UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission File Number: 001-14669

HELEN OF TROY LIMITED

(Exact name of registrant as specified in its charter)

Bermuda	74-2692550
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

Clarendon House

2 Church Street

Hamilton, Bermuda

(Address of principal executive offices)

1 Helen of Troy Plaza

El Paso, Texas 79912

(Registrant's United States Mailing Address) (Zip Code)

(915) 225-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $0.10 par value per share	HELE	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of October 3, 2024, there were 22,851,622 common shares, $0.10 par value per share, outstanding.

HELEN OF TROY LIMITED AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Note 1 - Basis of Presentation and Related Information	7
	Note 2 - New Accounting Pronouncements	8
	Note 3 - Accrued Expenses and Other Current Liabilities	8
	Note 4 - Share-Based Compensation Plans	9
	Note 5 - Repurchases of Common Stock	9
	Note 6 - Restructuring Plan	10
	Note 7 - Commitments and Contingencies	12
	Note 8 - Long-Term Debt	13
	Note 9 - Fair Value	14
	Note 10 - Financial Instruments and Risk Management	16
	Note 11 - Accumulated Other Comprehensive Income (Loss)	19
	Note 12 - Segment and Geographic Information	19
	Note 13 - Income Taxes	20
	Note 14 - Earnings Per Share	21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
SIGNATURES		50

1

PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except shares and par value)	August 31, 2024		February 29, 2024
Assets
Assets, current:
Cash and cash equivalents	$	20,137	$	18,501
Receivables, less allowances of $7,438 and $7,481	365,675		394,536
Inventory	469,625		395,995
Prepaid expenses and other current assets	29,909		27,012
Income taxes receivable	15,289		7,874
Total assets, current	900,635		843,918
Property and equipment, net of accumulated depreciation of $186,489 and $169,021	331,496		336,646
Goodwill	1,066,730		1,066,730
Other intangible assets, net of accumulated amortization of $195,941 and $186,882	528,511		536,696
Operating lease assets	34,707		35,962
Deferred tax assets, net	3,811		3,662
Other assets	14,487		15,008
Total assets	$	2,880,377	$	2,838,622
Liabilities and Stockholders' Equity
Liabilities, current:
Accounts payable	$	323,256	$	245,349
Accrued expenses and other current liabilities	163,684		181,391
Income taxes payable	13,943		17,821
Long-term debt, current maturities	7,813		6,250
Total liabilities, current	508,696		450,811
Long-term debt, excluding current maturities	705,422		659,421
Lease liabilities, non-current	37,056		37,262
Deferred tax liabilities, net	49,347		41,253
Other liabilities, non-current	12,276		12,433
Total liabilities	1,312,797		1,201,180
Commitments and contingencies
Stockholders' equity:
Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; none issued	—		—
Common stock, $0.10 par. Authorized 50,000,000 shares; 22,814,811 and 23,751,258 shares issued and outstanding	2,281		2,375
Additional paid in capital	355,578		348,739
Accumulated other comprehensive (loss) income	(1,515)		2,099
Retained earnings	1,211,236		1,284,229
Total stockholders' equity	1,567,580		1,637,442
Total liabilities and stockholders' equity	$	2,880,377	$	2,838,622

See accompanying notes to condensed consolidated financial statements.

2

HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited) 

	Three Months Ended August 31,				Six Months Ended August 31,
(in thousands, except per share data)	2024		2023		2024		2023
Sales revenue, net	$	474,221	$	491,563	$	891,068	$	966,235
Cost of goods sold	258,151		261,910		471,919		520,951
Gross profit	216,070		229,653		419,149		445,284
Selling, general and administrative expense (“SG&A”)	179,692		179,191		350,173		346,826
Restructuring charges	1,526		3,617		3,361		10,972
Operating income	34,852		46,845		65,615		87,486
Non-operating income, net	170		148		270		285
Interest expense	13,216		13,654		25,759		27,706
Income before income tax	21,806		33,339		40,126		60,065
Income tax expense	4,792		5,958		16,908		10,103
Net income	$	17,014	$	27,381	$	23,218	$	49,962
Earnings per share (“EPS”):
Basic	$	0.75	$	1.14	$	1.00	$	2.08
Diluted	0.74		1.14		1.00		2.07
Weighted average shares used in computing EPS:
Basic	22,814		23,918		23,169		23,984
Diluted	22,839		24,041		23,236		24,088

See accompanying notes to condensed consolidated financial statements.

3

HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited) 

	Three Months Ended August 31,				Six Months Ended August 31,
(in thousands)	2024		2023		2024		2023
Net income	$	17,014	$	27,381	$	23,218	$	49,962
Other comprehensive (loss) income, net of tax:
Cash flow hedge activity - interest rate swaps	(3,446)		2,768		(2,521)		(324)
Cash flow hedge activity - foreign currency contracts	(866)		(314)		(1,093)		(937)
Total other comprehensive (loss) income, net of tax	(4,312)		2,454		(3,614)		(1,261)
Comprehensive income	$	12,702	$	29,835	$	19,604	$	48,701

See accompanying notes to condensed consolidated financial statements.

