (GAAP) $ 134,925 15.6 % $ 137,625 10.1 % $ 272,550 12.3 % Acquisition-related expenses 2,424 0.3 % — — % 2,424 0.1 % EPA compliance costs — — % 32,354 2.4 % 32,354 1.5 % Restructuring charges 369 — % 11 — % 380 — % Subtotal 137,718 15.9 % 169,990 12.5 % 307,708 13.8 % Amortization of intangible assets 2,891 0.3 % 9,873 0.7 % 12,764 0.6 % Non-cash share-based compensation 13,812 1.6 % 20,806 1.5 % 34,618 1.6 % Adjusted operating income (non-GAAP) $ 154,421 17.8 % $ 200,669 14.8 % $ 355,090 16.0 % Fiscal Year Ended February 28, 2021 (in thousands) Home & Outdoor Beauty & Wellness Total Operating income, as reported (GAAP) $ 122,487 16.8 % $ 159,001 11.6 % $ 281,488 13.4 % Asset impairment charges — — % 8,452 0.6 % 8,452 0.4 % Restructuring charges 249 — % 101 — % 350 — % Subtotal 122,736 16.9 % 167,554 12.2 % 290,290 13.8 % Amortization of intangible assets 2,055 0.3 % 15,588 1.1 % 17,643 0.8 % Non-cash share-based compensation 10,278 1.4 % 16,140 1.2 % 26,418 1.3 % Adjusted operating income (non-GAAP) $ 135,069 18.6 % $ 199,282 14.5 % $ 334,351 15.9 % (1) Fiscal 2023 includes a full year of operating results from Osprey, acquired on December 29, 2021, compared to approximately nine weeks of operating results in fiscal 2022.
For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Fiscal Year Ended February 29, 2024 (in thousands) Home & Outdoor (1) Beauty & Wellness (2) Total Operating income, as reported (GAAP) $ 142,732 15.6 % $ 117,857 10.8 % $ 260,589 13.0 % Bed, Bath & Beyond bankruptcy 3,087 0.3 % 1,126 0.1 % 4,213 0.2 % Gain on sale of distribution and office facilities (16,175) (1.8) % (18,015) (1.7) % (34,190) (1.7) % Restructuring charges 5,144 0.6 % 13,568 1.2 % 18,712 0.9 % Subtotal 134,788 14.7 % 114,536 10.5 % 249,324 12.4 % Amortization of intangible assets 7,057 0.8 % 11,269 1.0 % 18,326 0.9 % Non-cash share-based compensation 16,319 1.8 % 17,553 1.6 % 33,872 1.7 % Adjusted operating income (non-GAAP) $ 158,164 17.3 % $ 143,358 13.2 % $ 301,522 15.0 % Fiscal Year Ended February 28, 2023 (in thousands) Home & Outdoor (1) Beauty & Wellness (2) Total Operating income, as reported (GAAP) $ 134,053 14.6 % $ 77,738 6.7 % $ 211,791 10.2 % Acquisition-related expenses 117 — % 2,667 0.2 % 2,784 0.1 % EPA compliance costs — — % 23,573 2.0 % 23,573 1.1 % Gain from insurance recoveries — — % (9,676) (0.8) % (9,676) (0.5) % Restructuring charges 8,689 0.9 % 18,673 1.6 % 27,362 1.3 % Subtotal 142,859 15.6 % 112,975 9.8 % 255,834 12.3 % Amortization of intangible assets 7,020 0.8 % 11,302 1.0 % 18,322 0.9 % Non-cash share-based compensation 10,751 1.2 % 16,002 1.4 % 26,753 1.3 % Adjusted operating income (non-GAAP) $ 160,630 17.5 % $ 140,279 12.1 % $ 300,909 14.5 % Fiscal Year Ended February 28, 2022 (in thousands) Home & Outdoor (1) Beauty & Wellness Total Operating income, as reported (GAAP) $ 134,925 15.6 % $ 137,625 10.1 % $ 272,550 12.3 % Acquisition-related expenses 2,424 0.3 % — — % 2,424 0.1 % EPA compliance costs — — % 32,354 2.4 % 32,354 1.5 % Restructuring charges 369 — % 11 — % 380 — % Subtotal 137,718 15.9 % 169,990 12.5 % 307,708 13.8 % Amortization of intangible assets 2,891 0.3 % 9,873 0.7 % 12,764 0.6 % Non-cash share-based compensation 13,812 1.6 % 20,806 1.5 % 34,618 1.6 % Adjusted operating income (non-GAAP) $ 154,421 17.8 % $ 200,669 14.8 % $ 355,090 16.0 % (1) Fiscal 2024 and 2023 include a full year of operating results from Osprey, acquired on December 29, 2021, compared to approximately nine weeks of operating results in fiscal 2022.
