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| | 5.1 | % | | 51,455 | | | 2.7 | % |
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| 117,857 | | | 10.8 | % | | $ | 260,589 | | | 13.0 | % |
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| 143,358 | | | 13.2 | % | | $ | 301,522 | | | 15.0 | % |
(1)Fiscal 2025 includes approximately eleven weeks of operating results from Olive & June, acquired on December 16, 2024. For additional information see Note 6 to the accompanying consolidated financial statements.
Consolidated Operating Income
Comparison of Fiscal 2025 to 2024
Consolidated operating income was $142.7 million, or 7.5% of net sales revenue, compared to $260.6 million, or 13.0% of net sales revenue. Fiscal 2025 includes pre-tax acquisition-related expenses of $3.0 million, pre-tax asset impairment charges of $51.5 million, and pre-tax restructuring charges of $14.8 million, compared to a pre-tax Bed, Bath & Beyond bankruptcy charge of $4.2 million, a pre-tax gain on sale of distribution and office facilities of $34.2 million and pre-tax restructuring charges of $18.7 million in fiscal 2024. The combined effect of these items unfavorably impacted the year-over-year comparison of consolidated operating margin by a combined 4.2 percentage points. The remaining 1.3 percentage point decrease in consolidated operating margin was primarily driven by:
•higher marketing and new product development expense as we reinvested back into our brands;
•a less favorable product mix within the segments and a less favorable customer mix within Home & Outdoor;
•unfavorable distribution center expense primarily due to additional costs and lost efficiency associated with automation startup issues at our Tennessee distribution facility; and
•the impact of unfavorable operating leverage due to the decrease in net sales.
These factors were partially offset by:
•favorable inventory obsolescence expense year-over-year;
•lower commodity and product costs, partly driven by Project Pegasus initiatives; and
•lower overall personnel expense primarily driven by lower annual incentive compensation expense.
Consolidated adjusted operating income decreased 16.3% to $252.3 million, or 13.2% of net sales revenue, compared to $301.5 million, or 15.0% of net sales revenue.
Home & Outdoor
Comparison of Fiscal 2025 to 2024
Operating income was $119.6 million, or 13.2% of segment net sales revenue, compared to $142.7 million, or 15.6% of segment net sales revenue. The 2.4 percentage point decrease in segment operating margin was primarily due to:
•the unfavorable comparative impact of a gain on the sale of the El Paso facility of $16.2 million recognized in the prior year;
•a less favorable product and customer mix;
•higher marketing expense as we reinvested back into our brands; and
•unfavorable distribution center expense primarily due to additional costs and lost efficiency associated with automation startup issues at our Tennessee distribution facility.
These factors were partially offset by:
•favorable inventory obsolescence expense year-over-year;
•lower commodity and product costs, partly driven by Project Pegasus initiatives; and
•lower overall personnel expense primarily driven by lower annual incentive compensation expense.
Adjusted operating income decreased 10.3% to $141.9 million, or 15.7% of segment net sales revenue, compared to $158.2 million, or 17.3% of segment net sales revenue.
Beauty & Wellness
Comparison of Fiscal 2025 to 2024
Operating income was $23.1 million, or 2.3% of segment net sales revenue, compared to $117.9 million, or 10.8% of segment net sales revenue. Operating income in fiscal 2025 included $51.5 million of pre-tax asset impairment charges. The effect of this item unfavorably impacted the year-over-year comparison of segment operating margin by 5.1 percentage points. The remaining 3.4 percentage point decrease in segment operating margin was primarily due to:
•higher marketing and new product development expense as we reinvested back into our brands;
•the unfavorable comparative impact of a gain on the sale of the El Paso facility of $18.0 million recognized in the prior year;
•a less favorable product mix; and
•the impact of unfavorable operating leverage due to the decrease in net sales.
These factors were partially offset by:
•lower commodity and product costs, partly driven by Project Pegasus initiatives;
•favorable inventory obsolescence expense year-over-year; and
•lower overall personnel expense primarily driven by lower annual incentive compensation expense.
Adjusted operating income decreased 23.0% to $110.4 million, or 11.0% of segment net sales revenue, compared to $143.4 million, or 13.2% of segment net sales revenue.
Interest Expense
Comparison of Fiscal 2025 to 2024
Interest expense was $51.9 million, compared to $53.1 million. The decrease in interest expense was primarily due to lower average borrowings outstanding, partially offset by a higher average effective interest rate inclusive of the impact of our interest rate swaps compared to the prior year.
Income Tax Expense
The period-over-period comparison of our effective tax rate is often impacted by the mix of income in our various tax jurisdictions. Due to our organization in Bermuda and the ownership structure of our foreign subsidiaries, many of which are not owned directly or indirectly by a U.S. parent company, an immaterial amount of our foreign income is subject to U.S. taxation on a permanent basis under current law. Additionally, our intangible assets are largely owned by our foreign affiliates, resulting in proportionally higher earnings in jurisdictions with lower statutory tax rates, which historically had the effect of decreasing our overall effective tax rate.
The OECD has introduced a framework to implement a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Certain countries in which we operate have enacted Pillar Two legislation and continue to modify their rules and guidance, often to align with ongoing OECD interpretive guidance on the “Model Rules.” Meanwhile, additional countries are in the process of introducing legislation to implement Pillar Two, even as the OECD continues to modify its administrative guidance. Pillar Two legislation effective for our fiscal 2025 has been incorporated into our financial statements. However, the extent to which other jurisdictions adopt or enact Pillar Two is uncertain and could increase the cost and complexity of compliance, and we expect that it could have a further material adverse affect on our global effective tax rate in fiscal 2026.
In response to Pillar Two, on May 24, 2024, Barbados enacted a domestic corporate income tax rate of 9%, effective for our fiscal 2025. We incorporated this corporate income tax into our income tax provision and revalued our existing deferred tax liabilities subject to the Barbados legislation, which resulted in a
discrete tax charge of $6.0 million during fiscal 2025. Additionally, Barbados enacted a DMTT of 15% which applies to Barbados businesses that are part of multinational enterprise groups with annual revenue of €750 million or more and is effective beginning with our fiscal 2026. Although we currently do not expect the Barbados DMTT to have a material impact to our consolidated financial statements, we will continue to monitor and evaluate impacts as further regulatory guidance becomes available.
Like Barbados, the government of Bermuda enacted a 15% corporate income tax that will become effective for us in fiscal 2026. The Bermuda corporate income tax allows for a beginning net operating loss balance related to the five years preceding the effective date. Accordingly, during fiscal 2024, we recorded a deferred tax asset of $9.3 million for the Bermuda net operating losses generated from fiscal 2021 through 2024 with an offsetting valuation allowance of $9.3 million. Although we currently do not expect this Bermuda tax to have a material impact to our consolidated financial statements, we will continue to monitor and evaluate impacts as further regulatory guidance becomes available.
In the fourth quarter of fiscal 2025, we implemented a reorganization involving the transfer of intangible assets previously held by Helen of Troy Limited (Barbados). The reorganization resulted in the consolidation of the ownership of intangible assets, supporting streamlined internal licensing and centralized management of the intangible assets. As a result of the reorganization, additional intangible assets are now owned by our subsidiary in Switzerland. Further, the reorganization resulted in a transitional income tax benefit of $64.6 million from the recognition of a deferred tax asset, partially offset by taxes associated with the transfer.
Fiscal 2025 income tax benefit as a percentage of income before income tax was 35.0% compared to income tax expense of 19.3% for fiscal 2024, primarily due to the transitional tax benefit resulting from the intangible asset reorganization, a tax benefit related to a resolution of an uncertain tax position, the comparative impact of tax expense recognized in the prior year for the gain on the sale of the El Paso facility, partially offset by the Barbados tax legislation described above, including a discrete tax charge of $6.0 million during fiscal 2025 to revalue deferred tax liabilities, and shifts in the mix of income in our various tax jurisdictions.
Net Income, Diluted EPS, Adjusted Income (non-GAAP), and Adjusted Diluted EPS (non-GAAP)
In order to provide a better understanding of the impact of certain items on our income and diluted EPS, the tables that follow report the comparative after-tax impact of acquisition-related expenses, asset impairment charges, Barbados tax reform, Bed, Bath & Beyond bankruptcy, gain on sale of distribution and office facilities, intangible asset reorganization, restructuring charges, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on income and diluted EPS for the periods presented below. Adjusted income and adjusted diluted EPS may be considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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| | Fiscal Year Ended February 28, 2025 |
| | Income | | Diluted EPS |
| (in thousands, except per share data) | Before Tax | | Tax | | Net of Tax | | Before Tax | | Tax | | Net of Tax |
| As reported (GAAP) | $ | 91,664 | | | $ | (32,087) | | | $ | 123,751 | | | $ | 3.97 | | | $ | (1.39) | | | $ | 5.37 | |
| Acquisition-related expenses | 3,035 | | | — | | | 3,035 | | | 0.13 | | | — | | | 0.13 | |
Asset impairment charges | 51,455 | | | 3,895 | | | 47,560 | | | 2.23 | | | 0.17 | | | 2.06 | |
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Barbados tax reform | — | | | (6,045) | | | 6,045 | | | — | | | (0.26) | | | 0.26 | |
Intangible asset reorganization | — | | | 64,604 | | | (64,604) | | | — | | | 2.80 | | | (2.80) | |
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| Restructuring charges | 14,822 | | | 1,433 | | | 13,389 | | | 0.64 | | | 0.06 | | | 0.58 | |
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| Subtotal | 160,976 | | | 31,800 | | | 129,176 | | | 6.98 | | | 1.38 | | | 5.60 | |
| Amortization of intangible assets | 18,875 | | | 2,798 | | | 16,077 | | | 0.82 | | | 0.12 | | | 0.70 | |
| Non-cash share-based compensation | 21,376 | | | 1,240 | | | 20,136 | | | 0.93 | | | 0.05 | | | 0.87 | |
| Adjusted (non-GAAP) | $ | 201,227 | | | $ | 35,838 | | | $ | 165,389 | | | $ | 8.72 | | | $ | 1.55 | | | $ | 7.17 | |
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| Weighted average shares of common stock used in computing diluted EPS | 23,065 | |
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| | 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 | |
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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 | |
Comparison of Fiscal 2025 to 2024
Net income was $123.8 million compared to $168.6 million. Diluted EPS was $5.37 compared to $7.03. Diluted EPS decreased primarily due to lower operating income inclusive of after-tax asset impairment charges of $47.6 million, partially offset by a decrease in the effective income tax rate due to a $64.6 million transitional income tax benefit recognized in connection with our intangible asset reorganization and lower weighted average diluted shares outstanding.