4

HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

	Common Stock			Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders' Equity
(in thousands, including shares)	Shares	Par Value
Balances at February 28, 2023	23,994	$	2,399	$	317,277	$	4,947	$	1,164,188	$	1,488,811
Net income	—	—		—		—		22,581		22,581
Other comprehensive loss, net of tax	—	—		—		(3,715)		—		(3,715)
Exercise of stock options	5	1		211		—		—		212
Issuance and settlement of restricted stock	120	12		(12)		—		—		—
Issuance of common stock related to stock purchase plan	23	2		2,166		—		—		2,168
Common stock repurchased and retired	(45)	(4)		(4,442)		—		—		(4,446)
Share-based compensation	—	—		9,297		—		—		9,297
Balances at May 31, 2023	24,097	$	2,410	$	324,497	$	1,232	$	1,186,769	$	1,514,908
Net income	—	—		—		—		27,381		27,381
Other comprehensive income, net of tax	—	—		—		2,454		—		2,454
Issuance and settlement of restricted stock	4	—		—		—		—		—
Common stock repurchased and retired	(382)	(38)		(1,499)		—		(48,552)		(50,089)
Share-based compensation	—	—		7,229		—		—		7,229
Balances at August 31, 2023	23,719	$	2,372	$	330,227	$	3,686	$	1,165,598	$	1,501,883

Balances at February 29, 2024	23,751	$	2,375	$	348,739	$	2,099	$	1,284,229	$	1,637,442
Net income	—	—		—		—		6,204		6,204
Other comprehensive income, net of tax	—	—		—		698		—		698
Exercise of stock options	6	1		351		—		—		352
Issuance and settlement of restricted stock	71	7		(7)		—		—		—
Issuance of common stock related to stock purchase plan	19	2		2,004		—		—		2,006
Common stock repurchased and retired	(1,037)	(104)		(6,720)		—		(96,211)		(103,035)
Share-based compensation	—	—		5,833		—		—		5,833
Balances at May 31, 2024	22,810	$	2,281	$	350,200	$	2,797	$	1,194,222	$	1,549,500
Net income	—	—		—		—		17,014		17,014
Other comprehensive loss, net of tax	—	—		—		(4,312)		—		(4,312)
Issuance and settlement of restricted stock	6	—		—		—		—		—
Common stock repurchased and retired	(1)	—		(109)		—		—		(109)
Share-based compensation	—	—		5,487		—		—		5,487
Balances at August 31, 2024	22,815	$	2,281	$	355,578	$	(1,515)	$	1,211,236	$	1,567,580

See accompanying notes to condensed consolidated financial statements.

5

HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended August 31,
(in thousands)	2024		2023
Cash provided by operating activities:
Net income	$	23,218	$	49,962
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27,628		24,606
Amortization of financing costs	639		616
Non-cash operating lease expense	5,840		3,941
Provision for credit losses	112		3,671
Non-cash share-based compensation	11,320		16,526
Gain on the sale or disposal of property and equipment	(29)		(246)
Deferred income taxes and tax credits	9,039		6,845
Changes in operating capital:
Receivables	26,340		(14,427)
Inventory	(73,630)		19,804
Prepaid expenses and other current assets	(5,805)		(5,391)
Other assets and liabilities, net	(441)		(253)
Accounts payable	78,922		71,990
Accrued expenses and other current liabilities	(22,529)		(10,317)
Accrued income taxes	(10,708)		(9,595)
Net cash provided by operating activities	69,916		157,732
Cash used by investing activities:
Capital and intangible asset expenditures	(14,026)		(20,557)
Payments for purchases of U.S. Treasury Bills	(1,363)		—
Proceeds from maturity of U.S. Treasury Bills	1,249		—
Proceeds from the sale of property and equipment	39		246
Net cash used by investing activities	(14,101)		(20,311)
Cash used by financing activities:
Proceeds from revolving loans	509,930		261,150
Repayment of revolving loans	(459,880)		(348,150)
Repayment of long-term debt	(3,125)		(3,125)
Payment of financing costs	(318)		—
Proceeds from share issuances under share-based compensation plans	2,358		2,380
Payments for repurchases of common stock	(103,144)		(54,535)
Net cash used by financing activities	(54,179)		(142,280)
Net increase (decrease) in cash and cash equivalents	1,636		(4,859)
Cash and cash equivalents, beginning balance	18,501		29,073
Cash and cash equivalents, ending balance	$	20,137	$	24,214
Supplemental non-cash investing activity:
Capital expenditures included in accounts payable and accrued expenses	$	7,767	$	2,790

See accompanying notes to condensed consolidated financial statements.