For fiscal 2023, 2022 and 2021, our net sales to retail customers fulfilling end-consumer online orders and online sales directly to consumers comprised approximately 23%, 24% and 26%, respectively, of our total consolidated net sales revenue and decreased approximately 8.9% and 1.3% in fiscal 2023 and fiscal 2022, respectively, and grew approximately 32.2% in fiscal 2021 over the prior fiscal year periods.
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.
The assumptions and estimates used in our impairment testing involve significant elements of subjective judgment and analysis 65 Table of Contents by our management.
The assumptions and estimates used in our fair value analysis involve significant elements of subjective judgment and analysis by our management.
We are able to repay amounts borrowed at any time without penalty. Borrowings accrue interest under one of two alternative methods pursuant to the Credit Agreement as described below. With each borrowing against our credit line, we can elect the interest rate method based on our funding needs at the time.
Borrowings accrue interest under one of two alternative methods pursuant to the Credit Agreement as described below. With each borrowing against our credit line, we can elect the interest rate method based on our funding needs at the time. We also incur loan commitment and letter of credit fees under the Credit Agreement.
Adjusted income increased $8.1 million, or 2.8%, to $301.8 million compared to $293.7 million. Adjusted diluted EPS increased 6.1% to $12.36 compared to $11.65. 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 $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.
Our quantitative impairment test methodology primarily uses estimated future discounted cash flow models (“DCF Models”). The DCF Models use a number of assumptions including expected future cash flows from the assets, volatility, risk free rate, and the expected life of the assets, the determination of which require significant judgments from management.
The DCF Models use a number of assumptions including expected future cash flows from the assets, volatility, risk free rate, and the expected life of the assets, the determination of which require significant judgments from management.
For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Fiscal Year Ended February 28, 2023 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 171,289 $ 28,016 $ 143,273 $ 7.11 $ 1.16 $ 5.95 Acquisition-related expenses 2,784 2 2,782 0.12 — 0.12 EPA compliance costs 23,573 354 23,219 0.98 0.01 0.96 Gain from insurance recoveries (9,676) (121) (9,555) (0.40) (0.01) (0.40) Restructuring charges 27,362 388 26,974 1.14 0.02 1.12 Subtotal 215,332 28,639 186,693 8.94 1.19 7.75 Amortization of intangible assets 18,322 2,275 16,047 0.76 0.09 0.67 Non-cash share-based compensation 26,753 1,830 24,923 1.11 0.08 1.03 Adjusted (non-GAAP) $ 260,407 $ 32,744 $ 227,663 $ 10.81 $ 1.36 $ 9.45 Weighted average shares of common stock used in computing diluted EPS 24,090 Fiscal Year Ended February 28, 2022 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 259,966 $ 36,202 $ 223,764 $ 10.65 $ 1.48 $ 9.17 Acquisition-related expenses 2,424 87 2,337 0.10 — 0.10 EPA compliance costs 32,354 485 31,869 1.33 0.02 1.31 Restructuring charges 380 6 374 0.02 — 0.02 Subtotal 295,124 36,780 258,344 12.09 1.51 10.58 Amortization of intangible assets 12,764 1,010 11,754 0.52 0.04 0.48 Non-cash share-based compensation 34,618 2,965 31,653 1.42 0.12 1.30 Adjusted (non-GAAP) $ 342,506 $ 40,755 $ 301,751 $ 14.03 $ 1.67 $ 12.36 Weighted average shares of common stock used in computing diluted EPS 24,410 Fiscal Year Ended February 28, 2021 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 269,430 $ 15,484 $ 253,946 $ 10.69 $ 0.61 $ 10.08 Asset impairment charges 8,452 1,009 7,443 0.34 0.04 0.30 Restructuring charges 350 2 348 0.01 — 0.01 Tax reform — 9,357 (9,357) — 0.37 (0.37) Subtotal 278,232 25,852 252,380 11.04 1.03 10.02 Amortization of intangible assets 17,643 865 16,778 0.70 0.03 0.67 Non-cash share-based compensation 26,418 1,926 24,492 1.05 0.08 0.97 Adjusted (non-GAAP) $ 322,293 $ 28,643 $ 293,650 $ 12.79 $ 1.14 $ 11.65 Weighted average shares of common stock used in computing diluted EPS 25,196 57 Table of Contents Comparison of Fiscal 2023 to 2022 Net Income was $143.3 million compared to $223.8 million.