Adjusted income decreased $48.1 million, or 22.5%, to $165.4 million compared to $213.5 million. Adjusted diluted EPS decreased 19.5% to $7.17 compared to $8.91.
Liquidity and Capital Resources
We principally rely on our cash flow from operations and borrowings under our Credit Agreement to finance our operations, capital and intangible asset expenditures, acquisitions and share repurchases. Historically, our principal uses of cash to fund our operations have included operating expenses, primarily SG&A, and working capital, predominantly for inventory purchases and the extension of credit to our retail customers. We have typically been able to generate positive cash flow from operations sufficient to fund our operating activities. In the past, we have utilized a combination of available cash and existing, or additional, sources of financing to fund strategic acquisitions, share repurchases and capital investments. We generated $113.2 million in cash from operations during fiscal 2025 and had $18.9 million in cash and cash equivalents at February 28, 2025. As of February 28, 2025, the amount of cash and cash equivalents held by our foreign subsidiaries was $16.0 million. During fiscal 2025, we acquired Olive & June for $229.4 million in cash, net of cash acquired, and contingent cash consideration of up to $15.0 million, subject to Olive & June's performance during calendar years 2025, 2026, and 2027, payable annually. The acquisition was funded with cash on hand and borrowings under our existing revolving credit facility. We have no existing activities involving special purpose entities or off-balance sheet financing.
Our anticipated material cash requirements in fiscal 2026 include the following:
•operating expenses, primarily SG&A and working capital predominately for inventory purchases and to carry normal levels of accounts receivable on our balance sheet;
•repayment of a current maturity of long term debt of $9.4 million;
•estimated interest payments of approximately $55.4 million based on outstanding debt obligations, weighted average interest rates and interest rate swaps in effect at February 28, 2025;
•minimum operating lease payments under existing obligations of approximately $8.2 million;
•minimum royalty payments under existing license agreements of approximately $6.3 million;
•restructuring payments under Project Pegasus of approximately $7.7 million (refer to Note 11 for additional information); and
•capital and intangible asset expenditures between approximately $25 million to $30 million to support ongoing operations and future infrastructure needs, including investments to transfer sourcing of certain products.
Our anticipated material cash requirements beyond fiscal 2026 include the following:
•operating expenses, primarily SG&A and working capital predominately for inventory purchases and to carry normal levels of accounts receivable on our balance sheet;
•outstanding long-term debt obligations maturing between fiscal 2027 and fiscal 2029, in an aggregate principal value of approximately $912.5 million, with $887.5 million of that amount maturing in fiscal 2029 (refer to Note 13 to the accompanying consolidated financial statements for additional information);
•estimated interest payments of approximately $55.0 million, $54.6 million, and $51.7 million in 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 28, 2025 (refer to Note 13 to the accompanying consolidated financial statements for additional information);
•minimum operating lease payments of approximately $48.5 million over the term of our existing operating lease arrangements (refer to Note 3 to the accompanying consolidated financial statements for additional information);
•minimum royalty payments of approximately $20.0 million over the term of the existing license agreements (refer to Note 12 to the accompanying consolidated financial statements for additional information); and
•capital and intangible asset expenditures to support ongoing operations and future infrastructure needs.
Based on our current financial condition and current operations, we believe that cash flows from operations and available financing sources will continue to provide sufficient capital resources to fund our foreseeable short- and long-term liquidity requirements.
We continue to evaluate acquisition opportunities on a regular basis. We may finance acquisition activity with available cash, the issuance of shares of common stock, additional debt, or other sources of financing, depending upon the size and nature of any such transaction and the status of the capital markets at the time of such acquisition.
We may also elect to repurchase additional shares of common stock under our Board of Directors' authorization, subject to limitations contained in our debt agreement and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. We may finance share repurchases with available cash, additional debt or other sources of financing. For additional information, see Item 5., “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in this Annual Report.
Operating Activities
Comparison of Fiscal 2025 to 2024
Operating activities provided net cash of $113.2 million compared to $306.1 million. The decrease was primarily driven by increases in payments for inventory, annual incentive compensation and income taxes, as well as a decrease in cash earnings, partially offset by decreases in cash used for restructuring activities and interest payments.
Investing Activities
Investing activities used cash of $263.1 million in fiscal 2025 and provided cash of $5.4 million in fiscal 2024.
Highlights from Fiscal 2025
•We paid $229.4 million, net of cash acquired, to acquire Olive & June and made investments in capital and intangible asset expenditures of $30.1 million, of which $5.6 million primarily related to the implementation of an automation system at our new two million square foot distribution facility. Capital and intangible asset expenditures also included expenditures for computer, furniture and other equipment and tooling, molds, and other production equipment.
Highlights from Fiscal 2024
•We received proceeds of $49.5 million from the sale of our distribution and office facilities in El Paso, Texas and made investments in capital and intangible asset expenditures of $36.6 million, of which $19.3 million related to expenditures, primarily equipment, for our new distribution facility. Capital and intangible asset expenditures also included expenditures for computer, furniture and other equipment and tooling, molds, and other production equipment. In addition, we invested $9.6 million in U.S. Treasury Bills.
Financing Activities
Financing activities provided cash of $150.2 million and used cash of $322.1 million in fiscal 2025 and 2024.
Highlights from Fiscal 2025
•we had proceeds of $1,096.6 million from revolving loans under our Credit Agreement;
•we repaid $840.5 million of revolving loans drawn under our Credit Agreement;
•we repaid $6.3 million of long-term debt; and
•we repurchased and retired 1,038,696 shares of common stock at an average price of $99.34 per share for a total purchase price of $103.2 million through a combination of open market purchases and the settlement of certain stock awards.
Highlights from Fiscal 2024
•we had proceeds of $1,415.5 million from revolving loans under our Credit Agreement and Prior Credit Agreement, net of lender fees paid in connection with the refinancing of our Credit Agreement;
•we repaid $1,686.6 million of revolving loans drawn under our Credit Agreement and Prior Credit Agreement;
•we received proceeds, net of lender fees, of $248.9 million from term loans under our Credit Agreement;
•we repaid $246.9 million of long-term debt which included the repayment of amounts outstanding on our term loans under the Prior Credit Agreement;
•we paid $2.0 million of third-party financing costs in connection with the refinancing of our Credit Agreement; and
•we repurchased and retired 432,532 shares of common stock at an average price of $127.67 per share for a total purchase price of $55.2 million through a combination of open market purchases and the settlement of certain stock awards.
Credit Agreement
Credit Agreement and Prior Credit Agreement
On February 15, 2024, we entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders. The Credit Agreement replaces our prior credit agreement (the “Prior Credit Agreement”), which terminated on February 15, 2024 and is further described below. We utilized the proceeds from the refinancing to repay all principal, interest, and fees outstanding under the Prior Credit Agreement without penalty. As a result, we recognized a loss on extinguishment of debt within interest expense of $0.5 million during fiscal 2024, which consisted of a write-off of $0.4 million of unamortized prepaid financing fees related to the Prior Credit Agreement and $0.1 million of lender fees related to debt under the Credit Agreement treated as an extinguishment. Additionally, we expensed $0.3 million of third-party fees in fiscal 2024 related to debt under the Credit Agreement treated as a modification, which was recognized within interest expense. We capitalized $4.0 million of lender fees and $2.2 million of third-party fees incurred in connection with the Credit Agreement, which were recorded as prepaid financing fees in long-term debt and prepaid expenses and other current assets in the amounts of $5.4 million and $0.8 million, respectively.
The Credit Agreement provides for aggregate commitments of $1.5 billion, which are available through (i) a $1.0 billion revolving credit facility, which includes a $50 million sublimit for the issuance of letters of credit, (ii) a $250 million term loan facility, and (iii) a committed $250 million delayed draw term loan facility, which may be borrowed in multiple drawdowns until August 15, 2025. Proceeds can be used for working capital and other general corporate purposes, including funding permitted acquisitions. At the closing date of the Credit Agreement, we borrowed $457.5 million under the revolving credit facility and
$250.0 million under the term loan facility and utilized the proceeds to repay all debt outstanding under the Prior Credit Agreement. The Credit Agreement matures on February 15, 2029. The Credit Agreement includes an accordion feature, which permits the Company to request to increase its borrowing capacity by an additional $300 million plus an unlimited amount when the Leverage Ratio (as defined in the Credit Agreement) on a pro-forma basis is less than 3.25 to 1.00. The Company’s exercise of the accordion is subject to certain conditions being met, including lender approval.