6

HELEN OF TROY LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

August 31, 2024

Note 1 - Basis of Presentation and Related Information

Corporate Overview

The accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly our consolidated financial position as of August 31, 2024 and February 29, 2024, and the results of our consolidated operations for the interim periods presented. We follow the same accounting policies when preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the consolidated financial statements and the notes included in our latest annual report on Form 10-K for the fiscal year ended February 29, 2024 (“Form 10-K”), and our other reports on file with the Securities and Exchange Commission (the “SEC”).

When used in these notes, unless otherwise indicated or the context suggests otherwise, references to “the Company”, “our Company”, “Helen of Troy”, “we”, “us”, or “our” refer to Helen of Troy Limited and its subsidiaries, which are all wholly-owned. We refer to our common shares, par value $0.10 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 include OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith and Revlon, among others. As of August 31, 2024, we operated two reportable segments: Home & Outdoor and Beauty & Wellness.

Our Home & Outdoor segment offers a broad range of outstanding world-class brands that help consumers enjoy everyday living inside their homes and outdoors. Our innovative products for home activities include food preparation and storage, cooking, cleaning, organization, and beverage service. Our outdoor performance range, on-the-go food storage, and beverageware includes lifestyle hydration products, coolers and food storage solutions, backpacks, and travel gear. The Beauty & Wellness segment provides consumers with a broad range of outstanding world-class brands for beauty and wellness. In Beauty, we deliver innovation through products such as hair styling appliances, grooming tools, and liquid and aerosol personal care products that help consumers look and feel more beautiful. In Wellness, we are there when you need us most with highly regarded humidifiers, thermometers, water and air purifiers, heaters, and fans.

Our business is seasonal due to different calendar events, holidays and seasonal weather and illness patterns. Our fiscal reporting period ends on the last day in February. Historically, our highest sales volume and operating income occur in our third fiscal quarter ending November 30th. We purchase our products from unaffiliated manufacturers, most of which are located in China, Mexico, Vietnam and the U.S.

7

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 6 for additional information.

Principles of Consolidation

The accompanying condensed consolidated financial statements are prepared in accordance with GAAP and include all of our subsidiaries. Our condensed 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 condensed consolidated financial statements and accompanying notes. Actual results may differ materially from those estimates.

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 have and may continue to adversely impact our sales, results of operations and cash flows. These factors are 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 to perform quantitative impairment testing on our indefinite-lived trademark licenses and trade names and our definite-lived trademark licenses, trade names, and customer lists. We performed quantitative impairment testing on our goodwill and intangible assets described above and determined none were impaired. Accordingly, no impairment charges were recorded. For additional information, refer to “Critical Accounting Policies and Estimates” in Item 2., “Management's Discussion and Analysis of Financial Condition and Results of Operations”.

Note 2 - New Accounting Pronouncements

There have been no changes in the information provided in our Form 10-K.

Note 3 - Accrued Expenses and Other Current Liabilities

A summary of accrued expenses and other current liabilities was as follows:

(in thousands)	August 31, 2024		February 29, 2024
Accrued compensation, benefits and payroll taxes	$	19,740	$	36,572
Accrued sales discounts and allowances	39,984		37,851
Accrued sales returns	20,910		21,282
Accrued advertising	27,503		29,212
Other	55,547		56,474
Total accrued expenses and other current liabilities	$	163,684	$	181,391

8

Note 4 - Share-Based Compensation Plans

As part of our compensation structure, we grant share-based compensation awards to certain employees and non-employee members of our Board of Directors during the fiscal year. These awards may be subject to attainment of certain service conditions, performance conditions and/or market conditions. During the first quarter of fiscal 2025, we granted 94,900 service condition awards (“Service Condition Awards”) with a weighted average grant date fair value of $124.37. Additionally, we granted 157,797 performance-based awards during the first quarter of fiscal 2025, of which 94,586 contained performance conditions (“Performance Condition Awards”) and 63,211 contained market conditions (“Market Condition Awards”), with weighted average grant date fair values of $124.37 and $91.19, respectively. Refer to our Form 10-K for further information on the Company's share-based compensation plans.

We recorded share-based compensation expense in SG&A as follows:

	Three Months Ended August 31,				Six Months Ended August 31,
(in thousands)	2024		2023		2024		2023
Directors stock compensation	$	196	$	196	$	392	$	393
Service Condition Awards	2,826		2,878		5,394		6,198
Performance Condition Awards	1,093		1,113		2,140		3,136
Market Condition Awards	1,372		3,042		2,767		6,189
Employee stock purchase plan	—		—		627		610
Share-based compensation expense	5,487		7,229		11,320		16,526
Less: income tax benefits	(221)		(385)		(485)		(1,026)
Share-based compensation expense, net of income tax benefits	$	5,266	$	6,844	$	10,835	$	15,500

Unrecognized Share-Based Compensation Expense

As of August 31, 2024, our total unrecognized share-based compensation for all awards was $27.7 million, which will be recognized over a weighted average amortization period of 2.3 years. The total unrecognized share-based compensation reflects an estimate of target achievement for Performance Condition Awards granted during fiscal 2025 and fiscal 2024 and an estimate of zero percent of target achievement for Performance Condition Awards granted during fiscal 2023.