For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Fiscal Year Ended February 29, 2024 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 209,042 $ 40,448 $ 168,594 $ 8.72 $ 1.69 $ 7.03 Bed, Bath & Beyond bankruptcy 4,213 53 4,160 0.18 — 0.17 Gain on sale of distribution and office facilities (34,190) (8,787) (25,403) (1.43) (0.37) (1.06) Restructuring charges 18,712 234 18,478 0.78 0.01 0.77 Subtotal 197,777 31,948 165,829 8.25 1.33 6.92 Amortization of intangible assets 18,326 2,447 15,879 0.76 0.10 0.66 Non-cash share-based compensation 33,872 2,110 31,762 1.41 0.09 1.33 Adjusted (non-GAAP) $ 249,975 $ 36,505 $ 213,470 $ 10.43 $ 1.52 $ 8.91 Weighted average shares of common stock used in computing diluted EPS 23,970 Fiscal Year Ended February 28, 2023 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 171,289 $ 28,016 $ 143,273 $ 7.11 $ 1.16 $ 5.95 Acquisition-related expenses 2,784 2 2,782 0.12 — 0.12 EPA compliance costs 23,573 354 23,219 0.98 0.01 0.96 Gain from insurance recoveries (9,676) (121) (9,555) (0.40) (0.01) (0.40) Restructuring charges 27,362 388 26,974 1.14 0.02 1.12 Subtotal 215,332 28,639 186,693 8.94 1.19 7.75 Amortization of intangible assets 18,322 2,275 16,047 0.76 0.09 0.67 Non-cash share-based compensation 26,753 1,830 24,923 1.11 0.08 1.03 Adjusted (non-GAAP) $ 260,407 $ 32,744 $ 227,663 $ 10.81 $ 1.36 $ 9.45 Weighted average shares of common stock used in computing diluted EPS 24,090 54 Table of Contents Fiscal Year Ended February 28, 2022 Income Diluted EPS (in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported (GAAP) $ 259,966 $ 36,202 $ 223,764 $ 10.65 $ 1.48 $ 9.17 Acquisition-related expenses 2,424 87 2,337 0.10 — 0.10 EPA compliance costs 32,354 485 31,869 1.33 0.02 1.31 Restructuring charges 380 6 374 0.02 — 0.02 Subtotal 295,124 36,780 258,344 12.09 1.51 10.58 Amortization of intangible assets 12,764 1,010 11,754 0.52 0.04 0.48 Non-cash share-based compensation 34,618 2,965 31,653 1.42 0.12 1.30 Adjusted (non-GAAP) $ 342,506 $ 40,755 $ 301,751 $ 14.03 $ 1.67 $ 12.36 Weighted average shares of common stock used in computing diluted EPS 24,410 Comparison of Fiscal 2024 to 2023 Net income was $168.6 million compared to $143.3 million.
For additional information see Note 7 to the accompanying consolidated financial statements. * Calculation is not meaningful. 43 Table of Contents Fiscal 2023 Financial Results • Consolidated net sales revenue decreased 6.8%, or $150.7 million, to $2,072.7 million compared to $2,223.4 million for the same period last year. • Consolidated operating income decreased 22.3%, or $60.8 million, to $211.8 million, compared to $272.6 million for the same period last year.
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.
The Osprey and Curlsmith acquisitions contributed $152.7 million and $35.5 million, respectively, or 8.5%, to consolidated net sales revenue growth. Net sales revenue was unfavorably impacted by net foreign currency fluctuations of approximately $17.0 million, or (0.8)%. Net sales revenue from our Leadership Brands was $1,753.7 million, compared to $1,810.2 million, representing a decrease of 3.1%.