Outstanding letters of credit reduce the borrowing availability under the Credit Agreement on a dollar-for-dollar basis. We are able to repay amounts borrowed at any time without penalty. Borrowings accrue interest under one of two alternative methods pursuant to the Credit Agreement as described below. With each borrowing against our credit line, we can elect the interest rate method based on our funding needs at the time. We also incur loan commitment and letter of credit fees under the Credit Agreement. The term loans are payable at the end of each fiscal quarter in equal installments of 0.625% through February 28, 2025, 0.9375% through February 28, 2026, and 1.25% thereafter of the original principal balance of the term loans, which began in the first quarter of fiscal 2025, with the remaining balance due at the maturity date. Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term SOFR (as defined in the Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.125% and 1.0% to 2.125% for Base Rate and Term SOFR borrowings, respectively, pursuant to the below table.
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Pricing Level | Net Leverage Ratio | Revolving Commitment Fee and Delayed Draw Commitment Fee | Term SOFR for Loans & Letter of Credit Fees | Base Rate for Loans |
I | Less than 1.00 to 1.00 | 0.100% | 1.000% | 0.000% |
II | Greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00 | 0.150% | 1.125% | 0.125% |
III | Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00 | 0.200% | 1.250% | 0.250% |
IV | Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00 | 0.250% | 1.500% | 0.500% |
V | Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00 | 0.300% | 1.750% | 0.750% |
VI | Greater than or equal to 3.00 to 1.00 but less than 3.50 to 1.00 | 0.350% | 2.000% | 1.000% |
VII | Greater than or equal to 3.50 to 1.00 | 0.400% | 2.125% | 1.125% |
Our Prior Credit Agreement with Bank of America, N.A., as administrative agent, and other lenders, provided for an unsecured total revolving commitment of $1.25 billion and a $300 million accordion, which could be used for term loan commitments. In June 2022, we exercised the accordion under the Prior Credit Agreement and borrowed $250 million as term loans. The proceeds from the term loans were used to repay revolving loans under the Prior Credit Agreement. The maturity date of the term loans and the revolving loans under the Prior Credit Agreement was March 13, 2025. Borrowings under the Prior Credit Agreement bore floating interest at either the Base Rate or Term SOFR (as defined in the Prior Credit Agreement), plus a margin based on the Net Leverage Ratio (as defined in the Prior Credit Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and Term SOFR borrowings, respectively.
The floating interest rates on our borrowings under the Credit Agreement and Prior Credit Agreement are hedged with interest rate swaps to effectively fix interest rates on $550 million and $500 million of the outstanding principal balance under the Credit Agreement as of February 28, 2025 and February 29, 2024, respectively. See Notes 14, 15, and 16 to the accompanying consolidated financial statements for additional information regarding our interest rate swaps.
In connection with the acquisition of Olive & June, we provided notice of a qualified acquisition and borrowed $235.0 million under our Credit Agreement to fund the acquisition initial cash consideration inclusive of amounts for cash acquired. The exercise of the qualified acquisition notice triggered temporary adjustments to the maximum leverage ratio, which was 3.50 to 1.00 before the impact of the qualified acquisition notice. As a result of the qualified acquisition notice, commencing at the beginning of our fourth quarter of fiscal 2025, the maximum leverage ratio is 4.50 to 1.00 through November 30, 2025 and 3.50 to 1.00 thereafter. For additional information on the acquisition, see Note 6 to the accompanying consolidated financial statements.
As of February 28, 2025, the outstanding Credit Agreement principal balance was $921.9 million (excluding prepaid financing fees) and the balance of outstanding letters of credit was $9.5 million. The weighted average interest rate on borrowings outstanding under the Credit Agreement was 5.6% at February 28, 2025. As of February 28, 2025, the amount available for revolving loans under the Credit Agreement was $312.4 million and the amount available per the maximum leverage ratio was $446.1 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur. As of February 28, 2025, these covenants effectively limited our ability to incur more than $312.4 million of additional debt from all sources, including the Credit Agreement, the lesser of the two borrowing limitations.
Debt Covenants
Our debt under our Credit Agreement is unconditionally guaranteed, on a joint and several basis, by the Company and certain of its subsidiaries. Our Credit Agreement requires the maintenance of certain key financial covenants, defined in the table below. Our Credit Agreement also contains other customary covenants, including, among other things, covenants restricting or limiting us, except under certain conditions set forth therein, from (1) incurring liens on our properties, (2) making certain types of investments, (3) incurring additional debt, and (4) assigning or transferring certain licenses. Our Credit Agreement also contains customary events of default, including failure to pay principal or interest when due, among others. Upon an event of default under our Credit Agreement, the lenders may, among other things, accelerate the maturity of any amounts outstanding. The commitments of the lenders to make loans to us under the Credit Agreement are several and not joint. Accordingly, if any lender fails to make loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such lender’s commitments under the Credit Agreement.
As of February 28, 2025, we were in compliance with all covenants as defined under the terms of the Credit Agreement.
The table below provides the formulas currently in effect for certain key financial covenants as defined under our Credit Agreement:
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| Applicable Financial Covenant | Credit Agreement |
| Minimum Interest Coverage Ratio | EBIT (1) ÷ Interest Expense (1) |
Minimum Required: 3.00 to 1.00 |
| Maximum Leverage Ratio | Total Current and Long Term Debt (2) ÷ EBITDA (1) + Pro Forma Effect of Transactions |
Maximum Currently Allowed: 4.50 to 1.00 (3) |
Key Definitions:
| | | | | | | | | | | |
| EBIT: | | Earnings + Interest Expense + Taxes + Non-Cash Charges (4) + Certain Allowed Addbacks (4) - Certain Non-Cash Income (4) | |
| EBITDA: | | EBIT + Depreciation and Amortization Expense | |
| Pro Forma Effect of Transactions: | | For any acquisition, pre-acquisition EBITDA of the acquired business is included so that the
EBITDA of the acquired business included in the computation equals its twelve month trailing total. In addition, the amount of certain pro forma run-rate cost savings for acquisitions or dispositions may be added to EBIT and EBITDA. | |
(1)Computed using totals for the latest reported four consecutive fiscal quarters.
(2)Computed using the ending debt balances plus outstanding letters of credit as of the latest reported fiscal quarter.
(3)In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.50 to 1.00 for the first four fiscal quarters after the qualified acquisition is consummated. During fiscal 2025, we provided a qualified acquisition notice and, as a result, the maximum leverage ratio is 4.50 to 1.00 through November 30, 2025 and 3.50 to 1.00 thereafter.
(4)As defined in the Credit Agreement.
Critical Accounting Policies and Estimates
The SEC defines critical accounting estimates as those made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a company's financial condition or results of operations. We consider the following estimates to meet this definition and represent our more critical estimates and assumptions used in the preparation of our consolidated financial statements.
Income Taxes
We must make certain estimates and judgments in determining our provision for income tax expense. The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between the financial statement carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback years, estimated future taxable income and available tax planning strategies. In projecting future taxable income, we begin with historical results and incorporate assumptions including future operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These
assumptions require significant judgement and are consistent with the plans and estimates we are using to manage our underlying business. Should a change in facts or circumstances, such as changes in our business plans, economic conditions or future tax legislation, lead to a change in judgment about the ultimate recoverability of a deferred tax asset, we record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in income tax expense. Additionally, if future taxable income varies from projected taxable income, we may be required to adjust our valuation allowance in future years.
In addition, the calculation of our tax liabilities requires us to account for uncertainties in the application of complex and evolving tax regulations. We recognize liabilities for uncertain tax positions based on the two-step process prescribed within GAAP. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination by the tax authority based upon its technical merits assuming the tax authority has full knowledge of all relevant information. To be recognized in the financial statements, the tax position must meet this more-likely-than-not threshold. For positions meeting this recognition threshold, the second step requires us to estimate and measure the tax benefit as the largest amount that has greater than a 50 percent likelihood of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, historical experience with similar tax matters, guidance from our tax advisors, and new audit activity. For tax positions that do not meet the threshold requirement, we record liabilities for unrecognized tax benefits as a tax expense or benefit in the period recognized or reversed and disclose as a separate liability in our financial statements, including related accrued interest and penalties. A change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period in which the change occurs.
Valuation of Inventory
We record inventory on our balance sheet at the lower of average cost or net realizable value. We write down a portion of our inventory to net realizable value based on the historical sales trends of products and estimates about future demand and market conditions, among other factors. We regularly review our inventory for slow-moving items and for items that we are unable to sell at prices above their original cost. When we identify such an item, we use net realizable value as the basis for recording such inventory and base our estimates on expected future selling prices less expected disposal costs. These estimates entail a significant amount of inherent subjectivity and uncertainty. As a result, these estimates could vary significantly from the amounts that we may ultimately realize upon the sale of inventories if future economic conditions, product demand, product discontinuances, competitive conditions or other factors differ from our estimates and expectations. Additionally, changes in consumer demand, retailer inventory management strategies, transportation lead times, supplier capacity and raw material availability could make our inventory management and reserves more difficult to estimate.
Acquisitions, Goodwill and Indefinite-Lived Intangibles, and Related Impairment Testing
A significant portion of our non-current assets consists of goodwill and intangible assets recorded as a result of past acquisitions. Accounting for business combinations requires the use of estimates and assumptions in determining the fair value of assets acquired and liabilities assumed in order to properly allocate the purchase price. Goodwill is recorded as the difference, if any, between the aggregate consideration paid and the fair value of the net tangible and intangible assets acquired in the acquisition of a business. Our intangible assets acquired primarily include trade names and customer relationships. The fair value of our assets acquired and liabilities assumed are typically based upon valuations performed by independent third-party appraisers using the income approach, including estimated future discounted cash flow models (“DCF Models”), the relief from royalty method for trade names, and the distributor method for customer relationships. The fair value of our trade names and customer relationships acquired involved significant estimates and assumptions, including revenue growth rates,
gross profit and operating profit margins, discount rates and royalty and customer attrition rates (as applicable). We believe that the fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that marketplace participants would use.