Note 5 - Repurchases of Common Stock

In August 2024, our Board of Directors authorized the repurchase of up to $500 million of our outstanding common stock. The authorization became effective August 20, 2024, for a period of three years, and replaced our former repurchase authorization, of which approximately $245.3 million remained. As of August 31, 2024, substantially all of our new repurchase authorization of $500.0 million remained available.

Our current equity-based compensation plans include provisions that allow for the “net exercise” of share-settled awards by all plan participants. In a net exercise, any required payroll taxes, federal withholding taxes and exercise price of the shares due from the option or other share-based award holders are settled by having the holder tender back to us a number of shares at fair value equal to the amounts due. Net exercises are treated as purchases and retirements of shares.

9

The following table summarizes our share repurchase activity for the periods shown:

	Three Months Ended August 31,				Six Months Ended August 31,
(in thousands, except share and per share data)	2024		2023		2024		2023
Common stock repurchased on the open market:
Number of shares	—		381,200		1,011,243		381,200
Aggregate value of shares	$	—	$	50,006	$	100,019	$	50,006
Average price per share	$	—	$	131.18	$	98.91	$	131.18
Common stock received in connection with share-based compensation:
Number of shares	1,403		765		26,775		45,397
Aggregate value of shares	$	109	$	83	$	3,125	$	4,529
Average price per share	$	78.07	$	108.00	$	116.72	$	99.75

Note 6 - Restructuring Plan

During fiscal 2023, we initiated Project Pegasus, a global restructuring plan intended to expand operating margins through initiatives designed to improve efficiency and effectiveness and reduce costs. Project Pegasus includes initiatives to further optimize our brand portfolio, streamline and simplify the organization, accelerate and amplify cost of goods savings projects, enhance the efficiency of our supply chain network, optimize our indirect spending and improve our cash flow and working capital, as well as other activities. We anticipate these initiatives will create operating efficiencies, as well as provide a platform to fund future growth investments.

During the fourth quarter of fiscal 2023, we made changes to the structure of our organization. These changes resulted in our previous Health & Wellness and Beauty operating segments being combined into a single reportable segment, the creation of a North America Regional Market Organization (“RMO”) responsible for sales and go-to-market strategies for all categories and channels in the U.S. and Canada, and further centralization of certain functions under shared services, particularly in operations and finance to better support our business segments and RMOs. This new structure reduced the size of our global workforce by approximately 10%. We believe that these changes better focus business segment resources on brand development, consumer-centric innovation and marketing, the RMOs on sales and go to market strategies, and shared services on their respective areas of expertise while also creating a more efficient and effective organizational structure.

During the second quarter of fiscal 2024, we announced plans to geographically consolidate the U.S. Beauty business, currently located in El Paso, Texas, and Irvine, California, and co-locate it with our Wellness business in the Boston, Massachusetts area. This geographic consolidation and relocation is the next step in our initiative to streamline and simplify the organization and is expected to be completed during fiscal 2025. We expect these changes will enable a greater opportunity to capture synergies and enhance collaboration and innovation within the Beauty & Wellness segment.

As previously disclosed, we continue to have the following expectations regarding Project Pegasus charges:

•Total one-time pre-tax restructuring charges of approximately $50 million to $55 million over the duration of the plan, expected to be completed during fiscal 2025.

•Pre-tax restructuring charges to be comprised of approximately $15 million to $19 million of severance and employee related costs, $28 million of professional fees, $3 million to $4 million of contract termination costs, and $4 million of other exit and disposal costs.

•All of our operating segments and shared services will be impacted by the plan and pre-tax restructuring charges include approximately $16 million to $17 million in Home & Outdoor and $34 million to $38 million in Beauty & Wellness.

10

•Pre-tax restructuring charges represent primarily cash expenditures, which are expected to be substantially paid by the end of fiscal 2025.

We also continue to have the following expectations regarding Project Pegasus savings:

•Targeted annualized pre-tax operating profit improvements of approximately $75 million to $85 million, which began in fiscal 2024 and we expect to be substantially achieved by the end of fiscal 2027.

•Estimated cadence of the recognition of the savings will be approximately 25% in fiscal 2024, which was achieved, approximately 35% in fiscal 2025, approximately 25% in fiscal 2026 and approximately 15% in fiscal 2027.

•Total profit improvements to be realized approximately 60% through reduced cost of goods sold and 40% through lower SG&A.

During the three and six month periods ended August 31, 2024, we incurred $1.5 million and $3.4 million, respectively, of pre-tax restructuring costs in connection with Project Pegasus, which were recorded as “Restructuring charges” in the condensed consolidated statements of income. We recognized $3.6 million and $11.0 million of pre-tax restructuring costs during the three and six month periods ended August 31, 2023, respectively, in connection with Project Pegasus.