The Curlsmith acquisition contributed $6.1 million, or 0.3%, to consolidated net sales revenue growth. Net sales revenue was favorably impacted by net foreign currency fluctuations of approximately $6.8 million, or 0.3%. Net sales revenue from our Leadership Brands was $1,708.0 million, compared to $1,753.7 million, a decrease of 2.6%.
Consolidated adjusted operating margin decreased 1.5 percentage points to 14.5% of consolidated net sales revenue, compared to 16.0% for the same period last year. • Net income decreased 36.0%, or $80.5 million, to $143.3 million, compared to $223.8 million for the same period last year.
Consolidated adjusted operating margin decreased 1.5 percentage point to 14.5% of consolidated net sales revenue in fiscal 2023, compared to 16.0% in fiscal 2022. • Net income decreased 36.0%, or $80.5 million, to $143.3 million in fiscal 2023, compared to $223.8 million in fiscal 2022.
Fiscal Years Ended Last Day of February, % of Sales Revenue, net % Change (in thousands) 2023 (1)(2) 2022 (2) 2021 2023 2022 2021 23/22 22/21 Sales revenue by segment, net Home & Outdoor $ 915,685 $ 865,844 $ 727,354 44.2 % 38.9 % 34.7 % 5.8 % 19.0 % Beauty & Wellness 1,156,982 1,357,511 1,371,445 55.8 % 61.1 % 65.3 % (14.8) % (1.0) % Total sales revenue, net 2,072,667 2,223,355 2,098,799 100.0 % 100.0 % 100.0 % (6.8) % 5.9 % Cost of goods sold 1,173,316 1,270,168 1,171,497 56.6 % 57.1 % 55.8 % (7.6) % 8.4 % Gross profit 899,351 953,187 927,302 43.4 % 42.9 % 44.2 % (5.6) % 2.8 % SG&A 660,198 680,257 637,012 31.9 % 30.6 % 30.4 % (2.9) % 6.8 % Asset impairment charges — — 8,452 — % — % 0.4 % — % * Restructuring charges 27,362 380 350 1.3 % — % — % * 8.6 % Operating income 211,791 272,550 281,488 10.2 % 12.3 % 13.4 % (22.3) % (3.2) % Non-operating income, net 249 260 559 — % — % — % (4.2) % (53.5) % Interest expense 40,751 12,844 12,617 2.0 % 0.6 % 0.6 % * 1.8 % Income before income tax 171,289 259,966 269,430 8.3 % 11.7 % 12.8 % (34.1) % (3.5) % Income tax expense 28,016 36,202 15,484 1.4 % 1.6 % 0.7 % (22.6) % * Net income $ 143,273 $ 223,764 $ 253,946 6.9 % 10.1 % 12.1 % (36.0) % (11.9) % (1) Fiscal 2023 includes approximately forty-five weeks of operating results from Curlsmith, acquired on April 22, 2022.
Fiscal Years Ended Last Day of February, % of Sales Revenue, net % Change (in thousands) 2024 (1)(2) 2023 (1)(2) 2022 (2) 2024 2023 2022 24/23 23/22 Sales revenue by segment, net Home & Outdoor $ 916,381 $ 915,685 $ 865,844 45.7 % 44.2 % 38.9 % 0.1 % 5.8 % Beauty & Wellness 1,088,669 1,156,982 1,357,511 54.3 % 55.8 % 61.1 % (5.9) % (14.8) % Total sales revenue, net 2,005,050 2,072,667 2,223,355 100.0 % 100.0 % 100.0 % (3.3) % (6.8) % Cost of goods sold 1,056,390 1,173,316 1,270,168 52.7 % 56.6 % 57.1 % (10.0) % (7.6) % Gross profit 948,660 899,351 953,187 47.3 % 43.4 % 42.9 % 5.5 % (5.6) % SG&A 669,359 660,198 680,257 33.4 % 31.9 % 30.6 % 1.4 % (2.9) % Restructuring charges 18,712 27,362 380 0.9 % 1.3 % — % (31.6) % * Operating income 260,589 211,791 272,550 13.0 % 10.2 % 12.3 % 23.0 % (22.3) % Non-operating income, net 1,518 249 260 0.1 % — % — % * (4.2) % Interest expense 53,065 40,751 12,844 2.6 % 2.0 % 0.6 % 30.2 % * Income before income tax 209,042 171,289 259,966 10.4 % 8.3 % 11.7 % 22.0 % (34.1) % Income tax expense 40,448 28,016 36,202 2.0 % 1.4 % 1.6 % 44.4 % (22.6) % Net income $ 168,594 $ 143,273 $ 223,764 8.4 % 6.9 % 10.1 % 17.7 % (36.0) % (1) Fiscal 2024 includes a full year of operating results from Curlsmith, acquired on April 22, 2022, compared to approximately forty-five weeks of operating results in fiscal 2023.