We review goodwill and indefinite-lived intangible assets for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We consider whether circumstances or conditions exist which suggest that the carrying value of our goodwill and indefinite-lived intangible assets might be impaired. If such circumstances or conditions exist, we perform a qualitative assessment to determine whether it is more likely than not that the assets are impaired. We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment). We operate two reportable segments, Home & Outdoor and Beauty & Wellness, which are comprised of eight reporting units, one of which does not have any goodwill recorded. If the results of the qualitative assessment indicate that it is more likely than not that the assets are impaired, further steps are required in order to determine whether the carrying value of each reporting unit and indefinite-lived intangible assets exceeds its fair market value. An impairment charge is recognized to the extent the goodwill or indefinite-lived intangible asset recorded exceeds the reporting unit’s or asset's fair value. We perform our annual impairment testing for goodwill and indefinite-lived assets as of the beginning of the fourth quarter of our fiscal year.
We use an enterprise premise to determine the fair value and carrying amount of our reporting units. All assets and liabilities that are employed in or relate to the operations of a reporting unit and will be considered in determining the fair value of the reporting unit are included in the carrying value of the reporting unit. Our reporting units’ net assets primarily consist of goodwill and intangible assets, which are assigned to a reporting unit upon acquisition, and accounts receivable and inventory which are directly identifiable. Assets and liabilities employed in or related to the operations of multiple reporting units as well as corporate assets and liabilities are primarily allocated to the reporting units based on specific identification or a percentage of net sales revenue.
We estimate the fair value of our reporting units using an income approach based upon projected future DCF Models. Under the DCF Model, the fair value of each reporting unit is determined based on the present value of estimated future cash flows, discounted at a risk-adjusted rate of return. We use internal forecasts and strategic long-term plans to estimate future cash flows, including net sales revenue, gross profit margin, and earnings before interest and taxes margins. Our internal strategic long-term plans were developed in tandem with our Elevate for Growth Strategy, which provides the Company’s strategic roadmap through fiscal 2030. Our internal forecasts and strategic long-term plans take into consideration historical and recent business results, industry trends and macroeconomic conditions. Other key estimates used in the DCF Model include, but are not limited to, discount rates, statutory tax rates, terminal growth rates, as well as working capital and capital expenditures needs. The discount rates are based on a weighted-average cost of capital utilizing industry market data of our peer group companies. Our goodwill impairment analysis also includes a reconciliation of the aggregate estimated fair values of our reporting units to the Company’s total enterprise value (market capitalization plus long-term debt).
We estimate the fair value of our indefinite-lived trade names and trademark licenses using the relief from royalty method income approach which is based upon a DCF Model. The relief-from-royalty method estimates the fair value of a trade name or trademark license by discounting the hypothetical avoided royalty payments to their present value over the economic life of the asset. The determination of fair value using this method entails a significant number of estimates and assumptions, which require management judgment, and include net sales revenue growth rates, discount rates, royalty rates, and residual growth rates. We use internal forecasts and strategic long-term plans (which are described above) to estimate net sales revenue growth rates and royalty rates. We utilize a constant growth model to determine the residual growth rates which are based upon long-term industry growth expectations and long-term expected inflation.
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. When estimating expected future cash flows judgement is necessary in evaluating the impact of operational and external economic factors on future cash flows, all of which are subject to uncertainty. 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 assumptions and estimates used in our fair value analysis involve significant elements of subjective judgment and analysis by management. Certain future events and circumstances, including deterioration of retail economic conditions, higher cost of capital, a decline in actual and expected consumer demand, among others, could result in changes to these assumptions and judgements. While we believe that the estimates and assumptions we use are reasonable at the time made, changes in business conditions or other unanticipated events and circumstances may occur that cause actual results to differ materially from projected results and this could potentially require future adjustments to our asset valuations.
During the second quarter of fiscal 2025, we concluded that a goodwill impairment triggering event had occurred primarily due to a sustained decline in our stock price. Additional factors that contributed to this conclusion included current macroeconomic trends and uncertainty surrounding inflation and high interest rates, which negatively impact consumer disposable income, credit availability, spending and overall consumer confidence, all of which had and may continue to adversely impact our sales, results of operations and cash flows. These factors were applicable to all of our reporting units which resulted in us performing quantitative goodwill impairment testing on all of our reporting units. We considered whether these events and circumstances would affect any other assets and concluded we should perform quantitative impairment testing on our indefinite-lived trademark licenses and trade names. The quantitative assessments performed during the second quarter of fiscal 2025 did not result in impairment of our goodwill or indefinite-lived intangible assets. All of our reporting units and indefinite-lived intangible assets had a fair value that exceeded their carrying value by at least 10%.
During the fourth quarter of fiscal 2025, we concluded a goodwill impairment triggering event had occurred due to a continued sustained decline in our stock price, resulting in our carrying value (excluding long-term debt) exceeding the Company's total enterprise value (market capitalization plus long-term debt). Additional factors that contributed to this conclusion included downward revisions to our internal forecasts and strategic long-term plans. These factors were applicable to all of our reporting units and indefinite-lived and definite-lived trademark licenses and trade names.
The quantitative assessments performed during the fourth quarter of fiscal 2025 resulted in an impairment charge of $38.7 million to reduce the goodwill of our Drybar reporting unit, which is included within our Beauty & Wellness segment. Our Drybar business has continued to experience a decline in net sales revenue due to lower consumer demand, increased competition, and net distribution declines, all of which have contributed to reduced earnings and cash flows. In connection with our annual budgeting and forecasting process, management reduced its forecasts of Drybar's net sales revenue growth, gross margin and earnings before interest and taxes. An inability to achieve expected revenue growth and profitability in line with our internal projections could result in further declines in the fair value that may result in additional impairment charges to our Drybar goodwill.
Our impairment testing did not result in impairment of our indefinite-lived intangible assets. All of our reporting units and indefinite-lived intangible assets had a fair value that exceeded their carrying value by at least 10% except for our Curlsmith reporting unit and our PUR trade name.
The fair value of our Curlsmith reporting unit, within our Beauty & Wellness reportable segment, represented 106% of its carrying value as of the end of fiscal 2025. We performed a sensitivity analysis
on key assumptions used in the valuation. A hypothetical adverse change of 10% in the forecasted sales used to estimate the fair value of the Curlsmith reporting unit would have resulted in an impairment charge of approximately $41.6 million against its goodwill carrying value of $117.1 million as of the end of fiscal 2025.
The fair value of our PUR indefinite-lived trade name, within our Beauty & Wellness reportable segment,
represented 102% of its carrying value as of the end of fiscal 2025. We performed a sensitivity analysis on key assumptions used in the valuation. A hypothetical adverse change of 10% in the forecasted sales used to estimate the fair value of the PUR trade name would have resulted in an impairment charge of approximately $4.0 million against its carrying value of $54.0 million as of the end of fiscal 2025.
Refer to “Impairment of Long-Lived Assets” below for discussion of our definite-lived trademark license and trade name testing.
We performed our annual impairment testing of our goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal 2024 and 2023 and determined based on our qualitative assessment that it is not more likely than not that the fair value of each reporting unit and indefinite-lived intangible asset is lower than its carrying value. Therefore, quantitative impairment testing in fiscal 2024 and fiscal 2023 was not required. Accordingly, no impairment changes were recorded during fiscal 2024 and 2023.
Some of the inherent estimates and assumptions used in determining the fair value of our reporting units and indefinite-lived intangible assets are outside of the control of management, including interest rates, cost of capital, tax rates, strength of retail economies and industry growth. While we believe that the estimates and assumptions we use are reasonable at the time made, it is possible changes could occur. The recoverability of our goodwill and indefinite-lived intangible assets is dependent upon discretionary consumer demand and the execution of our Elevate for Growth Strategy, which includes investing in our brands, growing internationally, new product introductions and expanded distribution to drive revenue growth and profitability and achieve our projections. The net sales revenue and profitability growth rates used in our projections are management’s estimate of the most likely results over time, given a wide range of potential outcomes. Actual results may differ from those assumed in forecasts, which could result in material impairment charges. We will continue to monitor our reporting units and indefinite-lived intangible assets for any triggering events or other signs of impairment including consideration of changes in the macroeconomic environment, significant declines in operating results, further significant sustained decline in market capitalization from current levels, and other factors, which could result in impairment charges in the future.
Impairment of Long-Lived Assets
We review intangible assets with definite lives and long-lived assets held and used if a triggering event occurs during the reporting period. If such circumstances or conditions exist, further steps are required in order to determine whether the carrying value of each of the individual assets exceeds its fair market value. If our analysis indicates that an individual asset's carrying value does exceed its fair market value, the next step is to record a loss equal to the excess of the individual asset's carrying value over its fair value. We evaluate any long-lived assets held for sale quarterly to determine if estimated fair value less cost to sell has changed during the reporting period.
We estimate the fair value of our trade names and trademark licenses using the relief from royalty method income approach (described above) which is based upon a DCF Model. We estimate the fair value of our customer relationships and lists using the distributor method income approach which is based upon a DCF Model. The distributor method uses financial margin information for distributors within the applicable industry and most representative of the Company to estimate a royalty rate. The determination of fair value using these methods entails a significant number of estimates and assumptions, which require management judgment, and include net sales revenue growth rates, discount rates, royalty rates, residual growth rates (as applicable) and customer attrition rates (as applicable). We
use internal forecasts and strategic long-term plans (which are described above) to estimate net sales revenue growth rates and royalty rates. We utilize a constant growth model to determine the residual growth rates which are based upon long-term industry growth expectations and long-term expected inflation.
The assumptions and estimates used in determining the fair value of our definite-lived intangible assets and long-lived assets involve significant elements of subjective judgment and analysis by management. Certain future events and circumstances, including deterioration of retail economic conditions, higher cost of capital, a decline in actual and expected consumer demand, could result in changes to these assumptions and judgements. A revision of these estimates and assumptions could cause the fair values of the definite-lived intangible assets and long-lived assets to fall below their respective carrying values, resulting in impairment charges, which could have a material adverse effect on our results of operations.
As described above, during the second quarter of fiscal 2025, we concluded that an impairment triggering event had occurred and concluded to perform quantitative impairment analyses on our definite-lived trademark licenses, trade names, and customer relationships and lists. Our definite-lived intangible asset impairment test compares the fair value of our intangible assets with their carrying amount and an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value. The quantitative assessments performed during the second quarter of fiscal 2025 did not result in any impairment of these intangible assets. All of our definite-lived trademark licenses, trade names, and customer relationships and lists had a fair value that exceeded their carrying value by at least 10%.
As described above, during the fourth quarter of fiscal 2025, we concluded that an impairment triggering event had occurred and concluded to perform quantitative impairment analyses on our definite-lived trademark licenses and trade names. Our definite-lived trademark license and trade name testing resulted in an impairment charge of $12.8 million to reduce the carrying value of our Drybar definite-lived trade name to an estimated fair value of $7.0 million. Our Drybar business and trade name is included within our Beauty & Wellness segment and has continued to experience a decline in net sales revenue due to lower consumer demand, increased competition, and net distribution declines, all of which have contributed to reduced earnings and cash flows. In connection with our annual budgeting and forecasting process, management reduced its forecasts of Drybar's net sales revenue growth, gross margin and earnings before interest and taxes which also resulted in management selecting a lower royalty rate. An inability to achieve expected revenue growth and profitability in line with our internal projections could result in further declines in the fair value that may result in additional impairment charges to our definite-lived Drybar trade name.
All of our definite-lived trademark licenses and trade names had a fair value that exceeded their carrying value by at least 10% except for our Curlsmith trade name and Revlon trademark license.
The fair value of our Curlsmith trade name, within our Beauty & Wellness reportable segment,
represented 105% of its carrying value as of the end of fiscal 2025. We performed a sensitivity analysis on key assumptions used in the valuation. A hypothetical adverse change of 10% in the forecasted sales used to estimate the fair value of the Curlsmith trade name would have resulted in an impairment charge of approximately $1.0 million against its carrying value of $18.0 million as of the end of fiscal 2025.
The fair value of our Revlon trademark license, within our Beauty & Wellness reportable segment,
represented 109% of its carrying value as of the end of fiscal 2025. We performed a sensitivity analysis on key assumptions used in the valuation. A hypothetical adverse change of 10% in the forecasted sales used to estimate the fair value of the Revlon trademark license would have resulted in an impairment charge of approximately $0.9 million against its carrying value of $64.9 million as of the end of fiscal 2025.
During fiscal 2024 and 2023 we determined no changes in circumstances or conditions or events occurred that would indicate the carrying value of our definite-lived intangible assets may not be recoverable.
The estimates and assumptions inherent in determining the fair value of our definite-lived intangible assets are subject to the same risks described above for determining the fair value of our goodwill and indefinite-lived intangible assets. Further declines in anticipated consumer spending or an inability to achieve expected revenue growth and profitability in line with our Elevate for Growth Strategy could result in declines in the fair value that may result in impairment charges to our definite-lived intangible assets. We will continue to monitor our definite-lived intangible assets and long-lived assets for any triggering events or other signs of impairment including consideration of changes in the macroeconomic environment, significant declines in sales or operating results, and other factors, which could result in impairment charges in the future. For additional information, refer to Note 1 and Note 7 to the accompanying consolidated financial statements.
Economic Useful Lives of Intangible Assets
We amortize intangible assets, such as trademark licenses, trade names, customer relationships and lists, patents and non-compete agreements over their economic useful lives, unless those assets' economic useful lives are indefinite. If an intangible asset’s economic useful life is deemed indefinite, that asset is not amortized. The determination of the economic useful life of an intangible asset requires a significant amount of judgment and entails significant subjectivity and uncertainty. When we acquire an intangible asset, we consider factors such as our plans for the asset, the market for products associated with the asset, economic factors, any legal, regulatory or contractual provisions and industry trends. We consider these same factors when reviewing the economic useful lives of our previously acquired intangible assets as well. We review the economic useful lives of our intangible assets at least annually. We complete our analysis of the remaining useful economic lives of our intangible assets during the fourth quarter of each fiscal year or when a triggering event occurs.
Share-Based Compensation
We grant share-based compensation awards to non-employee directors and certain associates under our equity plans. We measure the cost of services received in exchange for equity awards, which include grants of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock awards (“PSAs”), and performance stock units (“PSUs”), based on the fair value of the awards on the grant date. These awards may be subject to attainment of certain service conditions, performance conditions and/or market conditions.
We grant PSAs and PSUs to certain officers and associates, which cliff vest after three years and are contingent upon meeting one or more defined operational performance metrics over the three year performance period (“Performance Condition Awards”). The quantity of shares ultimately awarded can range from 0% to 200% of “Target”, as defined in the award agreement as 100%, based on the level of achievement against the defined operational performance metrics. We recognize compensation expense for Performance Condition Awards over the requisite service period to the extent performance conditions are considered probable. Estimating the number of shares of Performance Condition Awards that are probable of vesting requires judgment, including assumptions about future operating performance. While the assumptions used to estimate the probability of achievement against the defined operational performance metrics are management's best estimates, such estimates involve inherent uncertainties. The extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment to share-based compensation expense in the period estimates are revised.
The critical accounting estimates described above supplement the description of our accounting policies disclosed in Note 1 to the accompanying consolidated financial statements. Note 1 describes several
other policies that are important to the preparation of our consolidated financial statements, but do not meet the SEC's definition of critical accounting estimates.
Information Regarding Forward-Looking Statements
Certain written and oral statements in this Annual Report may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. This includes statements made in this Annual Report, in other filings with the SEC, in press releases, and in certain other oral and written presentations. Generally, the words “anticipates”, “assumes”, “believes”, “expects”, “plans”, “may”, “will”, “might”, “would”, “should”, “seeks”, “estimates”, “project”, “predict”, “potential”, “currently”, “continue”, “intends”, “outlook”, “forecasts”, “targets”, “reflects”, “could”, and other similar words identify forward-looking statements. All statements that address operating results, events or developments that we expect or anticipate may occur in the future, including statements related to sales, expenses, EPS results, and statements expressing general expectations about future operating results, are forward-looking statements and are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and assumptions, but there can be no assurance that we will realize our expectations or that our assumptions will prove correct. Forward-looking statements are only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Accordingly, we caution readers not to place undue reliance on forward-looking statements. We believe that these risks include but are not limited to the risks described in this Annual Report under Item 1A., “Risk Factors” and that are otherwise described from time to time in our SEC reports as filed. We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Changes in currency exchange rates and interest rates are our primary financial market risks.
Foreign Currency Risk
The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the reporting currency for the Company. By operating internationally, we are subject to foreign currency risk from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses. As a result of such transactions, portions of our cash, accounts receivable and accounts payable are denominated in foreign currencies. Approximately 14%, 14% and 13% of our net sales revenue was denominated in foreign currencies during fiscal 2025, 2024 and 2023, respectively. These sales were primarily denominated in Euros, British Pounds and Canadian Dollars. We make most of our inventory purchases from manufacturers in Asia and primarily use the U.S. Dollar for such purchases.
In our consolidated statements of income, foreign currency exchange rate gains and losses resulting from the remeasurement of foreign income tax receivables and payables, and deferred income tax assets and liabilities are recognized in income tax (benefit) expense, and all other foreign currency exchange rate gains and losses are recognized in SG&A. We recorded in income tax (benefit) expense a foreign currency exchange rate net loss of $0.7 million during fiscal 2025, a net gain of $0.3 million during fiscal 2024 and a net loss of $0.4 million during fiscal 2023. We recorded in SG&A foreign currency exchange rate net losses of $1.5 million, $0.5 million and $1.7 million during fiscal 2025, 2024 and 2023, respectively.
We identify foreign currency risk by regularly monitoring our foreign currency denominated transactions and balances. Where operating conditions permit, we reduce our foreign currency risk by purchasing most of our inventory with U.S. Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars.
We mitigate certain foreign currency exchange rate risk by using a series of forward contracts to protect against the foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies. Our primary objective in holding derivatives is to reduce the volatility of net earnings, cash flows, and the net asset value associated with changes in foreign currency exchange rates. Our foreign currency risk management strategy includes both hedging instruments and derivatives that are not designated as hedging instruments, which have terms of generally 12 to 24 months. We do not enter into any derivatives or similar instruments for trading or other speculative purposes. We expect that as currency market conditions warrant, and our foreign currency denominated transaction exposure grows, we will continue to execute additional contracts in order to hedge against certain potential foreign currency exchange rate losses.
As of February 28, 2025 and February 29, 2024, a hypothetical adverse 10% change in foreign currency exchange rates would reduce the carrying and fair values of our derivatives by $7.9 million and $8.3 million on a pre-tax basis, respectively. This calculation is for risk analysis purposes and does not purport to represent actual losses or gains in fair value that we could incur. It is important to note that the change in value represents the estimated change in fair value of the contracts. Actual results in the future may differ materially from these estimated results due to actual developments in the global financial markets. Because the contracts hedge an underlying exposure, we would expect a similar and opposite change in foreign currency exchange rate gains or losses over the same periods as the contracts. Refer to Note 15 to the accompanying consolidated financial statements for further information regarding these instruments.