The following tables summarize restructuring charges recorded as a result of Project Pegasus for the periods presented:

	Three Months Ended August 31, 2024
(in thousands)	Home & Outdoor		Beauty & Wellness		Total
Severance and employee related costs	$	250	$	541	$	791
Professional fees	268		315		583
Contract termination	—		—		—
Other	—		152		152
Total restructuring charges	$	518	$	1,008	$	1,526

	Three Months Ended August 31, 2023
(in thousands)	Home & Outdoor		Beauty & Wellness		Total
Severance and employee related costs	$	87	$	501	$	588
Professional fees	1,182		1,719		2,901
Contract termination	—		108		108
Other	2		18		20
Total restructuring charges	$	1,271	$	2,346	$	3,617

	Six Months Ended August 31, 2024						Total Incurred Since Inception
(in thousands)	Home & Outdoor		Beauty & Wellness		Total
Severance and employee related costs	$	690	$	1,666	$	2,356	$	17,632
Professional fees	268		585		853		27,730
Contract termination	—		—		—		1,331
Other	—		152		152		2,742
Total restructuring charges	$	958	$	2,403	$	3,361	$	49,435

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	Six Months Ended August 31, 2023
(in thousands)	Home & Outdoor		Beauty & Wellness		Total
Severance and employee related costs	$	571	$	909	$	1,480
Professional fees	3,451		5,076		8,527
Contract termination	—		796		796
Other	39		130		169
Total restructuring charges	$	4,061	$	6,911	$	10,972

The tables below present a rollforward of our accruals related to Project Pegasus, which are included in accounts payable and accrued expenses and other current liabilities:

(in thousands)	Balance at February 29, 2024		Charges		Payments		Balance at August 31, 2024
Severance and employee related costs	$	4,493	$	2,356	$	(4,852)	$	1,997
Professional fees	272		853		(599)		526
Contract termination	—		—		—		—
Other	—		152		(139)		13
Total	$	4,765	$	3,361	$	(5,590)	$	2,536

(in thousands)	Balance at February 28, 2023		Charges		Payments		Balance at August 31, 2023
Severance and employee related costs	$	3,173	$	1,480	$	(3,422)	$	1,231
Professional fees	3,201		8,527		(10,635)		1,093
Contract termination	160		796		(956)		—
Other	34		169		(203)		—
Total	$	6,568	$	10,972	$	(15,216)	$	2,324

Note 7 - Commitments and Contingencies

Legal Matters

We are involved in various legal claims and proceedings in the normal course of operations. We believe the outcome of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity, except as described below.

On December 23, 2021, Brita LP filed a complaint against Kaz USA, Inc. and Helen of Troy Limited in the United States District Court for the Western District of Texas (the “Patent Litigation”), alleging patent infringement by the Company relating to its PUR gravity-fed water filtration systems. In the Patent Litigation, Brita LP seeks monetary damages and injunctive relief relating to the alleged infringement. Brita LP simultaneously filed a complaint with the United States International Trade Commission (“ITC”) against Kaz USA, Inc., Helen of Troy Limited and five other unrelated companies that sell water filtration systems (the “ITC Action”). The complaint in the ITC Action also alleged patent infringement by the Company with respect to a limited set of PUR gravity-fed water filtration systems. In the ITC Action, Brita LP requested the ITC to initiate an unfair import investigation relating to such filtration systems. This action sought injunctive relief to prevent entry of certain accused PUR products (and certain other products) into the U.S. and cessation of marketing and sales of existing inventory that is already in the U.S. On January 25, 2022, the ITC instituted the investigation requested by the ITC Action. Discovery closed in the ITC Action in May 2022, and approximately half of the originally identified PUR gravity-fed water filters were removed from the case and are no longer included in the ITC Action. In August 2022, the parties participated in the evidentiary hearing, with additional supplemental hearings in October 2022. On February 28, 2023, the ITC issued an Initial Determination in the ITC Action, tentatively ruling against the Company and the other unrelated respondents. The ITC has a guaranteed review process, and thus

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all respondents, including the Company, filed a petition with the ITC for a full review of the Initial Determination. On September 19, 2023, the ITC issued its Final Determination in the Company’s favor. The ITC determined there was no violation by the Company and terminated the investigation. Brita LP is appealing the ITC's decision to the Federal Circuit (“CAFC Appeal”) and filed its Notice of Appeal on October 24, 2023. The Company intervened in the CAFC Appeal, but as of the filing date of this Form 10-Q, no hearings have been scheduled. The Patent Litigation remains stayed for the time being. We cannot predict the outcome of these legal proceedings, the amount or range of any potential loss, when the proceedings will be resolved, or customer acceptance of any replacement water filter. Litigation is inherently unpredictable, and the resolution or disposition of these proceedings could, if adversely determined, have a material and adverse impact on our financial position and results of operations.