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”, “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.
For additional information see Note 7 to the accompanying consolidated financial statements. 46 Table of Contents Consolidated Net Sales Revenue Comparison of Fiscal 2023 to 2022 Consolidated net sales revenue decreased $150.7 million, or 6.8%, to $2,072.7 million, compared to $2,223.4 million.
For additional information see Note 6 to the accompanying consolidated financial statements. Consolidated Net Sales Revenue Comparison of Fiscal 2024 to 2023 Consolidated net sales revenue decreased $67.6 million, or 3.3%, to $2,005.1 million, compared to $2,072.7 million.
Consolidated adjusted operating income increased 6.2% to $355.1 million, or 16.0% of net sales revenue, compared to $334.4 million, or 15.9% of net sales revenue. 53 Table of Contents Home & Outdoor Comparison of Fiscal 2023 to 2022 Operating income was $134.1 million, or 14.6% of segment net sales revenue, compared to $134.9 million, or 15.6% of segment net sales revenue.
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.
Our Credit Agreement also contains other customary covenants, including, among other things, covenants restricting or limiting us, except under certain conditions set forth therein, from (1) incurring debt, (2) incurring liens on our properties, (3) making certain types of investments, (4) selling certain assets or making other fundamental changes relating to mergers and consolidations, and (5) repurchasing shares of our common stock and paying dividends.
Our Credit Agreement also contains other customary covenants, including, among other things, covenants restricting or limiting us, except under certain conditions set forth therein, from (1) incurring liens on our properties, (2) making certain types of investments, (3) incurring additional debt, and (4) assigning or transferring certain licenses.
Diluted EPS decreased 35.1% to $5.95, compared to $9.17 for the same period last year. • Adjusted income decreased 24.6% to $227.7 million, compared to $301.8 million for the same period last year. Adjusted diluted EPS decreased 23.5% to $9.45, compared to $12.36 for the same period last year.
Diluted EPS decreased 35.1% to $5.95 in fiscal 2023, compared to $9.17 in fiscal 2022. 45 Table of Contents • Adjusted income decreased 24.6% to $227.7 million in fiscal 2023, compared to $301.8 million in fiscal 2022. Adjusted diluted EPS decreased 23.5% to $9.45 in fiscal 2023, compared to $12.36 in fiscal 2022.
Fiscal 2023 includes 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, compared to pre-tax acquisition-related expenses of $2.4 million, pre-tax EPA compliance costs of $32.4 million, and pre-tax restructuring charges of $0.4 million in fiscal 2022.
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.
Continuation of adverse trends, or more pronounced adverse impacts may arise, which could have further negative impacts to our business, results of operations and financial condition. EPA Compliance Costs Some product lines within our Beauty & Wellness segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the EPA, U.S.
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.
Diluted EPS was $5.95 compared to $9.17. Diluted EPS decreased primarily due to lower operating income in the Beauty & Wellness segment, higher interest expense and an increase in the effective income tax rate, partially offset by lower weighted average diluted shares outstanding. Adjusted income decreased $74.1 million, or 24.6%, to $227.7 million compared to $301.8 million.
Diluted EPS was $7.03 compared to $5.95. Diluted EPS increased primarily due to higher operating income in both the Beauty & Wellness and Home & Outdoor segments, an increase in interest income, and lower weighted average diluted shares outstanding, partially offset by higher interest expense and an increase in the effective income tax rate.
Fiscal 2022 Financial Results • Consolidated net sales revenue increased 5.9%, or $124.6 million, to $2,223.4 million in fiscal 2022, compared to $2,098.8 million in fiscal 2021. • Consolidated operating income decreased 3.2%, or $8.9 million, to $272.6 million in fiscal 2022, compared to $281.5 million in fiscal 2021.