A significant portion of the products we sell are purchased from third-party manufacturers in China, who source a significant portion of their labor and raw materials in Chinese Renminbi. The Chinese Renminbi has fluctuated against the U.S. Dollar in recent years and in fiscal 2025 the average exchange rate of the Chinese Renminbi weakened against the U.S. Dollar by approximately 1.0% compared to the average rate during fiscal 2024. If China’s currency continues to fluctuate against the U.S. Dollar in the short-to-intermediate term, we cannot accurately predict the impact of those fluctuations on our results of operations. 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, 2025 and February 29, 2024 is based on variable floating interest rates. As such, we are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense. As of February 28, 2025 and February 29, 2024, certain borrowings under the Credit Agreement bore interest at an adjusted Term SOFR (as defined in the Credit Agreement). SOFR began in April 2018 and it therefore has a limited history. The future performance of SOFR cannot reliably be predicted based on hypothetical or limited historical performance data. Uncertainty as to SOFR or changes to SOFR may affect the interest rate of certain borrowings under the Credit Agreement. We hedge against interest rate volatility by using interest rate swaps to hedge a portion of our outstanding floating rate debt. Additionally, our cash and short-term investments generate interest income that will vary based on changes in short-term interest.
As of February 28, 2025 and February 29, 2024, a hypothetical adverse 10% change in interest rates would reduce the carrying and fair values of the interest rate swaps by $2.2 million and $2.7 million on a pre-tax basis, respectively. This calculation is for risk analysis purposes and does not purport to represent actual losses or gains in fair value that we could incur. It is important to note that the change in value represents the estimated change in the fair value of the swaps. Actual results in the future may differ materially from these estimated results due to actual developments in the global financial markets. Because the swaps hedge an underlying exposure, we would expect a similar and opposite change in floating interest rates over the same periods as the swaps. Refer to Notes 13
and 15 to the accompanying consolidated financial statements for further information regarding our interest rate sensitive assets and liabilities.
As of February 28, 2025 and February 29, 2024, a hypothetical 1% increase in interest rates would increase our annual interest expense, net of the effect of our interest rate swaps, by approximately $3.7 million and $1.7 million, respectively. This calculation is for risk analysis purposes and does not purport to represent actual increases or decreases in interest expense that we could incur. Actual results in the future may differ materially from these estimated results due to actual developments in the global financial markets. Refer to Item 1A., “Risk Factors” and Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report for further information regarding our interest rate risks.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
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All other schedules are omitted as the required information is included in the consolidated financial statements or is not applicable.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Helen of Troy’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined by Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act.
Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
There are inherent limitations in the effectiveness of internal control over financial reporting, including the possibility that misstatements may not be prevented or detected. Furthermore, the effectiveness of internal controls may become inadequate because of future changes in conditions, or variations in the degree of compliance with our policies or procedures.
Our management assesses the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
On December 16, 2024, we completed our acquisition of Olive & June, LLC (“Olive & June”). In accordance with Securities Exchange Commission guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, we have excluded Olive & June from our assessment of the effectiveness of internal control over financial reporting as of February 28, 2025. The assets and net sales revenue of Olive & June that were excluded from our assessment constituted approximately 1.3 percent of the Company's total consolidated assets (excluding goodwill and intangibles, which are included within the scope of the assessment) and 1.2 percent of total consolidated net sales revenue, as of and for the year ended February 28, 2025. The scope of management’s assessment of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2025 includes all of our consolidated operations except for those disclosure controls and procedures of Olive & June. See Note 6 for additional information regarding the Olive & June acquisition. Based on our assessment, we have concluded that our internal control over financial reporting was effective as of February 28, 2025.
Our independent registered public accounting firm, Grant Thornton LLP, has issued an audit report on the effectiveness of our internal control over financial reporting. Their report appears on the following page.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Helen of Troy Limited
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Helen of Troy Limited and subsidiaries (the “Company”) as of February 28, 2025, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 28, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended February 28, 2025, and our report dated April 24, 2025 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Olive & June, LLC (“Olive & June”), a wholly-owned subsidiary, whose financial statements reflect total assets (excluding goodwill and intangibles, which are included within the scope of the assessment) and net sales revenue constituting 1.3 percent and 1.2 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended February 28, 2025. As indicated in Management’s Report, Olive & June was acquired during the fiscal year ended February 28, 2025. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Olive & June.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/
April 24, 2025
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Helen of Troy Limited
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Helen of Troy Limited and subsidiaries (the “Company”) as of February 28, 2025 and February 29, 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended February 28, 2025, and the related notes and financial statement schedule included under Schedule II – Valuation and Qualifying Accounts (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2025 and February 29, 2024, and the results of its operations and its cash flows for each of the three years in the period ended February 28, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of February 28, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated April 24, 2025 expressed an unqualified opinion.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Estimation of the fair value of the trade name acquired in the acquisition of Olive & June, LLC
As described further in Note 6 to the consolidated financial statements, the Company completed its acquisition of Olive & June, LLC (“Olive & June”) on December 16, 2024. The Company’s accounting for the acquisition required the estimation of the fair value of assets acquired and liabilities assumed. We identified the estimation of the fair value of the acquired trade name as a critical audit matter.
The principal considerations for our determination that the valuation of the acquired trade name is a critical audit matter are that significant inputs and assumptions used to estimate the fair value of the trade name, including revenue growth rates, royalty rates, and the discount rate applied by the valuation specialist have a high degree of estimation uncertainty. This in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence related to the aforementioned inputs and assumptions.
Our audit procedures related to the estimation of the fair value of the acquired trade name of Olive & June included the following, among others.
•We tested the design and operating effectiveness of key controls relating to evaluating the fair value model for the trade name and the development of related assumptions such as the estimated revenue growth rates, royalty rates and the discount rate used in the valuation.
•We evaluated the qualifications and competence of valuation specialists engaged by the Company to assist in developing the estimated fair value of the trade name.
•We tested the mathematical accuracy of the fair value models utilized by the valuation specialists and by management in estimating the fair value of the trade name.
•We identified significant inputs and assumptions applied in the estimation of the fair value of the acquired trade name to determine whether the inputs and assumptions were relevant and complete in the circumstances and applied appropriately in the development of the fair value estimate.
•We evaluated the forecasted financial performance of the acquired business by comparing the projected amounts of revenue to actual historical performance or relevant industry data and reconciling significant differences.
•We utilized valuation specialists to evaluate the methodologies used, whether they were acceptable for the underlying fair value determinations and whether such methodologies had been applied appropriately; to evaluate the appropriateness of the discount rate used by developing an independent expectation; and to test the royalty rate applied in the estimation of fair value of the trade name.
Impairment of definite and indefinite-lived intangible assets and goodwill
As described further in Note 7 to the consolidated financial statements, management evaluates goodwill for impairment, at the reporting unit level, annually or more frequently if events or circumstances indicate the carrying value of a reporting unit that includes goodwill might exceed the fair value of that reporting unit. Due to the Company's sustained decline in stock price in the second quarter, an interim triggering event was identified. Further sustained declines and a revision of the Company's forecasted financial performance at year-end indicated additional quantitative testing was required as of year-end. As a result of the year-end quantitative testing, management concluded the fair value of the Drybar definite-lived trade name and Drybar reporting unit was impaired and recorded a $12.8 million and a $38.7 million impairment charge to Other intangible assets, net of accumulated amortization and Goodwill, respectively. We identified the estimation of the fair values of certain definite-lived trade names and trademark licenses totaling $90.0 million, indefinite-lived trade names totaling $54.0 million, and five reporting units' carrying value of goodwill totaling $861.9 million as a critical audit matter.
The principal considerations for our determination that the estimation of fair values of the definite and indefinite-lived intangible assets and reporting units is a critical audit matter are that there is high estimation uncertainty related to significant judgements and assumptions used to project the future cash flows, including revenue growth rates, royalty rates (as applicable to definite and indefinite-lived intangible assets), operating expenses, and discount rates. Changes in these assumptions could materially affect the estimated fair values. This in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence related to the aforementioned significant inputs and assumptions.
Our audit procedures related to the estimation of the fair values of the definite and indefinite-lived intangible assets and reporting units included the following, among others.
•We tested the design and operating effectiveness of controls related to the quantitative impairment assessments, including controls over the models and assumptions used in determining the fair values of the definite and indefinite-lived intangible assets and reporting units.
•We evaluated the qualifications and competence of the valuation specialist in developing the estimated fair value of each definite and indefinite-lived intangible asset and reporting unit.
•We tested the mathematical accuracy of the fair value models utilized by the valuation specialist.
•We identified significant inputs and assumptions applied in the estimation of the fair value of each reporting unit and evaluated whether the inputs and assumptions were complete and relevant in the circumstances and applied appropriately in the development of the fair value estimates.
•We evaluated the forecasted financial performance used as a basis for determining the fair value of each of the definite and indefinite-lived intangible assets and reporting units by comparing the projected amounts of revenue, operating expense and cash flows to actual historical performance or relevant industry data and reconciling significant differences.
•We reconciled the aggregate fair value of all of the Company's reporting units to the total enterprise value (market capitalization plus long-term debt) of the Company as of the testing date and reconciled any difference in value by comparing to representative control premiums.
•We utilized valuation specialists to evaluate: the methodologies used, whether they were acceptable for the underlying fair value determinations and whether such methodologies had been applied appropriately; the appropriateness of the discount rate and royalty rate used by the valuation specialist by developing an independent expectation.
/s/
We have served as the Company’s auditor since 2007.
April 24, 2025
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
| | | | | | | | | | | |
| (in thousands, except shares and par value) | February 28, 2025 | | February 29, 2024 |
| Assets | | | |
| Assets, current: | | | |
| Cash and cash equivalents | $ | | | | $ | | |
Receivables, less allowances of $ and $ | | | | | |
| Inventory | | | | | |
| Prepaid expenses and other current assets | | | | | |
| |
| Income taxes receivable | | | | | |
| |
| Total assets, current | | | | | |
| | | |
Property and equipment, net of accumulated depreciation of $ and $ | | | | | |
| Goodwill | | | | | |
Other intangible assets, net of accumulated amortization of $ and $ | | | | | |
| Operating lease assets | | | | | |
| Deferred tax assets, net | | | | | |
| Other assets | | | | | |
| |
| Total assets | $ | | | | $ | | |
| | | |
| Liabilities and Stockholders' Equity | | | |
| Liabilities, current: | | | |
| Accounts payable | $ | | | | $ | | |
| Accrued expenses and other current liabilities | | | | | |
| Income taxes payable | | | | | |
| Long-term debt, current maturities | | | | | |
| |
| Total liabilities, current | | | | | |
| | | |
| Long-term debt, excluding current maturities | | | | | |
| Lease liabilities, non-current | | | | | |
| Deferred tax liabilities, net | | | | | |
| Other liabilities, non-current | | | | | |
| Total liabilities | | | | | |
| | | |
| Commitments and contingencies | | | |
| | | |
| Stockholders' equity: | | | |
Cumulative preferred stock, non-voting, $ par. Authorized shares; issued | | | | | |
Common stock, $ par. Authorized shares; and shares issued and outstanding | | | | | |
| Additional paid in capital | | | | | |
| Accumulated other comprehensive income | | | | | |
| Retained earnings | | | | | |
| Total stockholders' equity | | | | | |
| Total liabilities and stockholders' equity | $ | | | | $ | | |
See accompanying notes to consolidated financial statements.
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Income
| | | | | | | | | | | | | | | | | |
| | Fiscal Years Ended Last Day of February, |
| (in thousands, except per share data) | 2025 | | 2024 | | 2023 |
| Sales revenue, net | $ | | | | $ | | | | $ | | |
| Cost of goods sold | | | | | | | | |
| Gross profit | | | | | | | | |
| | | | | |
| Selling, general and administrative expense (“SG&A”) | | | | | | | | |
| Asset impairment charges | | | | | | | | |
| Restructuring charges | | | | | | | | |
| Operating income | | | | | | | | |
| | | | | |
| Non-operating income, net | | | | | | | | |
| Interest expense | | | | | | | | |
| Income before income tax | | | | | | | | |
| | | | | |
Income tax (benefit) expense | () | | | | | | | |
|
|
| Net income | $ | | | | $ | | | | $ | | |
| | | | | |
| Earnings per share (“EPS”): | | | | | |
|
|
| Basic | $ | | | | $ | | | | $ | | |
|
|
|
|
| Diluted | | | | | | | | |
| | | | | |
| Weighted average shares used in computing EPS: | | | | | |
| Basic | | | | | | | | |
| Diluted | | | | | | | | |
See accompanying notes to consolidated financial statements.
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
| | | | | | | | | | | | | | | | | |
| | Fiscal Years Ended Last Day of February, |
| (in thousands) | 2025 | | 2024 | | 2023 |
| Net income | $ | | | | $ | | | | $ | | |
Other comprehensive income (loss), net of tax: | | | | | |
| Cash flow hedge activity - interest rate swaps | () | | | () | | | | |
| Cash flow hedge activity - foreign currency contracts | | | | () | | | () | |
Total other comprehensive income (loss), net of tax | | | | () | | | | |
| Comprehensive income | $ | | | | $ | | | | $ | | |
See accompanying notes to consolidated financial statements.
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
| | | | | | | | | | | | | | | | | | | | |
| Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive Income | Retained Earnings | Total Stockholders' Equity |
| (in thousands, including shares) | Shares | Par
Value |
| Balances at February 28, 2022 | | | $ | | | $ | | | $ | | | $ | | | $ | | |
| Net income | — | | — | | — | | — | | | | | |
| |
| Other comprehensive income, net of tax | — | | — | | — | | | | — | | | |
| Exercise of stock options | | | | | | | — | | — | | | |
| Issuance and settlement of restricted stock | | | | | () | | — | | — | | | |
| Issuance of common stock related to stock purchase plan | | | | | | | — | | — | | | |
| |
| Common stock repurchased and retired | () | | () | | () | | — | | () | | () | |
| Share-based compensation | — | | — | | | | — | | — | | | |
| |
| Balances at February 28, 2023 | | | $ | | | $ | | | $ | | | $ | | | $ | | |
| |
| Net income | — | | — | | — | | — | | | | | |
| |
| Other comprehensive loss, net of tax | — | | — | | — | | () | | — | | () | |
| Exercise of stock options | | | | | | | — | | — | | | |
| Issuance and settlement of restricted stock | | | | | () | | — | | — | | | |
| Issuance of common stock related to stock purchase plan | | | | | | | — | | — | | | |
| |
| Common stock repurchased and retired | () | | () | | () | | — | | () | | () | |
| Share-based compensation | — | | — | | | | — | | — | | | |
| |
| Balances at February 29, 2024 | | | $ | | | $ | | | $ | | | $ | | | $ | | |
| |
| Net income | — | | — | | — | | — | | | | | |
| |
| Other comprehensive income, net of tax | — | | — | | — | | | | — | | | |
| Exercise of stock options | | | | | | | — | | — | | | |
| Issuance and settlement of restricted stock | | | | | () | | — | | — | | | |
| Issuance of common stock related to stock purchase plan | | | | | | | — | | — | | | |
| |
| Common stock repurchased and retired | () | | () | | () | | — | | () | | () | |
| Share-based compensation | — | | — | | | | — | | — | | | |
| |
| Balances at February 28, 2025 | | | $ | | | $ | | | $ | | | $ | | | $ | | |
See accompanying notes to consolidated financial statements.
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
| | | | | | | | | | | | | | | | | |
| | Fiscal Years Ended Last Day of February, |
| (in thousands) | 2025 | | 2024 | | 2023 |
| Cash provided by operating activities: | | | | | |
| Net income | $ | | | | $ | | | | $ | | |
|
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | | | | | | | | |
| Amortization of financing costs | | | | | | | | |
| Non-cash operating lease expense | | | | | | | | |
| Provision for credit losses | () | | | | | | | |
| Non-cash share-based compensation | | | | | | | | |
Non-cash restructuring charges | | | | | | | | |
| Asset impairment charges | | | | | | | | |
| Loss on extinguishment of debt | | | | | | | | |
| Gain on sale of distribution and office facilities | | | | () | | | | |
| Gain on sale of Personal Care business | | | | | | | () | |
(Gain) loss on the sale or disposal of property and equipment | () | | | () | | | | |
| Deferred income taxes and tax credits | () | | | | | | () | |
| Changes in operating capital, net of effects of acquisition of businesses: | | | | | |
| Receivables | () | | | () | | | | |
| Inventory | () | | | | | | | |
| Prepaid expenses and other current assets | | | | () | | | | |
| Other assets and liabilities, net | | | | () | | | () | |
| Accounts payable | | | | | | | () | |
| Accrued expenses and other current liabilities | () | | | () | | | () | |
| Accrued income taxes | | | | | | | () | |
|
|
| Net cash provided by operating activities | | | | | | | | |
| | | | | |
Cash (used) provided by investing activities: | | | | | |
| Capital and intangible asset expenditures | () | | | () | | | () | |
| Net payments to acquire businesses, net of cash acquired | () | | | | | | () | |
Payments for purchases of U.S. Treasury Bills | () | | | () | | | | |
Proceeds from maturity of U.S. Treasury Bills | | | | | | | | |
Proceeds from sale of distribution and office facilities | | | | | | | | |
| Proceeds from sale of Personal Care business | | | | | | | | |
| Proceeds from the sale of property and equipment | | | | | | | | |
Payment for promissory note | () | | | | | | | |
|
|
Net cash (used) provided by investing activities | () | | | | | | () | |
| | | | | |
Cash provided (used) by financing activities: | | | | | |
| Proceeds from revolving loans | | | | | | | | |
| Repayment of revolving loans | () | | | () | | | () | |
| Proceeds from term loans | | | | | | | | |
| Repayment of long-term debt | () | | | () | | | () | |
| Payment of financing costs | () | | | () | | | () | |
| Proceeds from share issuances under share-based compensation plans | | | | | | | | |
|
| Payments for repurchases of common stock | () | | | () | | | () | |
|
|
Net cash provided (used) by financing activities | | | | () | | | | |
| | | | | |
Net increase (decrease) in cash and cash equivalents | | | | () | | | () | |
| Cash and cash equivalents, beginning balance | | | | | | | | |
| Cash and cash equivalents, ending balance | $ | | | | $ | | | | $ | | |
|
|
| | | | | |
| Supplemental cash flow information: | | | | | |
| Interest paid | $ | | | | $ | | | | $ | | |
| Income taxes paid, net of refunds | | | | | | | | |
| | | | | |
| Supplemental non-cash investing activity: | | | | | |
Capital expenditures included in accounts payable and accrued expenses | | | | | | | | |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. Dollars, except share and per share data, unless indicated otherwise)
per share, as “common stock.” References to “fiscal” in connection with a numeric year number denotes our fiscal year ending on the last day of February, during the year number listed. References to “the FASB” refer to the Financial Accounting Standards Board. References to “GAAP” refer to accounting principles generally accepted in the United States of America (the “U.S.”). References to “ASU” refer to the codification of GAAP in the Accounting Standards Updates issued by the FASB. References to “ASC” refer to the codification of GAAP in the Accounting Standards Codification issued by the FASB.
We incorporated as Helen of Troy Corporation in Texas in 1968 and were reorganized as Helen of Troy Limited in Bermuda in 1994. We are a leading global consumer products company offering creative products and solutions for our customers through a diversified portfolio of brands. Our portfolio of brands includes OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon, and Olive & June, among others. As of February 28, 2025, we operated reportable segments: Home & Outdoor and Beauty & Wellness.