Regulatory Matters

During fiscal 2022 and 2023, we were in discussions with the U.S. Environmental Protection Agency (the “EPA”) regarding the compliance of packaging claims on certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Beauty & Wellness segment that are sold in the U.S. The EPA did not raise any product quality, safety or performance issues. As a result of these packaging compliance discussions, we voluntarily implemented a temporary stop shipment action on the impacted products as we worked with the EPA towards an expedient resolution. We resumed normalized levels of shipping of the affected inventory during fiscal 2022 and we completed the repackaging and relabeling of our existing inventory of impacted products during fiscal 2023. Additionally, as a result of continuing dialogue with the EPA, we executed further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products, which were also completed during fiscal 2023. Ongoing settlement discussions with the EPA related to this matter may result in the imposition of fines or penalties in the future. Such potential fines or penalties cannot be estimated. For additional information refer to Part I, Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including “EPA Compliance Costs”.

Note 8 - Long-Term Debt

A summary of our long-term debt follows:

(in thousands)	August 31, 2024		February 29, 2024
Credit Agreement (1):
Revolving loans	$	472,000	$	421,950
Term loans	246,875		250,000
Total borrowings under Credit Agreement	718,875		671,950
Unamortized prepaid financing fees	(5,640)		(6,279)
Total long-term debt	713,235		665,671
Less: current maturities of long-term debt	(7,813)		(6,250)
Long-term debt, excluding current maturities	$	705,422	$	659,421

(1)The weighted average interest rates on borrowings outstanding under the Credit Agreement (defined below) inclusive of the impact of our interest rate swaps as of August 31, 2024 and February 29, 2024 were 6.3% and 6.0%, respectively.

Capitalized Interest

During the three month periods ended August 31, 2024 and August 31, 2023, we incurred interest costs totaling $13.2 million and $13.7 million, respectively, of which none was capitalized. During the six month period ended August 31, 2024, we incurred interest costs totaling $25.8 million, of which none was capitalized, compared to $28.6 million for the same period last year, of which we capitalized $0.9 million as part of property and equipment in connection with the construction of a new distribution facility.

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Credit Agreement

We have a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders that provides for 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, February 15, 2024, 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 our 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 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.

The floating interest rates on our borrowings under the Credit Agreement are hedged with interest rate swaps to effectively fix interest rates on $300 million and $500 million of the outstanding principal balance under the revolving loans as of August 31, 2024 and February 29, 2024, respectively. See Notes 9, 10, and 11 for additional information regarding our interest rate swaps.

As of August 31, 2024, the balance of outstanding letters of credit was $9.5 million and the amount available for revolving loans under the Credit Agreement was $518.5 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur. As of August 31, 2024, these covenants effectively limited our ability to incur more than $322.8 million of additional debt from all sources, including the Credit Agreement, or $518.5 million in the event a qualified acquisition is consummated.

Debt Covenants

As of August 31, 2024, we were in compliance with all covenants as defined under the terms of the Credit Agreement.

Note 9 - Fair Value 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. These inputs are classified into the following hierarchy:

Level 1:Quoted prices for identical assets or liabilities in active markets;

Level 2:Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and

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Level 3:Unobservable inputs that reflect the reporting entity’s own assumptions.

All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills, are classified as Level 2 because their valuation is dependent on observable inputs and other quoted prices for similar assets or liabilities, or model-derived valuations whose significant value drivers are observable. Our investments in U.S. Treasury Bills are classified as Level 1 because their value is based on quoted prices in active markets for identical assets.

The following table presents the fair value of our financial assets and liabilities:

	Fair Value
(in thousands)	August 31, 2024		February 29, 2024
Assets:
Cash equivalents (money market accounts)	$	3,275	$	462
U.S. Treasury Bills	9,267		8,948
Interest rate swaps	—		2,504
Foreign currency derivatives	346		592
Total assets	$	12,888	$	12,506
Liabilities:
Interest rate swaps	$	788	$	—
Foreign currency derivatives	1,501		386
Total liabilities	$	2,289	$	386

All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills, are measured and recorded at fair value on a recurring basis. Our investments in U.S. Treasury Bills are recorded at amortized cost. As of both August 31, 2024 and February 29, 2024, the current carrying amounts of our U.S. Treasury Bills were $2.5 million and were included within Prepaid expenses and other current assets in our condensed consolidated balance sheets. As of August 31, 2024 and February 29, 2024, the non-current carrying amounts of our U.S. Treasury Bills were $6.7 million and $6.6 million, respectively, and were included within Other assets in our condensed consolidated balance sheets.

The carrying amounts of cash, accounts payable, accrued expenses and other current liabilities and income taxes payable approximate fair value because of the short maturity of these items. The carrying amounts of receivables approximate fair value due to the effect of the related allowance for credit losses. The carrying amount of our floating rate long-term debt approximates its fair value.