Fiscal 2023 Financial Results • Consolidated net sales revenue decreased 6.8%, or $150.7 million, to $2,072.7 million in fiscal 2023, compared to $2,223.4 million in fiscal 2022. • Consolidated operating income decreased 22.3%, or $60.8 million, to $211.8 million in fiscal 2023, compared to $272.6 million in fiscal 2022.

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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 removed9 unchanged
Biggest changeWe recorded in SG&A foreign currency exchange rate net losses of $1.7 million, $0.2 million and $0.6 million during fiscal 2023, 2022 and 2021, respectively. We identify foreign currency risk by regularly monitoring our foreign currency denominated transactions and balances. Where operating conditions permit, we reduce our foreign currency risk by purchasing most of our inventory with U.S.
Biggest changeWe 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.
By operating internationally, we are subject to foreign currency risk from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses. As a result of such transactions, portions of our cash, trade accounts receivable and trade accounts payable are denominated in foreign currencies.
By operating internationally, we are subject to foreign currency risk from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses. As a result of such transactions, portions of our cash, accounts receivable and accounts payable are denominated in foreign currencies.
Refer to Note 16 to the accompanying consolidated financial statements for further information regarding these instruments. A significant portion of the products we sell are purchased from third-party manufacturers in China, who source a significant portion of their labor and raw materials in Chinese Renminbi. The Chinese Renminbi has fluctuated against the U.S.
Refer to Note 15 to the accompanying consolidated financial statements for further information regarding these instruments. A significant portion of the products we sell are purchased from third-party manufacturers in China, who source a significant portion of their labor and raw materials in Chinese Renminbi. The Chinese Renminbi has fluctuated against the U.S.
Refer to Item 1A., “Risk Factors” and Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report for further information regarding our interest rate risks. 69 Table of Contents
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
Accordingly, there can be no assurance that foreign exchange rates will be stable in the future or that fluctuations in Chinese foreign currency markets will not have a material adverse effect on our business, results of operations and financial condition. Interest Rate Risk Interest on our outstanding debt as of February 28, 2023 is based on variable floating interest rates.
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.
Dollar in recent years and in fiscal 2023 the average exchange rate of the Chinese Renminbi weakened against the U.S. Dollar by approximately 6.0% compared to the average rate during fiscal 2022. If China’s currency continues to fluctuate against the U.S. Dollar in the short-to-intermediate term, we cannot accurately predict the impact of those fluctuations on our results of operations.
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.
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 28, 2023, certain borrowings under the Credit Agreement bore interest at an adjusted Term SOFR (as defined in the Credit Agreement). SOFR began in April 2018 and it therefore has a limited history.
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.
Approximately 13%, 10%, and 12% of our net sales revenue was denominated in foreign currencies during fiscal 2023, 2022 and 2021, respectively. These sales were primarily denominated in Euros, British Pounds and Canadian Dollars. We make most of our inventory purchases from manufacturers in Asia and primarily use the U.S. Dollar for such purchases.
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.
Additionally, our cash and short-term investments generate interest income that will vary based on changes in short-term interest. As of February 28, 2023 and February 28, 2022, a hypothetical adverse 10% change in interest rates would reduce the carrying and fair values of the interest rate swaps by $4.3 million and $0.4 million on a pre-tax basis, respectively.
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, 2023 and February 28, 2022, a hypothetical adverse 10% change in foreign currency exchange rates would reduce the carrying and fair values of our derivatives by $8.8 million and $10.3 million on a pre-tax basis, respectively.
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, 2023 and February 28, 2022, a hypothetical 1% increase in interest rates would increase our annual interest expense, net of the effect of our interest rate swaps, by approximately $5.1 million and $6.9 million, respectively.
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.
In our consolidated statements of income, foreign currency exchange rate gains and losses resulting from the remeasurement of foreign taxes receivable, taxes payable, deferred tax assets, and deferred tax liabilities are recognized in their respective income tax lines, 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 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.
Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars. 67 Table of Contents We mitigate certain foreign currency exchange rate risk by using a series of forward contracts and cross-currency debt swaps to protect against the foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies.
We 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.
Refer to Notes 14 68 Table of Contents and 16 to the accompanying consolidated financial statements for further information regarding our interest rate sensitive assets and liabilities.
Refer to Notes 13 and 15 to the accompanying consolidated financial statements for further information regarding our interest rate sensitive assets and liabilities.
Added
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.

Other HELE 10-K year-over-year comparisons