Our Home & Outdoor segment offers a broad range of outstanding world-class brands that help consumers enjoy everyday living inside their homes and outdoors. Our innovative products for home activities include food preparation and storage, cooking, cleaning, organization, and beverage service. Our outdoor performance range, on-the-go food storage, and beverageware includes lifestyle hydration products, coolers and food storage solutions, backpacks, and travel gear. The Beauty & Wellness segment provides consumers with a broad range of outstanding world-class brands for beauty and wellness. In Beauty, we deliver innovation through products such as hair styling appliances, grooming tools, liquid and aerosol personal care products and nail care solutions that help consumers look and feel more beautiful. In Wellness, we are there when you need us most with highly regarded humidifiers, thermometers, water and air purifiers, heaters, and fans.
Our business is seasonal due to different calendar events, holidays and seasonal weather and illness patterns. Our fiscal reporting period ends on the last day in February. Historically, our highest sales volume and operating income occur in our third fiscal quarter ending November 30th. We purchase our products from unaffiliated manufacturers, most of which are located in China, Mexico, Vietnam and the U.S.
During fiscal 2023, we initiated a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs (referred to as “Project Pegasus”). See Note 11 for additional information.
On December 16, 2024, we completed the acquisition of Olive & June, LLC (“Olive & June”), an innovative, omni-channel nail care brand. Olive & June products deliver a salon-quality experience at home and include nail polish, press-on nails, manicure and pedicure systems, grooming tools and nail care essentials. The Olive & June brand and products were added to the Beauty & Wellness segment. The total purchase consideration consists of initial cash consideration of $ million, net of cash acquired, which included a preliminary net working capital adjustment and is subject to certain customary
million subject to Olive & June's performance during calendar years 2025, 2026, and 2027, payable annually. See Note 6 for additional information.
On April 22, 2022, we completed the acquisition of Recipe Products Ltd., a producer of innovative prestige hair care products for all types of curly and wavy hair under the Curlsmith brand (“Curlsmith”). The Curlsmith brand and products were added to the Beauty & Wellness segment. The total purchase consideration was $ million in cash, net of a final net working capital adjustment and cash acquired. See Note 6 for additional information.
During fiscal 2023, we divested certain assets within our Beauty & Wellness segment's Latin America and Caribbean mass channel personal care business, which included liquid, powder and aerosol products under brands such as Pert, Brut, Sure and Infusium (“Personal Care”) to HRB Brands LLC, for $ million in cash and recognized a gain on the sale in SG&A totaling $ million. The net assets sold included inventory, certain net trade receivables, fixed assets and certain accrued sales discounts and allowances relating to our Personal Care business.
Principles of Consolidation
The accompanying consolidated financial statements are prepared in accordance with GAAP and include all of our subsidiaries. Our consolidated financial statements are prepared in U.S. Dollars. All intercompany balances and transactions are eliminated in consolidation.
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results may differ materially from those estimates.
We have a significant concentration of credit risk with three major customers at February 28, 2025 representing approximately %, %, and % of our gross trade receivables, respectively. As of February 29, 2024, our significant concentration of credit risk with three major customers represented approximately %, %, and % of our gross trade receivables, respectively. In addition, as of February 28, 2025 and February 29, 2024, approximately % and % of our gross trade receivables were due from our five top customers, respectively.
million, $ million, and $ million of such general and administrative expenses into inventory during fiscal 2025, 2024 and 2023, respectively. We estimate that $ million and $ million of general and administrative expenses directly attributable to the procurement of inventory were included in our inventory balances on hand at February 28, 2025 and February 29, 2024, respectively.
The “Cost of goods sold” line item in the consolidated statements of income is comprised of the book value of inventory sold to customers during the reporting period and depreciation expense of tooling, molds and other production equipment. When circumstances dictate that we use net realizable value as the basis for recording inventory, we base our estimates on expected future selling prices less expected disposal costs.
For both fiscal 2025 and 2024, finished goods purchased from vendors in Asia comprised approximately % of total finished goods purchased compared to % for fiscal 2023. For fiscal 2025, 2024 and 2023, finished goods purchased from vendors in China comprised approximately %, % and %, respectively, of total finished goods purchased. During fiscal 2025, we had two vendors (located in China) who each fulfilled approximately % of our product requirements compared to two vendors (located in China) who fulfilled approximately % and % for fiscal 2024. During fiscal 2023, we had two vendors (located in China) who each fulfilled approximately % of our product requirements. Additionally, during fiscal 2025, we had one vendor (located in Mexico) who fulfilled approximately % of our product requirements compared to approximately % and % for fiscal 2024 and 2023, respectively. For fiscal 2025, 2024, and 2023, our top two vendors combined fulfilled approximately %, %, and % of our product requirements, respectively. For fiscal 2025, 2024 and 2023, our top five vendors fulfilled approximately %, %, and % of our product requirements, respectively.
%, %, and % of consolidated net sales revenue for fiscal 2025, 2024 and 2023, respectively. During fiscal 2025, license agreement accounted for net sales revenue of approximately % of consolidated net sales revenue. No other trademark license agreements had associated net sales revenue that accounted for 10% or more of consolidated net sales revenue.
We also sell products under trade names that we own for which we have registered trademarks. Trade names that we acquire through acquisition from other entities are generally recorded on our consolidated balance sheets based upon the appraised fair value of the acquired asset, net of any accumulated amortization and impairment charges. Costs associated with developing trade names internally are recorded as expenses in the period incurred. In certain instances where trade names have readily determinable useful lives, we amortize their costs on a straight-line basis over such lives. In some instances, we have determined that such acquired assets have an indefinite useful life. In these cases, no amortization is recorded. Patents acquired through acquisition, if material, are recorded on our consolidated balance sheets based upon the appraised value of the acquired patents and amortized over the remaining life of the patent. Additionally, we incur certain costs in connection with the design and development of products to be covered by patents, which are capitalized as incurred and amortized on a straight-line basis over the life of the patent in the jurisdiction filed, typically to years.
Other intangible assets include customer relationships, customer lists and non-compete agreements that we acquired. These are recorded on our consolidated balance sheets based upon the fair value of the acquired asset and amortized on a straight-line basis over the remaining life of the asset as determined either by a third-party appraisal or the term of any controlling agreements.
reportable segments, Home & Outdoor and Beauty &Wellness, which are comprised of reporting units, one of which does not have any goodwill
recorded. If the results of the qualitative assessment indicate that it is more likely than not that the assets are impaired, further steps are required in order to determine whether the carrying value of each reporting unit and indefinite-lived intangible assets exceeds its fair market value. An impairment charge is recognized to the extent the goodwill or indefinite-lived intangible asset recorded exceeds the reporting unit’s or asset's fair value. We perform our annual impairment testing for goodwill and indefinite-lived intangible assets as of the beginning of the fourth quarter of our fiscal year (see Note 7).
We review intangible assets with definite lives and long-lived assets held and used if a triggering event occurs during the reporting period. If such circumstances or conditions exist, further steps are required in order to determine whether the carrying value of each of the individual assets exceeds its fair market value. If our analysis indicates that an individual asset’s carrying value does exceed its fair market value, the next step is to record a loss equal to the excess of the individual asset’s carrying value over its fair value. We evaluate any long-lived assets held for sale quarterly to determine if estimated fair value less cost to sell has changed during the reporting period.
The assumptions and estimates used in our impairment testing involve significant elements of subjective judgment and analysis by management. While we believe that the estimates and assumptions we use are reasonable at the time made, changes in business conditions or other unanticipated events and circumstances may occur that cause actual results to differ materially from projected results and this could potentially require future adjustments to our asset valuations.
to years for trademark licenses, to years for trade names, to years for customer relationships and lists, and to years for other definite-lived intangible assets (see Note 7).
See Notes 14, 15 and 16 for more information on our fair value measurements, investments and derivatives.
, which are accounted for as variable consideration. We recognize an accrual for sales returns to reduce sales to reflect our best estimate of future customer returns, determined principally based on historical experience and specific allowances for known pending returns.Certain customers may receive cash incentives such as customer, trade, and advertising discounts as well as other customer-related programs, which are also accounted for as variable consideration. In some cases, we apply judgment, such as contractual rates and historical payment trends, when estimating variable consideration. Most of our variable consideration is classified as a reduction to net sales. In instances when we purchase a distinct good or service from our customer and fair value can be reasonably estimated, these amounts are expensed in our consolidated statements of income in SG&A. The amount of consideration granted to customers recorded in SG&A was $ million, $ million, and $ million for fiscal 2025, 2024 and 2023, respectively.
Sales taxes and other similar taxes are excluded from revenue. We have elected to account for shipping and handling activities as a fulfillment cost as permitted by the guidance. We generally do not have unsatisfied performance obligations since our performance obligations are satisfied at a single point in time.
We incurred total advertising costs of $ million, $ million, and $ million during fiscal 2025, 2024 and 2023, respectively, which is inclusive of the amounts described above for consideration granted to customers.
We incurred total research and development expenses of $ million, $ million, and $ million during fiscal 2025, 2024 and 2023, respectively.
Our net expense for shipping and handling was $ million, $ million, and $ million during fiscal 2025, 2024 and 2023, respectively.
See Note 8 for further information on our share-based compensation plans.
year to years. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term. We do not recognize leases with an initial term of twelve months or less on the balance sheet and instead recognize the related lease payments as expense in the consolidated statements of income on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease component for all asset classes. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Operating lease expense recognized within SG&A in the consolidated statements of income was $ million, $ million and $ million for fiscal 2025, 2024 and 2023, respectively, and includes short-term lease expense of $ million, $ million and $ million for fiscal 2025, 2024 and 2023, respectively. The non-cash component of lease expense is included as an adjustment to reconcile net income to net cash provided by operating activities in the consolidated statements of cash flows.
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