Our investments in U.S. Treasury Bills are classified as held-to-maturity because we have the positive intent and ability to hold the securities to maturity. We invest in U.S. Treasury Bills with maturities ranging from less than one to five years. Gross unrealized gains were $0.1 million, and there were no gross unrealized losses as of August 31, 2024. Gross unrealized gains and losses were not material as of February 29, 2024. During both the three and six month periods ended August 31, 2024, we recognized interest income on these investments of $0.1 million, which is included in “Non-operating income, net” in our condensed consolidated statements of income.

We use foreign currency forward contracts and interest rate swaps to manage our exposure to changes in foreign currency exchange rates and interest rates, respectively. All of our derivative assets and liabilities are recorded at fair value. See Notes 10 and 11 for more information on our derivatives.

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Note 10 - Financial Instruments and Risk Management

Foreign Currency Risk

The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the reporting currency for the Company. By operating internationally, we are subject to foreign currency risk from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses. As a result of such transactions, portions of our cash, accounts receivable and accounts payable are denominated in foreign currencies. Approximately 12% of our net sales revenue was denominated in foreign currencies during both the three month periods ended August 31, 2024 and 2023, and 14% of our net sales revenue was denominated in foreign currencies during both the six month periods ended August 31, 2024 and 2023. 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 condensed 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 expense, and all other foreign currency exchange rate gains and losses are recognized in SG&A. During the three and six month periods ended August 31, 2024, we recorded foreign currency exchange rate net losses of $0.2 million and $0.3 million, respectively, in income tax expense, compared to net gains of $0.2 million and $0.4 million for the same periods last year, respectively. During both the three and six month periods ended August 31, 2024, we recorded foreign currency exchange rate net gains of $0.6 million in SG&A, compared to net losses of $0.8 million and $0.4 million for the same periods last year, respectively. We mitigate certain foreign currency exchange rate risk by using forward contracts to protect against the foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies. We do not enter into any derivatives or similar instruments for trading or other speculative purposes. Certain of our forward contracts are designated as cash flow hedges (“foreign currency contracts”) and are recorded on the balance sheet at fair value with changes in fair value recorded in Other Comprehensive Income (Loss) (“OCI”) until the hedge transaction is settled, at which point amounts are reclassified from Accumulated Other Comprehensive Income (Loss) (“AOCI”) to our condensed consolidated statements of income. Foreign currency derivatives for which we have not elected hedge accounting consist of certain forward contracts, and any changes in the fair value of these derivatives are recorded in our condensed consolidated statements of income. These undesignated derivatives are used to hedge monetary net asset and liability positions. Cash flows from our foreign currency derivatives are classified as cash flows from operating activities in our condensed consolidated statements of cash flows, which is consistent with the classification of the cash flows from the underlying hedged item. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness.

Interest Rate Risk

Interest on our outstanding debt as of August 31, 2024 and February 29, 2024 is based on floating interest rates. If short-term interest rates increase, we will incur higher interest expense on any future outstanding balances of floating rate debt. Floating interest rates are hedged with interest rate swaps to effectively fix interest rates on a portion of our outstanding principal balance under the Credit Agreement, which totaled $718.9 million and $672.0 million as of August 31, 2024 and February 29, 2024, respectively. As of August 31, 2024 and February 29, 2024, $300.0 million and $500.0 million of the outstanding principal balance under the Credit Agreement, respectively, was hedged with interest rate swaps to fix the interest rate we pay. Our interest rate swaps are designated as cash flow hedges and are recorded on the balance sheet at fair value with changes in fair value recorded in OCI until the hedge transaction is settled, at which point amounts are reclassified from AOCI to our condensed consolidated statements of income. Cash flows from our interest rate swaps are classified as cash flows from

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operating activities in our condensed consolidated statements of cash flows, which is consistent with the classification of the cash flows from the underlying hedged item. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness.

The following tables summarize the fair values of our derivative instruments as of the end of the periods presented:

(in thousands)	August 31, 2024
Derivatives designated as hedging instruments	Hedge Type	Final Settlement Date	Notional Amount		Prepaid Expenses and Other Current Assets		Other Assets		Accrued Expenses and Other Current Liabilities		Other Liabilities, Non- Current
Forward contracts - sell Euro	Cash flow	2/2026	€	47,500	$	134	$	46	$	277	$	23
Forward contracts - sell Canadian Dollars	Cash flow	2/2025	$	14,250	82		—		68		—
Forward contracts - sell Pounds	Cash flow	2/2026	£	30,800	9		3		956		177
Forward contracts - sell Norwegian Kroner	Cash flow	8/2025	kr	16,500	22		—		—		—
Interest rate swaps	Cash flow	2/2026	$	300,000	—		—		528		260
Subtotal					247		49		1,829		460
Derivatives not designated under hedge accounting
Forward contracts - buy Euro	(1)	9/2024	€	2,450	23		—		—		—
Forward contracts - buy Pounds	(1)	9/2024	£	790	27		—		—		—
Subtotal					50		—		—		—
Total fair value					$	297	$	49	$	1,829	$	460

(in thousands)	February 29, 2024
Derivatives designated as hedging instruments	Hedge Type	Final Settlement Date	Notional Amount		Prepaid Expenses and Other Current Assets		Other Assets		Accrued Expenses and Other Current Liabilities		Other Liabilities Non- Current
Forward contracts - sell Euro	Cash flow	2/2025	€	36,500	$	377	$	—	$	90	$	—
Forward contracts - sell Canadian Dollars	Cash flow	2/2025	$	20,750	151		—		57		—
Forward contracts - sell Pounds	Cash flow	2/2025	£	20,250	59		—		234		—
Forward contracts - sell Norwegian Kroner	Cash flow	8/2024	kr	5,000	5		—		—		—
Interest rate swaps	Cash flow	2/2026	$	500,000	1,314		1,190		—		—
Subtotal					1,906		1,190		381		—
Derivatives not designated under hedge accounting
Forward contracts - sell Euro	(1)	3/2024	€	430	—		—		3		—
Forward contracts - sell Pounds	(1)	3/2024	£	735	—		—		2		—
Subtotal					—		—		5		—
Total fair value					$	1,906	$	1,190	$	386	$	—

(1)These forward contracts, for which we have not elected hedge accounting, hedge monetary net asset and liability positions for the notional amounts reported, creating an economic hedge against currency movements.

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The pre-tax effects of derivative instruments designated as cash flow hedges were as follows for the periods presented:

	Three Months Ended August 31,
	Gain (Loss) Recognized in AOCI				Gain (Loss) Reclassified from AOCI into Income
(in thousands)	2024		2023		Location	2024		2023
Foreign currency contracts - cash flow hedges	$	(1,317)	$	(779)	Sales revenue, net	$	(193)	$	(383)
Interest rate swaps - cash flow hedges	(3,535)		5,644		Interest expense	965		2,027
Total	$	(4,852)	$	4,865		$	772	$	1,644

	Six Months Ended August 31,
	Gain (Loss) Recognized in AOCI				Gain (Loss) Reclassified from AOCI into Income
(in thousands)	2024		2023		Location	2024		2023
Foreign currency contracts - cash flow hedges	$	(1,425)	$	(1,246)	Sales revenue, net	$	(9)	$	(45)
Interest rate swaps - cash flow hedges	(1,243)		3,010		Interest expense	2,049		3,434
Total	$	(2,668)	$	1,764		$	2,040	$	3,389

The pre-tax effects of derivative instruments not designated under hedge accounting were as follows for the periods presented:

	Gain (Loss)  Recognized in Income
		Three Months Ended August 31,				Six Months Ended August 31,
(in thousands)	Location	2024		2023		2024		2023
Forward contracts	SG&A	$	66	$	(16)	$	88	$	(40)
Total		$	66	$	(16)	$	88	$	(40)

We expect a net loss of $1.6 million associated with foreign currency contracts and interest rate swaps currently recorded in AOCI to be reclassified into income over the next twelve months. The amount ultimately realized, however, will differ as exchange rates and interest rates change and the underlying contracts settle. See Notes 9 and 11 for more information.

Counterparty Credit Risk

Financial instruments, including foreign currency contracts, forward contracts, and interest rate swaps, expose us to counterparty credit risk for non-performance. We manage our exposure to counterparty credit risk by only dealing with counterparties who are substantial international financial institutions with significant experience using such derivative instruments. We believe that the risk of incurring credit losses is remote.

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Note 11 - Accumulated Other Comprehensive Income (Loss)

The changes in AOCI by component and related tax effects for the periods presented were as follows:

(in thousands)	Interest Rate Swaps		Foreign Currency Contracts		Total
Balance at February 28, 2023	$	4,394	$	553	$	4,947
Other comprehensive income (loss) before reclassification	3,010		(1,246)		1,764
Amounts reclassified out of AOCI	(3,434)		45		(3,389)
Tax effects	100		264		364
Other comprehensive loss	(324)		(937)		(1,261)
Balance at August 31, 2023	$	4,070	$	(384)	$	3,686
Balance at February 29, 2024	$	1,917	$	182	$	2,099
Other comprehensive loss before reclassification	(1,243)		(1,425)		(2,668)
Amounts reclassified out of AOCI	(2,049)		9		(2,040)
Tax effects	771		323		1,094
Other comprehensive loss	(2,521)		(1,093)		(3,614)
Balance at August 31, 2024	$	(604)	$	(911)	$	(1,515)

See Notes 9 and 10 for additional information regarding our cash flow hedges.

Note 12 - Segment and Geographic Information

The following tables summarize segment information for the periods presented: