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 May 31, ~~2020~~2021

☐ 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:~~File Number: 001-14669

HELEN OF TROY LIMITED

(Exact name of registrant as specified in its charter)

Bermuda 74-2692550

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer 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~~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”,~~filer,” “smaller reporting ~~company”~~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 July ~~2, 2020~~1, 2021, there were ~~25,322,942~~24,098,751 common shares, ~~of common stock of the registrant,~~ $0.10 par value per share, outstanding.

Table of Contents

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 - Assets and Liabilities Held for Sale	8
	Note 34 - ~~Revenue Recognition~~Accrued Expenses and Other Current Liabilities	9
	Note 45 - ~~Leases~~Share-Based Compensation Plans	9
	Note 56 - ~~Assets Held for Sale~~Repurchases of Common Stock	10
	Note 7 - Restructuring Plan	10
	Note 8 - Commitments and Contingencies	11
	Note 69 - ~~Supplemental Balance Sheet Information~~Long-Term Debt	11
	~~Note 7 - Acquisitions~~	11
	~~Note 8 - Goodwill and Intangible Assets~~	13
	~~Note 9 - Share-Based Compensation Plans~~	1412
	Note 10 - ~~Repurchase of Helen of Troy Common Stock~~Fair Value	1512
	Note 1 1 ~~- Restructuring Plan~~	15
	~~Note 1~~2 ~~- Commitments and Contingencies~~	16
	~~Note 1~~3 ~~- Long-Term Debt~~	16
	~~Note 1~~4 ~~- Fair Value~~	18
	~~Note 1~~5 11 - Financial Instruments and Risk Management	1913
	Note 1 6 12 - Accumulated Other Comprehensive Income ~~(Loss)~~(Loss)	2117
	Note 1 7 13 - Segment Information	2117
	Note 1 8 14 - Income Taxes	2217
	Note 1 9 15 - Earnings Per Share	2318
	Note 16 - Subsequent Events	19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2420

Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	4238

Item 4.	Controls and Procedures	4238

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4339

Item 1A.	Risk Factors	4339

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4341

Item 6.	Exhibits	4542

SIGNATURES			4643

Table of Contents

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)	(in thousands, except shares and par value)	May 31, 2020		February 29, 2020		(in thousands, except shares and par value)	May 31, 2021		February 28, 2021
Assets	Assets					Assets
Assets, current:	Assets, current:					Assets, current:
Cash and cash equivalents	Cash and cash equivalents	$	88,517	$	24,467	Cash and cash equivalents	$	37,368	$	45,120
Receivables - principally trade, less allowances of $2,744 and $1,461		332,769		348,023
Receivables - principally trade, less allowances of $594 and $998						Receivables - principally trade, less allowances of $594 and $998	406,409		382,449
Inventory	Inventory	276,327		256,311		Inventory	540,129		481,611
Prepaid expenses and other current assets	Prepaid expenses and other current assets	8,271		9,229		Prepaid expenses and other current assets	18,584		16,170
Income taxes receivable	Income taxes receivable	10,356		—		Income taxes receivable	4,938		6,720
Assets held for sale	Assets held for sale	40,796		44,806		Assets held for sale	48,646		39,867
Total assets, current	Total assets, current	757,036		682,836		Total assets, current	1,056,074		971,937

Property and equipment, net of accumulated depreciation of $136,898 and $132,340		133,375		132,107
Property and equipment, net of accumulated depreciation of $145,915 and $140,379						Property and equipment, net of accumulated depreciation of $145,915 and $140,379	134,450		136,535
Goodwill	Goodwill	739,901		739,901		Goodwill	739,901		739,901
Other intangible assets, net of accumulated amortization of $153,372 and $148,891		297,000		300,952
Other intangible assets, net of accumulated amortization of $154,224 and $151,240						Other intangible assets, net of accumulated amortization of $154,224 and $151,240	354,642		357,264
Operating lease assets	Operating lease assets	32,934		32,645		Operating lease assets	31,905		32,533
Deferred tax assets, net	Deferred tax assets, net	14,012		14,635		Deferred tax assets, net	26,431		21,748
Other assets, net of accumulated amortization of $2,167 and $2,167		1,430		807
Other assets						Other assets	4,689		3,570
Total assets	Total assets	$	1,975,688	$	1,903,883	Total assets	$	2,348,092	$	2,263,488

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Liabilities, current:	Liabilities, current:					Liabilities, current:
Accounts payable, principally trade	Accounts payable, principally trade	$	193,637	$	152,674	Accounts payable, principally trade	$	317,573	$	334,807
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	170,408		183,157		Accrued expenses and other current liabilities	232,604		271,179
Income taxes payable	Income taxes payable	—		1,181		Income taxes payable	13,917		7,022
Long-term debt, current maturities	Long-term debt, current maturities	1,884		1,884		Long-term debt, current maturities	1,884		1,884
Liabilities held for sale						Liabilities held for sale	5,757		0
Total liabilities, current	Total liabilities, current	365,929		338,896		Total liabilities, current	571,735		614,892

Long-term debt, excluding current maturities	Long-term debt, excluding current maturities	322,999		337,421		Long-term debt, excluding current maturities	509,090		341,746
Lease liabilities, non-current	Lease liabilities, non-current	40,935		40,861		Lease liabilities, non-current	37,788		38,352
Deferred tax liabilities, net	Deferred tax liabilities, net	4,989		4,224		Deferred tax liabilities, net	6,432		5,735
Other liabilities, non-current	Other liabilities, non-current	19,084		20,758		Other liabilities, non-current	20,966		23,416
Total liabilities	Total liabilities	753,936		742,160		Total liabilities	1,146,011		1,024,141

Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0

Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; NaN issued	Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; NaN issued	—		—		Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; NaN issued	0		0
Common stock, $0.10 par. Authorized 50,000,000 shares; 25,321,205 and 25,193,766 shares issued and outstanding		2,532		2,519
Common stock, $0.10 par. Authorized 50,000,000 shares; 24,097,766 and 24,405,921 shares issued and outstanding						Common stock, $0.10 par. Authorized 50,000,000 shares; 24,097,766 and 24,405,921 shares issued and outstanding	2,410		2,441
Additional paid in capital	Additional paid in capital	269,797		268,043		Additional paid in capital	283,394		283,396
Accumulated other comprehensive income (loss)		(8,917)		(7,005)
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(12,453)		(11,656)
Retained earnings	Retained earnings	958,340		898,166		Retained earnings	928,730		965,166
Total stockholders' equity	Total stockholders' equity	1,221,752		1,161,723		Total stockholders' equity	1,202,081		1,239,347
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,975,688	$	1,903,883	Total liabilities and stockholders' equity	$	2,348,092	$	2,263,488

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended May 31,
(in thousands, except per share data) 2020 2019
Sales revenue, net $ 420,835 $ 376,335
Cost of goods sold 241,534 222,608
Gross profit 179,301 153,727
Selling, general and administrative expense ("SG&A") 121,989 105,901
Restructuring charges 333 619
Operating income 56,979 47,207
Non-operating income, net 236 132
Interest expense (3,846) (3,308)
Income before income tax 53,369 44,031
Income tax expense (benefit) (6,917) 3,337
Net income $ 60,286 $ 40,694
Earnings per share:
Basic $ 2.39 $ 1.63
Diluted $ 2.37 $ 1.61
Weighted average shares of common stock used in computing earnings per share:
Basic 25,254 25,019
Diluted 25,397 25,245


	Three Months Ended May 31,
(in thousands, except per share data)	2021		2020
Sales revenue, net	$	541,223	$	420,835
Cost of goods sold	320,631		241,534
Gross profit	220,592		179,301

Selling, general and administrative expense (“SG&A”)	155,751		121,989

Restructuring charges	6		333
Operating income	64,835		56,979

Non-operating income, net	102		236
Interest expense	2,995		3,846
Income before income tax	61,942		53,369

Income tax expense (benefit)	4,970		(6,917)
Net income	$	56,972	$	60,286




Earnings per share (“EPS”):
Basic	$	2.34	$	2.39
Diluted	2.31		2.37








Weighted average shares used in computing EPS:
Basic	24,349		25,254
Diluted	24,636		25,397

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended May 31,
(in thousands) 2020 2019
Net income $ 60,286 $ 40,694
Other comprehensive income (loss), net of tax:
Cash flow hedge activity - interest rate swaps (2,607) (3,993)
Cash flow hedge activity - foreign currency contracts 695 791
Total other comprehensive income (loss), net of tax (1,912) (3,202)
Comprehensive income $ 58,374 $ 37,492


	Three Months Ended May 31,
(in thousands)	2021		2020
Net income	$	56,972	$	60,286
Other comprehensive loss, net of tax:
Cash flow hedge activity - interest rate swaps	757		(2,607)
Cash flow hedge activity - foreign currency contracts	(1,554)		695
Total other comprehensive loss, net of tax	(797)		(1,912)
Comprehensive income	$	56,175	$	58,374

See accompanying notes to condensed consolidated financial statements.

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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 Shareholders' Equity
(in thousands, including shares) Shares Par
Value
Balances at February 28, 2019 24,946 $ 2,495 $ 246,585 $ 1,191 $ 746,366 $ 996,637
Net income — — — — 40,694 40,694
Other comprehensive loss, net of tax — — — (3,202) — (3,202)
Exercise of stock options 35 4 1,822 — — 1,826
Net issuance and settlement of restricted stock 173 17 (17) — — —
Issuance of common stock related to stock purchase plan 15 1 1,407 — — 1,408
Common stock repurchased and retired (68) (7) (8,322) — (459) (8,788)
Share-based compensation — — 7,604 — — 7,604
Balances at May 31, 2019 25,101 $ 2,510 $ 249,079 $ (2,011) $ 786,601 $ 1,036,179
Balances at February 29, 2020 25,194 $ 2,519 $ 268,043 $ (7,005) $ 898,166 $ 1,161,723
Net income — — — — 60,286 60,286
Other comprehensive loss, net of tax — — — (1,912) — (1,912)
Exercise of stock options 8 1 475 — — 476
Net issuance and settlement of restricted stock 165 17 (17) — — —
Issuance of common stock related to stock purchase plan 15 1 1,900 — — 1,901
Common stock repurchased and retired (61) (6) (9,895) — (112) (10,013)
Share-based compensation — — 9,291 — — 9,291
Balances at May 31, 2020 25,321 $ 2,532 $ 269,797 $ (8,917) $ 958,340 $ 1,221,752


	Common Stock			Additional Paid in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Shareholders' Equity
(in thousands, including shares)	Shares	Par Value
Balances at February 29, 2020	25,194	$	2,519	$	268,043	$	(7,005)	$	898,166	$	1,161,723
Net income	—	—		—		—		60,286		60,286

Other comprehensive loss, net of tax	—	—		—		(1,912)		—		(1,912)
Exercise of stock options	8	1		475		—		—		476
Issuance and settlement of restricted stock	165	17		(17)		—		—		0
Issuance of common stock related to stock purchase plan	15	1		1,900		—		—		1,901
Common stock repurchased and retired	(61)	(6)		(9,895)		—		(112)		(10,013)
Share-based compensation	—	—		9,291		—		—		9,291

Balances at May 31, 2020	25,321	$	2,532	$	269,797	$	(8,917)	$	958,340	$	1,221,752

Balances at February 28, 2021	24,406	$	2,441	$	283,396	$	(11,656)	$	965,166	$	1,239,347
Net income	—	—		—		—		56,972		56,972

Other comprehensive loss, net of tax	—	—		—		(797)		—		(797)
Exercise of stock options	4	—		275		—		—		275
Issuance and settlement of restricted stock	177	18		(18)		—		—		0
Issuance of common stock related to stock purchase plan	13	1		2,337		—		—		2,338
Common stock repurchased and retired	(502)	(50)		(16,616)		—		(93,408)		(110,074)
Share-based compensation	—	—		14,020		—		—		14,020

Balances at May 31, 2021	24,098	$	2,410	$	283,394	$	(12,453)	$	928,730	$	1,202,081

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


		Three Months Ended May 31,							Three Months Ended May 31,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020
Cash provided by operating activities:	Cash provided by operating activities:					Cash provided by operating activities:
Net income	Net income	$	60,286	$	40,694	Net income	$	56,972	$	60,286

Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used) provided by operating activities:						Adjustments to reconcile net income to net cash (used) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	9,140		7,767		Depreciation and amortization	8,713		9,140
Amortization of financing costs	Amortization of financing costs	267		255		Amortization of financing costs	243		267
Non-cash operating lease asset amortization		298		654
Provision for doubtful receivables		1,738		54
Non-cash operating lease expense						Non-cash operating lease expense	2,027		1,558
Provision for credit losses						Provision for credit losses	0		1,738
Non-cash share-based compensation	Non-cash share-based compensation	9,291		7,604		Non-cash share-based compensation	14,020		9,291

Loss on the sale or disposal of property and equipment	Loss on the sale or disposal of property and equipment	6		—		Loss on the sale or disposal of property and equipment	0		6
Deferred income taxes and tax credits	Deferred income taxes and tax credits	2,274		1,941		Deferred income taxes and tax credits	(3,811)		2,274
Changes in operating capital, net of effects of acquisition of businesses:
Changes in operating capital:						Changes in operating capital:
Receivables	Receivables	13,516		17,715		Receivables	(38,747)		13,516
Inventories		(16,017)		(33,005)
Inventory						Inventory	(58,860)		(16,017)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,490		(9,282)		Prepaid expenses and other current assets	(2,414)		1,490
Other assets and liabilities, net	Other assets and liabilities, net	(2,647)		9,138		Other assets and liabilities, net	(3,185)		(3,907)
Accounts payable	Accounts payable	40,963		(4,500)		Accounts payable	(10,885)		40,963
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	(16,010)		(22,842)		Accrued expenses and other current liabilities	(35,574)		(16,010)
Accrued income taxes	Accrued income taxes	(11,769)		(517)		Accrued income taxes	8,116		(11,769)
Net cash (used) provided by operating activities						Net cash (used) provided by operating activities	(63,385)		92,826

Net cash provided by operating activities		92,826		15,676

Cash used by investing activities:	Cash used by investing activities:					Cash used by investing activities:
Capital and intangible asset expenditures	Capital and intangible asset expenditures	(6,451)		(3,718)		Capital and intangible asset expenditures	(4,006)		(6,451)

Net cash used by investing activities						Net cash used by investing activities	(4,006)		(6,451)

Net cash used by investing activities		(6,451)		(3,718)

Cash used by financing activities:
Cash provided (used) by financing activities:						Cash provided (used) by financing activities:
Proceeds from line of credit	Proceeds from line of credit	765,200		165,300		Proceeds from line of credit	221,100		765,200
Repayment of line of credit	Repayment of line of credit	(774,200)		(163,300)		Repayment of line of credit	(52,100)		(774,200)
Repayment of long-term debt	Repayment of long-term debt	(1,900)		(1,900)		Repayment of long-term debt	(1,900)		(1,900)
Payment of financing costs	Payment of financing costs	(3,789)		—		Payment of financing costs	0		(3,789)
Proceeds from share issuances under share-based compensation plans	Proceeds from share issuances under share-based compensation plans	2,377		3,234		Proceeds from share issuances under share-based compensation plans	2,613		2,377

Payments for repurchases of common stock	Payments for repurchases of common stock	(10,013)		(8,788)		Payments for repurchases of common stock	(110,074)		(10,013)
Net cash provided (used) by financing activities						Net cash provided (used) by financing activities	59,639		(22,325)

Net cash used by financing activities		(22,325)		(5,454)

Net increase in cash and cash equivalents		64,050		6,504
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(7,752)		64,050
Cash and cash equivalents, beginning balance	Cash and cash equivalents, beginning balance	24,467		11,871		Cash and cash equivalents, beginning balance	45,120		24,467
Cash and cash equivalents, ending balance	Cash and cash equivalents, ending balance	88,517		18,375		Cash and cash equivalents, ending balance	$	37,368	$	88,517

Supplemental non-cash items not included above resulting from the adoption of ASC 842
Initial recognition of operating lease asset		$	—	$	(37,082)
Initial recognition of lease liabilities		—		47,223
Accrued expenses and other current liabilities		—		(2,873)
Other assets and liabilities, net		—		(7,311)
Prepaid expenses and other current assets		—		43

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

May 31, ~~2020~~2021

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 May 31, ~~2020~~2021 and February ~~29, 2020,~~28, 2021, 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, 2020,~~28, 2021 (“Form 10-K”), and our other reports on file with the Securities and Exchange Commission ~~(“SEC”~~(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.~~subsidiaries, which are all wholly-owned. We refer to our common shares, par value $0.10 per share, as “common stock.” References to ~~the "FASB”~~“the FASB” refer to the Financial Accounting Standards Board. References to “GAAP” refer to accounting principles generally accepted in the United States ~~(“U.S.~~of America (the “U.S.”) ~~generally accepted accounting principles.~~. References to “ASU” refer to the codification of GAAP in the Accounting Standards Updates issued by the FASB. References to ~~"ASC"~~“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 ~~global designer, developer, importer, marketer,~~leading consumer products company offering creative products and ~~distributor of an expanding~~solutions for our customers through a diversified portfolio of ~~brand-name consumer products. We have~~brands. As of May 31, 2021, we operated 3 segments: Housewares, Health & Home, and Beauty. Our Housewares segment provides a broad range of innovative consumer products for the home and on the ~~go. Product offerings include~~go to help with food preparation, ~~tools~~cooking, cleaning, organization, beverage service, and ~~storage containers; cleaning, bath and garden tools and accessories; infant and toddler care products; and insulated beverage, food containers and coolers.~~other tasks to ease everyday living for families. The Health & Home segment ~~focuses on~~provides healthcare and home environment products including health care devices, ~~such as thermometers, humidifiers, blood pressure monitors, and heating pads;~~ water filtration ~~systems;~~systems, and small home ~~appliances such as portable heaters, fans, and air purifiers.~~appliances. Our Beauty segment provides mass and prestige market beauty appliance and personal care products ~~include electric~~including hair ~~care, beauty care and wellness appliances;~~styling appliances, grooming tools, ~~and accessories;~~decorative haircare accessories, and liquid-, solid- and powder-based personal care and grooming products.

Our business is seasonal due to different calendar events, holidays and seasonal weather 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 and the ~~United States.~~

On January 23, 2020, we completed the acquisition of Drybar Products LLC ("Drybar Products"), for approximately $255.9 million in cash, subject to certain customary closing adjustments. Drybar Products is a fast-growing, innovative, trend-setting prestige hair care and styling brand. As part of the transaction, Helen of Troy granted a worldwide license to Drybar Holdings LLC, the owner and long-time operator of Drybar blowout salons, to use the Drybar trademark in their continued operation of Drybar salons. The salons will exclusively use, promote, and sell Drybar products globally. See Note 7 for additional information on the acquisition.U.S.

During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Beauty segment's mass ~~market~~channel personal care ~~business.~~business (“Personal Care”). The net assets to be disposed of include intangible assets, inventory, ~~and~~certain net trade receivables, fixed assets and certain accrued sales discounts and allowances relating to our mass channel liquids, powder and aerosol products ~~including~~under brands such as Pert, Brut, Sure and Infusium. ~~We expect~~Accordingly, we have classified the identified net assets of the disposal group as held for sale. The Personal Care divestiture ~~to occur within~~was completed during the second quarter of fiscal ~~2021. Accordingly, we~~2022. See Notes 3 and 16 for additional information.

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~~have classified the identified assets of the disposal group as held for sale. For additional information, see Note 5.~~

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus ~~(COVID-19)~~(“COVID-19”) to be a pandemic. ~~COVID-19 continues to spread throughout the United States and the world, with the continued potential for catastrophic impact.~~ The effects of the COVID-19 pandemic have had an unfavorable impact on certain parts of our business. The impact includes the effect of temporary closures of certain customer stores or limited hours of operation, ~~which has resulted in~~and materially lower store traffic, ~~at our brick and mortar retailers. The economic impact of historic unemployment and consumer uncertainty has also resulted in reduced overall demand for our more discretionary product lines.~~primarily during fiscal 2021. Additionally, COVID-19 has ~~also~~ disrupted certain parts of our supply ~~chain,~~chain. Surges in demand and shifts in shopping patterns related to COVID-19, as well as other factors, have strained the global freight network, which is resulting in ~~certain cases has limited~~higher costs, less capacity, and longer lead times. These factors may impact our ability to fulfill ~~demand. COVID-19 has favorably impacted~~some orders on a timely basis. Additionally, the extent of COVID-19's impact on the demand for certain of our product lines ~~that are more defensive, meet certain healthcare or healthy living needs, or meet~~in the ~~needs of consumers that are spending more time at home as a result~~future will depend on future developments, including the duration, spread and intensity of the ~~pandemic. COVID-19 has also favorably impacted~~pandemic, our ~~online channel in a meaningful way,~~continued ability to source and distribute our products, as ~~brick~~well as any future government actions affecting consumers and ~~mortar shopping options have been limited or considered unsafe. Although~~ the ~~favorable impacts~~global economy generally, all of ~~COVID-19 outweighed~~which are uncertain and difficult to predict considering the ~~unfavorable impacts in the first quarter of fiscal 2021, this situation is changing~~ rapidly ~~and additional impacts or more pronounced adverse impacts may arise that we are not currently aware of.~~evolving landscape. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.

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 ~~accounts~~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.

Reclassifications

We have reclassified, combined or separately disclosed certain amounts in the prior years’ condensed consolidated financial statements and accompanying footnotes to conform with the current period’s presentation.

Note 2 - New Accounting Pronouncements

~~Except for the changes discussed below, there~~There have been no changes in the information provided in our Form ~~10-K for the fiscal year ended February 29, 2020.~~

~~Adopted~~

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (with subsequent targeted amendments) which modifies the measurements of expected credit losses for certain financial instruments and financial assets, including trade receivables. This ASU was effective for us in the first quarter of fiscal 2021, and the adoption of this ASU did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. Certain disclosures in ASU 2018-13 would need to be applied on a retrospective basis and others on a prospective basis. This ASU was effective for us in the first quarter of fiscal 2021, and the adoption of this ASU did not have a material impact on our consolidated financial statements.

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In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU was effective for us in the first quarter of fiscal 2021, and the adoption of this ASU did not have a material impact on our consolidated financial statements.10-K.

Note 3 - ~~Revenue Recognition~~

~~We adopted the provisions of ASU 2014-09 in the first quarter of fiscal 2019,~~Assets and we elected to adopt the standard using the retrospective method. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Our revenue is primarily generated from the sale of non-customized consumer products to customers. These products are promised goods that are distinct performance obligations. Revenue is recognized when control of, and title to, the product sold transfers to the customer in accordance with applicable shipping terms, which can occur on the date of shipment or the date of receipt by the customer, depending on the customer and the agreed upon shipping terms. Payment terms from the sale of our products are typically due to us in thirty to ninety days after the date of sale. Therefore, the timing and amount of revenue recognized was not materially impacted by the new guidance. We have thus concluded that the adoption of the guidance did not have a material impact on our consolidated financial statements. The provisions of the new guidance did however impact the classification of certain consideration paid to our customers. We therefore have reclassified an immaterial amount of such payments from SG&A to a reduction of net sales revenue for all periods presented. Also, in accordance with the guidance, we reclassified an immaterial amount of estimated sales returns from a reduction of receivables to accrued expenses and other current liabilities for all periods presented. We elected to adopt the guidance using the full retrospective method.

We measure revenue as the amount of consideration for which we expect to be entitled, in exchange for transferring goods. Certain customers may receive cash incentives such as customer discounts (including volume or trade discounts), advertising discounts and other customer-related programs which are accounted for as variable consideration. In some cases, we apply judgment, such as contractual rates and historical payment trends, when estimating variable consideration. In accordance with the guidance, most variable consideration is classified as a reduction to net sales.

Sales taxes and other similar taxes are excluded from revenue. We elected to account for shipping and handling activities as a fulfillment cost as permitted by the guidance. We do not have unsatisfied performance obligations since our performance obligations are satisfied at a single point in time.

~~Note 4 - Leases~~

Adoption of the new lease standard resulted in the recording of lease assets and lease liabilities of approximately $37.1 million and $47.2 million, respectively, as of March 1, 2019. The difference between the lease assets and lease liabilities primarily relates to unamortized lease incentives and deferred rent recorded in accordance with the previous lease guidance. The new standard did not materially impact our consolidated statements of income or cash flows.

We primarily have leases for office space, which are classified as operating leases. Operating leases are included in operating lease assets, accrued expenses and other current liabilities, and lease liabilities, non-current in our consolidated balance sheets. Operating lease assets and operating lease liabilities are

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recognized based on the present value of the future lease payments over the lease term at commencement date. As most of our lease contracts do not provide an explicit interest rate, we use an estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We include options to extend or terminate the lease in the lease term for accounting considerations, when it is reasonably certain that we will exercise that option. Our leases have remaining lease terms of less than 1 to 13 years. Lease expense for lease payments is recognized on a straight-line basis over the lease term in a manner similar to previous accounting guidance. 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 condensed 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 in the condensed consolidated statements of income was $1.6 million for both of the three month periods ended May 31, 2020 and 2019. Short-term lease expense is excluded from this amount and is not material. For the three month periods ended May 31, 2020 and 2019, rent expense related to all our operating leases was $2.1 and $2.0 million, 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 condensed consolidated statements of cash flows. A summary of supplemental lease information is as follows:


	~~May 31, 2020~~
~~Weighted average remaining lease term (years)~~	~~10.5~~
~~Weighted average discount rate~~	~~6.13%~~
~~Year-to-date cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash flows from operating leases (in thousands~~)	$	~~1,272~~

~~A summary of our estimated lease payments, imputed interest and liabilities are as follows:~~


~~(in thousands)~~
~~Fiscal 2021 (balance for remainder of fiscal year)~~	$	~~5,014~~
~~Fiscal 2022~~	~~6,375~~
~~Fiscal 2023~~	~~6,044~~
~~Fiscal 2024~~	~~5,332~~
~~Fiscal 2025~~	~~5,762~~
~~Thereafter~~	~~34,370~~
~~Total future lease payments~~	~~62,897~~
~~Less: imputed interest~~	~~(17,808)~~
~~Present value of lease liability~~	$	~~45,089~~


	~~May 31, 2020~~
~~Lease liabilities, current (1)~~	$	~~4,154~~
~~Lease liabilities, non-current~~	~~40,935~~
~~Total lease liability~~	$	~~45,089~~

~~(1) Included as part of "Accrued expenses and other current liabilities" on the condensed consolidated balance sheet.~~

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~~Note 5 - Assets~~Liabilities Held for Sale

During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our ~~mass market personal care business.~~Personal Care business and accordingly, we classified the identified net assets of the disposal group as held for sale. The net assets to be disposed of include intangible assets, inventory, ~~and~~certain net trade receivables, fixed assets and certain accrued sales discounts and allowances relating to our mass channel liquids, powder and aerosol products under brands such as Pert, Brut, Sure and Infusium. ~~We expect~~The Personal Care divestiture was completed during the ~~divestiture to occur within~~second quarter of fiscal ~~2021 and have classified the identified assets of the disposal group as held~~2022. See Note 16 for ~~sale. The business is currently being marketed and the process is ongoing.~~additional information.

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The carrying amounts of the major classes of assets and liabilities for ~~the personal care~~our Personal Care business that were classified as held for sale are as follows:


(in thousands)	(in thousands)	May 31, 2020		February 29, 2020		(in thousands)	May 31, 2021		February 28, 2021
Assets:
Receivables, net of allowance of $89 and $30						Receivables, net of allowance of $89 and $30	$	16,415	$	7,979
Inventory	Inventory	$	13,140	$	17,150	Inventory	13,010		12,667
Property and equipment, net of accumulated depreciation of $403	Property and equipment, net of accumulated depreciation of $403	83		83		Property and equipment, net of accumulated depreciation of $403	100		100
Goodwill		9,849		9,849
Goodwill, net of accumulated impairment of $80,445						Goodwill, net of accumulated impairment of $80,445	1,397		1,397
Other intangible assets, net of accumulated amortization of $4,474	Other intangible assets, net of accumulated amortization of $4,474	17,724		17,724		Other intangible assets, net of accumulated amortization of $4,474	17,724		17,724
Total assets held for sale		$	40,796	$	44,806
Assets held for sale						Assets held for sale	$	48,646	$	39,867

Accrued sales discounts and allowances						Accrued sales discounts and allowances	$	5,757	$	0
Liabilities held for sale						Liabilities held for sale	$	5,757	$	0

Note 64 - ~~Supplemental Balance Sheet Information~~Accrued Expenses and Other Current Liabilities

~~PROPERTY AND EQUIPMENT~~A summary of accrued expenses and other current liabilities is as follows:

(in thousands) Estimated
Useful Lives
(Years) May 31, 2020 February 29, 2020
Land - $ 12,644 $ 12,644
Building and improvements 3 - 40 115,744 115,592
Computer, software, furniture and other equipment 3 - 15 90,327 89,257
Tools, molds and other production equipment 3 - 7 41,276 37,652
Construction in progress - 10,282 9,302
Property and equipment, gross 270,273 264,447
Less accumulated depreciation (136,898) (132,340)
Property and equipment, net $ 133,375 $ 132,107

~~ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES~~

(in thousands) May 31, 2020 February 29, 2020
Accrued compensation, benefits and payroll taxes $ 27,368 $ 49,624
Accrued sales discounts and allowances 30,716 34,176
Accrued sales returns 23,051 22,972
Accrued advertising 35,034 31,351
Other 54,239 45,034
Total accrued expenses and other current liabilities $ 170,408 $ 183,157

~~Note 7 - Acquisitions~~

~~Drybar Products Acquisition -~~ On January 23, 2020, we completed the acquisition of Drybar Products for approximately $255.9 million in cash, subject to certain customary closing adjustments. Acquisition-related expenses incurred during fiscal 2020 were approximately $2.5 million before tax. The purchase price was funded by borrowings under the Company's revolving credit agreement.

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Drybar is a fast-growing, innovative, trend-setting prestige hair care and styling brand in the multi-billion-dollar beauty industry. As part of the transaction, we granted a worldwide license to Drybar Holdings LLC, the owner and long-time operator of Drybar blowout salons, to use the Drybar trademark in their continued operation of Drybar salons. The salons will exclusively use, promote, and sell Drybar products globally.

We accounted for the acquisition as a purchase of a business and recorded the excess purchase price as goodwill. We completed our analysis of the economic lives of the assets acquired and determined the appropriate fair values of the acquired assets. We assigned $30.0 million to trade names and are amortizing over a 15 year expected life. We assigned $17.0 million to customer relationships and are amortizing over a 14.5 year expected life. We used historical attrition rates to assign the expected life. We assigned $10.0 million to a consulting agreement and $6.0 million to a non-compete provision, and we are amortizing these assets over expected lives of 5 and 10 years, respectively.

~~The following schedule presents the net assets recorded upon the acquisition of Drybar Products on January 23, 2020:~~


~~(in thousands)~~
~~Assets:~~
~~Receivables~~	$	~~7,710~~
~~Inventory~~	~~16,603~~
~~Prepaid expenses and other current assets~~	~~190~~
~~Property and equipment~~	~~1,472~~
~~Goodwill~~	~~172,933~~
~~Trade names - definite~~	~~30,000~~
~~Other intangible assets - definite~~	~~33,000~~
~~Subtotal - assets~~	~~261,908~~
~~Liabilities:~~
~~Accounts payable~~	~~1,948~~
~~Accrued expenses~~	~~4,099~~
~~Subtotal - liabilities~~	~~6,047~~
~~Net assets recorded~~	$	~~255,861~~

The fair values of the above assets acquired and liabilities assumed were estimated by applying income and market approaches. Key assumptions include various discount rates based upon a 12.6% weighted average cost of capital; royalty rates used in the determination of trade names and customer relationship asset values of 5.0% and 3.0%, respectively; and a customer attrition rate used in the determination of customer relationship values of 6.7% per year.


(in thousands)	May 31, 2021		February 28, 2021
Accrued compensation, benefits and payroll taxes	$	26,089	$	66,385
Accrued sales discounts and allowances	57,758		59,426
Accrued sales returns	30,344		29,434
Accrued advertising	45,528		50,923
Other	72,885		65,011
Total accrued expenses and other current liabilities	$	232,604	$	271,179

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~~Note 8 - Goodwill and Intangible Assets~~

We perform annual impairment tests each fiscal year during the fourth quarter and interim impairment tests, if and when necessary. We did not record any impairment charges during the first quarters of fiscal 2021 or 2020.

~~The following table summarizes the carrying amounts and accumulated amortization for all intangible assets by segment as of the end of the periods presented:~~

May 31, 2020 February 29, 2020
(in thousands) Gross
Carrying
Amount Cumulative
Goodwill
Impairments Accumulated
Amortization Net Book
Value Gross
Carrying
Amount Cumulative
Goodwill
Impairments Accumulated
Amortization (1) Net Book
Value
Housewares:
Goodwill $ 282,056 $ — $ — $ 282,056 $ 282,056 $ — $ — $ 282,056
Trademarks - indefinite 134,200 — — 134,200 134,200 — — 134,200
Other intangibles - finite 42,544 — (21,969) 20,575 42,095 — (21,469) 20,626
Subtotal 458,800 — (21,969) 436,831 458,351 — (21,469) 436,882
Health & Home:
Goodwill 284,913 — — 284,913 284,913 — — 284,913
Trademarks - indefinite 54,000 — — 54,000 54,000 — — 54,000
Licenses - finite 17,050 — (15,840) 1,210 17,050 — (15,752) 1,298
Licenses - indefinite 7,400 — — 7,400 7,400 — — 7,400
Other intangibles - finite 118,294 — (100,504) 17,790 118,223 — (98,142) 20,081
Subtotal 481,657 — (116,344) 365,313 481,586 — (113,894) 367,692
Beauty:
Goodwill 172,932 — — 172,932 244,925 (71,993) — 172,932
Trademarks - finite 30,151 — (824) 29,327 33,392 — (3,564) 29,828
Licenses - finite 13,697 — (12,879) 818 13,697 — (12,800) 897
Other intangibles - finite 33,036 — (1,356) 31,680 79,171 — (46,549) 32,622
Subtotal 249,816 — (15,059) 234,757 371,185 (71,993) (62,913) 236,279
Total $ 1,190,273 $ — $ (153,372) $ 1,036,901 $ 1,311,122 $ (71,993) $ (198,276) $ 1,040,853

~~(1)~~Reflects the retirement and reclassification of accumulated amortization of $49.4 million related to impaired assets and assets held for sale related to the personal care business in the Beauty segment.

The following table summarizes the amortization expense attributable to intangible assets recorded in SG&A in the condensed consolidated statements of income for the periods shown below, as well as our estimated amortization expense for fiscal 2021 through 2026:


~~Aggregate Amortization Expense~~
~~For the three months ended~~ ~~(in thousands)~~
~~May 31, 2020~~	$	~~4,474~~
~~May 31, 2019~~	~~3,876~~


~~Estimated Amortization Expense(in thousands)~~
~~Fiscal 2021~~	$	~~16,651~~
~~Fiscal 2022~~	~~10,317~~
~~Fiscal 2023~~	~~10,243~~
~~Fiscal 2024~~	~~9,858~~
~~Fiscal 2025~~	~~9,194~~
~~Fiscal 2026~~	~~7,210~~

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Note 95 - Share-Based Compensation Plans

~~We have equity awards outstanding under several~~As part of our compensation structure, we grant share-based compensation ~~plans.~~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 ~~three months ended May 31, 2020,~~first quarter of fiscal 2022, we ~~had the following share-based compensation activity:~~

•~~We issued 1,064 shares to non-employee Board members~~granted 83,227 service condition awards (“Service Condition Awards”) with a ~~total~~weighted average grant date fair value of ~~$0.2 million~~$219.02. Additionally we granted 143,340 performance-based awards during the first quarter of fiscal 2022, of which 71,670 contained performance conditions (“Performance Condition Awards”) and ~~an average share price of $171.25.~~

•~~We granted time-vested restricted stock units ("RSUs"~~71,670 contained market conditions (“Market Condition Awards”) ~~that may be settled for 2,708 shares of common stock~~ with a weighted average grant ~~price of $170.27 per share for a total award fair value at date of grant of $0.5 million.~~

•We granted time-vested restricted stock awards ("RSAs") that may be vested for 36,248 shares of common stock with a weighted average grant price of $170.35 per share and a total award fair value at date of grant of $6.2 million.

•We granted performance-based restricted stock units ("PSUs") that may be settled for 4,970 shares of common stock with a weighted average grant price of $170.27 per share and a total award fair value at date of grant of $0.8 million.

•We granted performance-based restricted stock awards ("PSAs") that are targeted to be vested for 86,004 shares of common stock with a weighted average grant price of $170.27 per share and a total award fair value at date of grant of $14.6 million.

•~~RSUs for 46,091 shares vested and settled, with a total fair value at settlement of $7.6 million, and an average share price of $164.48 per share.~~

•~~PSUs for 112,720 shares vested and settled, with a total grant~~ date fair ~~value~~values of ~~$18.6 million,~~$216.20 and ~~an average share price of $164.58 per share.~~

•~~RSAs~~$156.08, respectively. Refer to our Form 10-K for ~~5,462 shares vested, with a total fair value at settlement of $0.9 million, and an average share price of $164.23 per share.~~

•~~Employees exercised stock options to purchase 8,440 shares of common stock.~~

•~~There were purchases of 14,566 shares of common stock under~~further information on the ~~employee stock purchase plan at an average price of $130.48 per share.~~Company's share-based compensation plans.

We recorded ~~the following~~ share-based compensation expense in SG&A ~~for the periods shown below:~~ as follows:

Three Months Ended May 31,
(in thousands, except per share data) 2020 2019
Stock options $ 12 $ 116
Directors stock compensation 182 140
Performance based and other stock awards 8,611 7,023
Employee stock purchase plan 486 325
Share-based compensation expense 9,291 7,604
Less income tax benefits (606) (577)
Share-based compensation expense, net of income tax benefits $ 8,685 $ 7,027
Impact of share-based compensation on earnings per share:
Basic $ 0.34 $ 0.28
Diluted $ 0.34 $ 0.28


	Three Months Ended May 31,
(in thousands)	2021		2020
Stock options	$	0	$	12
Directors stock compensation	160		182
Service Condition Awards	1,940		1,920
Performance Condition Awards	10,023		6,691
Market Condition Awards	1,129		0
Employee stock purchase plan	768		486
Share-based compensation expense	14,020		9,291
Less income tax benefits	(859)		(606)
Share-based compensation expense, net of tax	$	13,161	$	8,685

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Unrecognized Share-Based Compensation Expense

As of May 31, 2021, our total unrecognized share-based compensation for all awards was $47.4 million, which will be recognized over a weighted average amortization period of 2.5 years. The total unrecognized share-based compensation reflects an estimate of target achievement for Performance Condition Awards granted during the first quarter of fiscal 2022 and fiscal 2021, and an estimate of 200% of target achievement for Performance Condition Awards granted in fiscal 2020.

Note 106 - ~~Repurchase~~Repurchases of ~~Helen of Troy~~ Common Stock

In May 2019, ~~we announced that~~ our Board of Directors authorized the repurchase of up to $400 million of our outstanding common stock.The authorization ~~was~~is effective until May ~~8, 2019 for a period of three years~~2022 and replaced ~~Helen of Troy's previous~~our former repurchase authorization, of which approximately $107.4 million remained. These repurchases may include open market purchases, privately negotiated transactions, block trades, accelerated stock repurchase transactions, or any combination of such methods. The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities.authorization. As of May 31, ~~2020,~~2021, our repurchase authorization allowed for the purchase of ~~$383.0~~$79.6 million of common stock.

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 equity holder can be ~~paid for~~settled by having the ~~equity~~ holder tender back to ~~the Company~~us a number of shares at fair value equal to the amounts due. Net exercises are treated as purchases and retirements of shares.

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


		Three Months Ended May 31,							Three Months Ended May 31,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2020		2019		(in thousands, except share and per share data)	2021		2020
Common stock repurchased on the open market:	Common stock repurchased on the open market:							Common stock repurchased on the open market:
Number of shares	Number of shares	—		—		Number of shares	436,842		0
Aggregate value of shares	Aggregate value of shares	$	—	$	—	Aggregate value of shares	$	95,484	$	0
Average price per share	Average price per share	$	—	$	—	Average price per share	$	218.58	$	0

Common stock received in connection with share-based compensation:	Common stock received in connection with share-based compensation:									Common stock received in connection with share-based compensation:
Number of shares	Number of shares	60,845		68,204		Number of shares	65,644		60,845
Aggregate value of shares	Aggregate value of shares	$	10,013	$	8,788	Aggregate value of shares	$	14,590	$	10,013
Average price per share	Average price per share	$	164.56	$	128.85	Average price per share	$	222.26	$	164.56

Note 117 - Restructuring Plan

In October 2017, we announced ~~that we had approved~~ a restructuring plan (referred to as “Project Refuel”) intended to ~~improve the~~enhance performance primarily in the Beauty and former Nutritional Supplements segments. Project Refuel includes charges for a reduction-in-force and the elimination of certain contracts. During the first quarter of fiscal 2019, we expanded Project Refuel to include the realignment and streamlining of our supply chain structure. We are targeting total annualized profit improvements of approximately ~~$9.0~~$10.5 million to ~~$11.0~~$12.5 million over the duration of the plan. We estimate the plan ~~will~~to be completed during fiscal ~~2021,~~2022 and expect to incur total restructuring charges of approximately ~~$9.5~~$10.3 million over the duration of the ~~plan.~~plan, of which $9.2 million have been incurred through the first quarter of fiscal 2022. Restructuring provisions are determined based on estimates prepared at the time the restructuring actions are approved by management and are revised periodically.

~~For the three month period ended May 31, 2020, we~~We incurred ~~pre-tax restructuring charges of~~an insignificant amount and $0.3 ~~million. Since implementing Project Refuel, we have incurred $9.0~~ million of pre-tax restructuring costs ~~as of~~during the three months ended May 31, ~~2020.~~2021 and May 31, 2020, respectively, which are recorded as “Restructuring

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charges” in the condensed consolidated statements of income. During the three month period ended May 31, ~~2020,~~2021, we made total cash restructuring payments of ~~$0.6~~$0.1 million. Since implementing Project Refuel, we have made total cash restructuring payments of ~~$8.6 million. We had a remaining liability of $0.5~~$9.2 million as of May 31, ~~2020.~~2021.

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Note 128 - 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.~~liquidity, except as described below.

~~Note 13 - Long-Term Debt~~Regulatory Matters

~~Credit Agreement -~~As a global company, we are subject to U.S. and foreign regulations, including environmental, health and

safety laws, and industry-specific product certifications. Many of ~~February 29, 2020,~~the products we ~~had a credit agreement~~sell are subject to

product safety laws and regulations in various jurisdictions. These laws and regulations specify the

maximum allowable levels of certain materials that may be contained in our products, provide statutory

prohibitions against misbranded and adulterated products, establish ingredients and manufacturing

procedures for certain products, specify product safety testing requirements, and set product

identification, labeling and claim requirements. Additionally, some of our product lines within our Health & Home segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the U.S. Environmental Protection Agency (the ~~“Credit Agreement”~~“EPA”) ~~with Bank of America, N.A.~~, ~~as administrative agent,~~U.S. Customs and other lenders that provided for an unsecured total revolving commitment of $1.0 billion. Borrowings accrued interest under one of two alternative methods (based upon a base rate or LIBOR) as described inBorder Protection, the ~~Credit Agreement. With each borrowing against our credit line, we could elect~~U.S. Food and Drug Administration, and the interest rate method based on our funding needs at the time. We also incurred loan commitment and letter of credit fees under the Credit Agreement. Outstanding letters of credit reduced the borrowing availability under the Credit Agreement on a dollar-for-dollar basis. We were able to repay amounts borrowed at any time without penalty.U.S. Consumer Product Safety Commission.

~~On March 13, 2020,~~We are currently in discussions with the EPA regarding the compliance of packaging claims on certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Health & Home segment that are sold in the U.S. The EPA has not raised any product quality, safety or performance issues. We expect these products to be available for distribution with the only changes being modified labeling or different packaging. As a result of these discussions, on May 27, 2021, we ~~entered into~~voluntarily implemented a temporary stop shipment action across this line of products in the U.S. while we ensure that all labeling is in compliance and we work with the EPA towards an ~~amendment~~expedient resolution. The EPA has approved modest changes to our labeling claims on our existing water filtration packaging, which we have begun to implement. We resumed shipment of these products and are actively working towards similar agreements regarding our air filtration and humidification packaging in continued collaboration with the ~~Credit Agreement. The amendment extended~~EPA. At our request, the ~~maturity~~EPA issued a Stop Sale, Use or Removal Order on June 29, 2021, which, among other things, allows for the movement of certain of our products among our warehouses and will facilitate rework of the ~~commitment under~~affected air filtration packaging once agreed to with the ~~Credit Agreement from December 7, 2021~~EPA. We believe this is meaningful progress towards a final resolution with the EPA. The stop shipment will remain in effect until we implement an approved labeling and repackaging plan. We expect that our consolidated and Health & Home segment’s fiscal 2022 net sales revenue, gross profit and operating income will be materially and adversely impacted by the stop shipment. At this time, we are not aware of any fines or penalties related to ~~March 13, 2025. Further,~~this matter imposed against us by the amendment increased the unsecured revolving commitment from $1.0 billion to $1.25 billion. The accordion was amended to increase it from $200 million to $300 million and to include the ability to use it for term loan commitments. The accordion permits the Company to request to increase its borrowing capacity,EPA. While we do not ~~to exceed the $300 million commitment in the aggregate, provided certain conditions are met, including lender approval. Any increase to term loan commitments and revolving loan commitments must~~anticipate material fines or penalties, there can be ~~made on terms identical to the revolving loans under the Credit Agreement and must have a maturity date of~~ no ~~earlier than March 13, 2025. Following the amendment, borrowings under the Credit Agreement bear interest at either the base rate~~assurances that such fines or ~~LIBOR, plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0%, respectively, for base rate and LIBOR borrowings.~~penalties will not be imposed.

AsIn addition, during the first quarter of ~~May 31, 2020,~~fiscal 2022, we recorded a $13.1 million charge to write-off the ~~outstanding revolving loan principal balance~~obsolete packaging for the affected products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022. The charge was ~~$311.0 million (excluding prepaid financing fees)~~ recognized in cost of goods sold and ~~the balance of outstanding letters of credit was $9.0 million. For the three months ended May 31, 2020, borrowings under the Credit Agreement incurred interest expense at rates ranging from 1.2%~~is referred to 4.8%. As of May 31, 2020, the amount available for borrowings under the Credit Agreement was $930.0 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur. As of May 31, 2020, these covenants effectively limited our abilitythroughout this Form 10-Q as “EPA compliance costs.” We expect to incur ~~more than $731.7 million of~~ additional ~~debt from all sources, including the Credit Agreement,~~compliance costs, which may include costs to relabel or ~~$930.0 million in the event a qualified acquisition is consummated.~~

~~Other Debt Agreements -~~ As of May 31, 2020, we have an aggregate principal balance of $18.6 million (excluding prepaid financing fees) under a loan agreement (the “MBFC Loan”) with the Mississippi Business Finance Corporation (the “MBFC”), which was enteredrepackage our existing inventory as well as incremental freight and storage costs, among other things. Costs to relabel or repackage our existing inventory will be capitalized into ~~in connection with the issuance by MBFC of taxable industrial development revenue bonds (the “Bonds”).~~ The borrowings were used to fund construction of our Olive Branch, Mississippi distribution facility. Since March 2018, the MBFC Loan can be called by the holder at any time. The remaining loan balance is payable as follows: $1.9 million annually on March 1, 2021 and 2022; and $14.8 million on March 1, 2023. Any remaining outstanding principal and interest is due upon maturity on March 1, 2023.

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~~lenders. Certain~~inventory; however, many of the ~~representations~~other potential incremental EPA compliance costs will be expensed as incurred and ~~warranties,~~could materially and ~~covenants~~adversely impact our consolidated and Health & Home segment’s gross profit and operating income. Additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today. Accordingly, our business, results of operations and financial condition could be adversely and materially impacted by our actions or in ~~the Guaranty Agreement were amended by the Amended Guaranty~~ways that we are not able to ~~include or modify certain baskets, exceptions and other customary provisions.~~

~~The Bonds were issued under a Trust Indenture, dated as of March 1, 2013 (as supplemented, the “Indenture”)~~predict today. For additional information refer to Part I, Item 2., by and between MBFC and U.S. Bank National Association, as trustee (the “Trustee”). On May 14, 2020, MBFC and U.S. Bank National Association, as Trustee, entered into the Fifth Supplemental Trust Indenture, effective May 14, 2020 (the “Fifth Supplemental Indenture”), with the consent of Kaz USA, Inc. (“Kaz USA”) and Bank of America, N.A., the purchaser of the Bonds. The Base Rate (as defined in the Indenture) and Eurodollar Rate (as defined in the Indenture) each was amended. As amended by the Fifth Supplemental Indenture, the Bonds and the related loans to Kaz USA will bear interest at a Base Rate or Eurodollar Rate plus a margin based on the Net Leverage Ratio (as defined in the Fifth Supplemental Indenture). The Fifth Supplemental Indenture amended the pricing grid for the Eurodollar and Base Rate margins.

All of our debt is unconditionally guaranteed, on a joint and several basis, by the Company and certain of its subsidiaries. Our debt agreements require the maintenance of certain key financial covenants defined in the accompanying Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations, ~~on page 39. Our debt agreements also contain other customary covenants,~~” including among other things, covenants restricting or limiting us, except under certain conditions set forth therein, from (1) incurring debt, (2) incurring liens on our properties, (3) making certain types of investments, (4) selling certain assets or making other fundamental changes relating“EPA Compliance Costs” and to mergers and consolidations, and (5) repurchasing shares of our common stock and paying dividends. Our debt agreements also contain customary events of default, including failure to pay principal or interest when due, among others. Our debt agreements are cross-defaulted to each other. Upon an event of default under our debt agreements, the holders or lenders may, among other things, accelerate the maturity of any amounts outstanding under our debt agreements. 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.Part II, Item 1A., “Risk Factors” included within this Form 10-Q.

~~As of May 31, 2020, we were in compliance with all covenants as defined under the terms of the Credit Agreement and our other debt agreements.~~

Note 9 - Long-Term Debt

~~The following table summarizes~~A summary of our long-term debt ~~as of the end of the periods shown:~~follows:

(in thousands) May 31, 2020 February 29, 2020
MBFC Loan (1) $ 18,540 $ 20,451
Credit Agreement (2) 306,343 318,854
Total long-term debt 324,883 339,305
Less current maturities of long-term debt (1,884) (1,884)
Long-term debt, excluding current maturities $ 322,999 $ 337,421


(in thousands)	May 31, 2021		February 28, 2021
Mississippi Business Finance Corporation Loan (the “MBFC Loan”) (1)	$	16,708	$	18,607
Credit Agreement (2)	498,000		329,000
Subtotal	514,708		347,607
Unamortized prepaid financing fees	(3,734)		(3,977)
Total long-term debt	510,974		343,630
Less: current maturities of long-term debt	(1,884)		(1,884)
Long-term debt, excluding current maturities	$	509,090	$	341,746

(1)The MBFC Loan is unsecured and bears floating interest based on either ~~LIBOR~~the London Interbank Offered Rate (“LIBOR”) plus a margin of up to 2.0%, or a Base Rate plus a margin of up to 1.0%, as determined by the interest rate elected and the ~~net leverage ratio~~Net Leverage Ratio defined in the Indenture. ~~Since March 2018, the loan may be called by the holder~~The weighted average interest rate on borrowings outstanding was1.1% at ~~any time. The loan can be prepaid without penalty. The remaining principal balance is payable as follows: $1.9 million annually on March 1,~~both May 31, 2021 and ~~2022; and $14.8 million on March 1, 2023. Any remaining outstanding principal and interest is due upon maturity on March 1, 2023.~~February 28, 2021.

(2)The Credit ~~Agreement's~~ Agreement (defined below) is unsecured and bears floating interest at either the Base Rate or LIBOR, plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0% for Base Rate and LIBOR borrowings, respectively. These floating interest rates are hedged with interest rate swaps to effectively fix interest rates on $225 million of the outstanding principal balance under the Credit Agreement (see Notes ~~14, 15~~10, 11, and 1612 for additional information regarding interest rate swaps). The weighted average interest rate on borrowings outstanding was 1.1% at both May 31, 2021 and February 28, 2021.

AtCredit Agreement

We have a credit agreement (the "Credit Agreement") with Bank of America, N.A., as administrative agent, and other lenders that provides for an unsecured total revolving commitment of $1.25 billion. As of May 31, ~~2020~~2021, the balance of outstanding letters of credit was $19.2 million and ~~February 29, 2020,~~the amount available for borrowings was $732.8 million. Covenants in the Credit Agreement limit the amount of total indebtedness we can incur. As of May 31, 2021, these covenants did not limit our ~~long-term~~ability to incur $732.8 million of additional debt ~~has floating interest rates,~~under the Credit Agreement.

Debt Covenants

As of May 31, 2021, we were in compliance with all covenants as defined under the terms of the Credit Agreement and ~~its book~~our other debt agreements.

Note 10 - Fair Value

Fair value ~~approximates its 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

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~~Note 14 - Fair Value~~

~~We classify our various assets and liabilities recorded or reported at fair value under a hierarchy prescribed by GAAP that prioritizes inputs~~the accounting guidance related to fair value ~~measurement techniques~~measurements are based on observable and unobservable inputs. These inputs are classified into ~~three broad levels:~~the following hierarchy:

Level 1:~~Observable inputs such as quoted~~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

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

Assets and liabilities subject to classification are classified upon acquisition. When circumstances dictate the transfer of an asset or liability to a different level, our policy is to recognize the transfer at the beginning of the reporting period in which the event resulting in the transfer occurred.

~~The following tables present the fair value of our financial assets and liabilities measured on a recurring basis as of the end of the periods shown:~~

Fair Values (1)
(in thousands) May 31, 2020 February 29, 2020
Assets:
Money market accounts $ 62,351 $ 2,648
Interest rate swaps — —
Foreign currency contracts 2,373 2,083
Total assets $ 64,724 $ 4,731

Liabilities:
Floating rate debt $ 324,883 $ 339,305
Interest rate swaps 14,123 10,717
Foreign currency contracts 400 159
Total liabilities $ 339,406 $ 350,181

~~(1)~~Our financial assets and liabilities 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. The following tables present the carrying amount and fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis and classified as Level 2 as follows:


	Carrying Amount and Fair Value

(in thousands)	May 31, 2021		February 28, 2021
Assets:
Cash equivalents (money market accounts)	$	1,602	$	1,631

Foreign currency derivatives	0		33
Total assets	$	1,602	$	1,664

Liabilities:

Interest rate swaps	$	8,947	$	9,941
Foreign currency derivatives	8,612		6,550
Total liabilities	$	17,559	$	16,491

The carrying amounts of cash, accounts payable, accrued expenses and ~~cash equivalents, receivables~~other current liabilities and ~~accounts~~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 debt approximates its fair value.

We use derivatives ~~for hedging purposes and~~to manage our ~~derivatives are primarily interest rate swaps,~~exposure to changes in foreign currency exchange rates, which can include foreign currency forward contracts, zero cost collars and cross-currency debt swaps. In addition, we use interest rate swaps to manage our exposure to changes in interest rates. All of our derivative assets and liabilities are recorded at fair value. See Notes ~~13, 15~~11 and ~~16 to these condensed consolidated financial statements~~12 for more information on our ~~hedging activities.~~

We classify our floating rate debt as a Level 2 item because the estimation of the fair market value requires the use of a discount rate based upon current market rates of interest for obligations with comparable remaining terms. Such comparable rates are considered significant other observable market inputs. The book value of the floating rate debt approximates its fair value as of the reporting date.

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Our other non-financial assets include goodwill, other intangible assets and assets held for sale, which we classify as Level 3 items. These assets are measured at fair value on a non-recurring basis as part of our impairment testing. Note 8 to these condensed consolidated financial statements contains additional information related to goodwill and intangible assets, and our impairment testing.derivatives.

Note 1511 - Financial Instruments and Risk Management

Foreign Currency Risk

~~- Our~~

The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the ~~U.S. Dollar.~~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, certain inventory purchases and operating expenses. As a result of such transactions, portions of our cash, trade accounts receivable and trade accounts payable are denominated in foreign currencies. ~~During~~Approximately 12% and 15% of our net sales revenue was

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denominated in foreign currencies during the three month periods ended May 31, ~~2020~~2021 and ~~2019, approximately 15% and 12% of our net sales revenue was in foreign currency,~~2020, respectively. These sales were primarily denominated in ~~Euros,~~ British Pounds, Euros, Mexican Pesos and Canadian ~~Dollars and Mexican Pesos.~~Dollars. We make most of our inventory purchases from vendors in the ~~Far East~~Asia Pacific market 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 taxes receivable, taxes payable, deferred tax assets, and deferred tax liabilities are recognized in their respective income tax lines, and all other foreign currency exchange rate gains and losses are recognized in SG&A. WeDuring the three month period ended May 31, 2021, we recorded ~~net exchange gains (losses) from~~ foreign currency ~~fluctuations, including the impact~~exchange rate net gains of ~~currency hedges and cross-currency debt swaps, of $(1.7) million and $0.8~~$0.4 million in SG&A ~~during~~compared to foreign currency exchange rate net losses of $1.7 million for the ~~three months ended May 31, 2020 and 2019, respectively.~~same period last year.

We ~~hedge against~~mitigate certain foreign currency exchange ~~rate-risk~~rate risk by using a series of foreign currency contracts, which can include forward contracts and zero-cost collars, designated as cash flow hedges, and mark-to-market ~~derivatives~~cross-currency debt swaps to protect against the foreign currency exchange rate risk inherent in our forecasted transactions denominated in ~~currencies other than the U.S. Dollar.~~foreign currencies. We do not enter into any ~~forward exchange contracts~~derivatives or similar instruments for trading or other speculative purposes. ~~The effective portion of~~Our foreign currency contracts are designated as cash flow hedges and are recorded on the balance sheet at fair value with changes in fair value recorded in Other Comprehensive Loss (“OCI”) until the hedge transaction is settled, at which point amounts are reclassified from Accumulated Other Comprehensive Loss (“AOCI”) to our condensed consolidated statements of ~~these instruments is reported in OCI~~income. Derivatives for which we have not elected hedge accounting consist of our cross-currency debt swaps, and ~~reclassified into SG&A~~any changes in the ~~same period they~~fair value of the derivatives are ~~settled. The ineffective portion,~~recorded in our condensed consolidated statements of income. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness. Any ineffectiveness, which is not material for any year presented, is immediately recognized in ~~SG&A.~~our condensed consolidated statements of income.

Interest Rate Risk

Interest on our outstanding debt as of May 31, ~~2020~~2021 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 $225.0 million of the outstanding principal balance under the Credit Agreement, which totaled ~~$311.0~~$498.0 million ~~(excluding prepaid finance fees)~~ as of May 31, ~~2020.~~2021. 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. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness. Any ineffectiveness, which is not material for any year presented, is immediately recognized in our condensed consolidated statements of income.

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

(in thousands) May 31, 2020

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
Zero-cost collar - Euro Cash flow 02/2021 € 6,500 $ 58 $ — $ — $ —
Foreign currency contracts - sell Euro Cash flow 02/2022 € 34,125 708 102 — —
Foreign currency contracts - sell Canadian Dollar Cash flow 09/2021 $ 21,250 310 — — 47
Zero-cost collar - Pound Cash flow 02/2021 £ 5,500 69 — — —
Foreign currency contracts - sell Pound Cash flow 02/2022 £ 15,935 945 181 — —
Foreign currency contracts - sell Mexican Peso Cash flow 08/2020 $ 10,000 — — 45 —
Foreign currency contracts - sell Australian Dollar Cash flow 08/2020 $ 1,000 — — 18 —
Interest rate swaps Cash flow 01/2024 $ 225,000 — — 5,045 9,078
Subtotal 2,090 283 5,108 9,125
Derivatives not designated under hedge accounting
Foreign currency contracts - cross-currency debt swaps - Euro (1) 04/2022 € 6,000 — — — 237
Foreign currency contracts - cross-currency debt swaps - Pound (1) 04/2022 £ 4,500 — — — 53
Subtotal — — — 290
Total fair value $ 2,090 $ 283 $ 5,108 $ 9,415


(in thousands)	May 31, 2021
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	2/2023	€	43,750	0		0		1,867		241
Forward contracts - sell Canadian Dollars	Cash flow	2/2023	$	46,750	0		0		1,857		251
Forward contracts - sell Pounds	Cash flow	2/2023	£	38,800	0		0		2,399		274


Forward contracts - Sell Australian Dollars	Cash flow	11/2021	A$	4,000	0		0		20		0
Interest rate swaps	Cash flow	1/2024	$	225,000	0		0		4,011		4,936
Subtotal					0		0		10,154		5,702

Derivatives not designated under hedge accounting
Cross-currency debt swaps - Euro	(1)	04/2022	€	6,000	0		0		863		0
Cross-currency debt swaps - Pounds	(1)	04/2022	£	4,500	0		0		840		0
Subtotal					0		0		1,703		0
Total fair value					$	0	$	0	$	11,857	$	5,702

(in thousands) February 29, 2020

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
Zero-cost collar - Euro Cash flow 02/2021 € 8,000 $ 74 $ — $ — $ —
Foreign currency contracts - sell Euro Cash flow 05/2021 € 25,875 837 — — 15
Foreign currency contracts - sell Canadian Dollar Cash flow 02/2021 $ 14,000 202 — — —
Zero-cost collar - Pound Cash flow 02/2021 £ 6,500 — — 144 —
Foreign currency contracts - sell Pound Cash flow 05/2021 £ 13,000 435 23 — —
Foreign currency contracts - sell Mexican Peso Cash flow 05/2020 $ 10,000 12 — — —
Interest rate swaps Cash flow 01/2024 $ 225,000 — — 3,489 7,228
Subtotal 1,560 23 3,633 7,243
Derivatives not designated under hedge accounting
Foreign currency contracts - cross-currency debt swaps - Euro (1) 04/2020 € 4,400 473 — — —
Foreign currency contracts - cross-currency debt swaps - Pound (1) 04/2020 £ 5,000 27 — — —
Subtotal 500 — — —
Total fair value $ 2,060 $ 23 $ 3,633 $ 7,243


(in thousands)	February 28, 2021
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	2/2022	€	39,000	0		0		1,851		0
Forward contracts - sell Canadian Dollars	Cash flow	2/2023	$	34,000	0		33		1,061		0

Forward contracts - sell Pounds	Cash flow	2/2023	£	34,500	0		0		2,026		21

Forward contracts - sell Australian Dollars	Cash flow	11/2021	A$	4,000	0		0		18		0
Interest rate swaps	Cash flow	1/2024	$	225,000	0		0		4,407		5,534
Subtotal					0		33		9,363		5,555

Derivatives not designated under hedge accounting
Cross-currency debt swaps - Euro	(1)	04/2022	€	6,000	0		0		0		817
Cross-currency debt swaps - Pounds	(1)	04/2022	£	4,500	0		0		0		756
Subtotal					0		0		0		1,573
Total fair value					$	0	$	33	$	9,363	$	7,128

(1)These ~~are foreign currency contracts~~cross-currency debt swaps, for which we have not elected hedge ~~accounting. We refer to them as “cross-currency debt swaps”. They, in effect,~~accounting, adjust the currency denomination of a portion of our outstanding debt to the Euro and British Pound, as applicable, for the notional amounts reported, creating an economic hedge against currency movements.

~~The following table summarizes the pre-tax effect of derivative instruments for the periods shown:~~

Three Months Ended May 31,
Gain (Loss)
Recognized in OCI
(effective portion) Gain (Loss) Reclassified from
Accumulated Other Comprehensive
Income (Loss) into Income Gain (Loss) Recognized
As Income
(in thousands) 2020 2019 Location 2020 2019 Location 2020 2019
Currency contracts - cash flow hedges $ 74 $ (186) SG&A $ (765) $ (1,218) $ — $ —
Interest rate swaps - cash flow hedges (3,407) (5,200) Interest expense — — Interest expense (726) 154
Cross-currency debt swaps - principal — — — — SG&A (149) 464
Cross-currency debt swaps - interest — — — — Interest Expense 74 74
Total $ (3,333) $ (5,386) $ (765) $ (1,218) $ (801) $ 692

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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 May 31,
	Gain (Loss) Recognized in AOCI		Gain (Loss) Reclassified from AOCI into Income
(in thousands)	2021			Location	2021
Foreign currency contracts - cash flow hedges	$	(3,191)		Sales revenue, net	$	(1,226)
Interest rate swaps - cash flow hedges	(290)			Interest expense	(1,284)


Total	$	(3,481)			$	(2,510)


	Three Months Ended May 31,
	Gain (Loss) Recognized in AOCI		Gain (Loss) Reclassified from AOCI into Income
(in thousands)	2020		Location	2020
Foreign currency contracts - cash flow hedges	$	1,604	SG&A	$	765
Interest rate swaps - cash flow hedges	(4,133)		Interest expense	(726)


Total	$	(2,529)		$	39

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


	Three Months Ended May 31,
	Gain (Loss) Recognized in Income
(in thousands)	Location	2021		2020
Cross-currency debt swaps - principal	SG&A	(129)		(149)
Cross-currency debt swaps - interest	Interest expense	(2)		74
Total		$	(131)	$	(75)

We expect ~~pre-tax losses~~a net loss of ~~$3.0~~$10.2 million associated with foreign currency contracts and interest rate swaps currently reported in ~~accumulated other comprehensive income,~~AOCI to be reclassified into income over the next twelve months. The amount ultimately realized, however, will differ as exchange rates ~~vary~~and interest rates change and the underlying contracts settle. See Notes 10 and 12 to these condensed consolidated financial statements for more information.

Counterparty Credit Risk

Financial instruments, including foreign currency contracts, ~~and~~ cross-currency debt swaps 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. ~~Although our theoretical credit risk is the replacement cost at the then-estimated fair value of these instruments, we~~We believe that the risk of incurring credit losses is remote.

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Note 1612 - Accumulated Other Comprehensive Income (Loss)

The ~~following table summarizes~~ changes in ~~accumulated other comprehensive income (loss)~~AOCI by component and related tax effects for the periods ~~shown:~~presented were as follows:


(in thousands)	(in thousands)	Interest Rate Swaps		Foreign Currency Contracts		Total		(in thousands)	Interest Rate Swaps		Foreign Currency Contracts		Total
Balance at February 28, 2019		$	132	$	1,059	$	1,191
Other comprehensive income (loss) before reclassification		(5,200)		(186)		(5,386)
Amounts reclassified out of accumulated other comprehensive income		—		1,218		1,218
Balance at February 29, 2020								Balance at February 29, 2020	$	(8,199)	$	1,194	$	(7,005)
Other comprehensive (loss) income before reclassification								Other comprehensive (loss) income before reclassification	(4,133)		1,604		(2,529)
Amounts reclassified out of AOCI								Amounts reclassified out of AOCI	726		(765)		(39)
Tax effects								Tax effects	800		(144)		656
Other comprehensive (loss) income								Other comprehensive (loss) income	(2,607)		695		(1,912)
Balance at May 31, 2020								Balance at May 31, 2020	$	(10,806)	$	1,889	$	(8,917)

Balance at February 28, 2021								Balance at February 28, 2021	$	(7,576)	$	(4,080)	$	(11,656)
Other comprehensive loss before reclassification								Other comprehensive loss before reclassification	(290)		(3,191)		(3,481)
Amounts reclassified out of AOCI								Amounts reclassified out of AOCI	1,284		1,226		2,510
Tax effects	Tax effects	1,207		(241)		966		Tax effects	(237)		411		174
Other comprehensive income (loss)	Other comprehensive income (loss)	(3,993)		791		(3,202)		Other comprehensive income (loss)	757		(1,554)		(797)
Balance at May 31, 2019		$	(3,861)	$	1,850	$	(2,011)

Balance at February 29, 2020		$	(8,199)	$	1,194	$	(7,005)
Other comprehensive income (loss) before reclassification		(3,407)		74		(3,333)
Amounts reclassified out of accumulated other comprehensive income		—		765		765
Tax effects		800		(144)		656
Other comprehensive income (loss)		(2,607)		695		(1,912)
Balance at May 31, 2020		$	(10,806)	$	1,889	$	(8,917)
Balance at May 31, 2021								Balance at May 31, 2021	$	(6,819)	$	(5,634)	$	(12,453)

See Notes ~~13, 14~~9, 10 and 1511 to these condensed consolidated financial statements for additional information regarding our ~~hedging activities.~~

cash flow hedges.

Note 1713 - Segment Information

The following tables ~~present~~summarize segment information for the periods ~~shown:~~presented:


		Three Months Ended May 31, 2020															Three Months Ended May 31, 2021
(in thousands)	(in thousands)	Housewares		Health & Home		Beauty (1)		Total		(in thousands)	Housewares		Health & Home		Beauty		Total
Sales revenue, net	Sales revenue, net	$	140,628	$	199,956	$	80,251	$	420,835	Sales revenue, net	$	193,644	$	204,096	$	143,483	$	541,223
Restructuring charges	Restructuring charges	238		—		95		333		Restructuring charges	0		0		6		6
Operating income	Operating income	23,233		31,533		2,213		56,979		Operating income	27,143		11,249		26,443		64,835
Capital and intangible asset expenditures	Capital and intangible asset expenditures	2,717		3,408		326		6,451		Capital and intangible asset expenditures	2,987		748		271		4,006
Depreciation and amortization	Depreciation and amortization	2,122		4,052		2,966		9,140		Depreciation and amortization	2,548		2,726		3,439		8,713

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Three Months Ended May 31, 2019
(in thousands) Housewares Health & Home Beauty Total
Sales revenue, net $ 144,942 $ 154,943 $ 76,450 $ 376,335
Restructuring charges 88 — 531 619
Operating income 31,200 15,056 951 47,207
Capital and intangible asset expenditures 2,867 680 171 3,718
Depreciation and amortization 1,613 4,313 1,841 7,767

~~(1)Includes the operating results from the Drybar Products acquisition, with no comparable results in the same period last year.~~

We compute segment operating income based on net sales revenue, less cost of goods sold, SG&A, restructuring charges, and any asset impairment charges associated with the segment. The SG&A used to compute each segment’s operating income is directly associated with the segment, plus shared service and corporate overhead expenses that are allocable to the segment. We do not allocate non-operating income and expense, including interest or income taxes, to operating segments.


	Three Months Ended May 31, 2020
(in thousands)	Housewares		Health & Home		Beauty		Total
Sales revenue, net	$	140,628	$	199,956	$	80,251	$	420,835
Restructuring charges	238		0		95		333

Operating income	23,233		31,533		2,213		56,979
Capital and intangible asset expenditures	2,717		3,408		326		6,451
Depreciation and amortization	2,122		4,052		2,966		9,140

Note 1814 - Income Taxes

~~Due to our organization~~We reorganized the Company in Bermuda in 1994 and ~~the ownership structure~~many of our foreign subsidiaries ~~many of which~~ are not ~~owned~~ directly or indirectly owned by a U.S. ~~parent company, an immaterial amount~~parent. As such, a large portion of our foreign income is not subject to U.S. taxation on a permanent basis under current law. Additionally, our intellectual property is largely owned by ~~our~~ foreign subsidiaries, resulting in proportionally higher earnings in jurisdictions with lower statutory tax

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rates, which decreases our overall effective tax rate. The taxable income earned in each jurisdiction, whether U.S. or foreign, is determined by the subsidiary's operating results and transfer pricing and tax regulations in the related jurisdictions.

For interim periods, our income tax expense and resulting effective tax rate are based upon an estimated annual effective tax rate adjusted for the effects of items required to be treated as discrete to the period, including changes in tax laws, changes in estimated exposures for uncertain tax positions and other items.

On March 11, 2021, the American Rescue Plan Act (the “ARM”) was enacted and signed into law. The ARM is an economic stimulus package in response to the COVID-19 outbreak which contains tax provisions that did not have a material impact to our condensed consolidated financial statements.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ~~(“CARES”~~Act (the “CARES Act”) ~~Act~~ was enacted and signed into law. The CARES Act is an emergency economic stimulus package in response to the COVID-19 outbreak that contains numerous tax provisions. Among other things, the CARES Act included technical corrections to the effective date language in the Tax Cuts and Jobs Act, enacted into law on December 22, 2017 (the “Tax Act”), related to net operating loss carrybacks.

Upon the enactment of the Tax Act in fiscal 2018, there was a net operating loss on our balance sheet, which was measured using the U.S. statutory tax rate in effect prior to enactment. As a result of the Tax Act, we were required to record a one-time charge of $17.9 million in fiscal 2018, which included a charge of $9.4 million to remeasure the net operating loss at the reduced rate at which it was expected to reverse in the future. The CARES Act effectively reversed the impact of the Tax Act on our net operating loss, resulting in a corresponding tax benefit of $9.4 million recorded in the first quarter of fiscal 2021.

For the three months ended May 31, ~~2020,~~2021, income tax ~~benefit~~expense as a percentage of income before income tax was ~~13.0%~~8.0% compared to an income tax ~~expense~~benefit of ~~7.6%~~13.0% for the same period last year, primarily due to ~~this benefit.~~the benefit of the CARES Act in fiscal 2021. Income tax ~~benefit~~expense for the three months ended May 31, 2020 also includes other discrete benefits to include reductions of U.S. BEAT tax (Base Erosion and Anti-Abuse) and GILTI tax (Global Intangible Low-Tax Income), the recognition of excess tax benefits from share-based compensation settlements, as well as shifts in2021 is driven by the mix of taxable income in our various tax ~~jurisdictions.~~

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~~vigorously protesting the assessment through administrative processes with the state. We believe~~ it is ~~unlikely that the outcome of these matters will have a material adverse effect on our consolidated financial position, results of operations, or liquidity.~~settled.

Our Macau subsidiary generates income from the sale of the goods that it has sourced and procured. This subsidiary is responsible for the sourcing and procurement of a large portion of the products that we sell. We ~~currently have~~previously had an indefinite tax holiday in Macau conditioned on the subsidiary meeting certain

employment and investment thresholds. The Macau Offshore Law and its supplementary regulations that

grant tax incentives to approved offshore institutions ~~will be~~was abolished on January 1, 2021. Existing approved offshore institutions such as ours ~~can continue~~continued to operate under the offshore regime until the end of the calendar year 2020. Beginning in calendar year 2021, our Macau subsidiary ~~will become~~transitioned to onshore status and is now subject to a statutory corporate income tax of ~~approximately~~ 12%. The ultimate impact of this change, if any, on our overall effective tax rate will depend on a variety of factors including our mix of income by jurisdiction, transfer pricing considerations and the specific tax regulations applicable to us when we are no longer under the Macau Offshore regime. We are in the process of completing our transfer pricing analysis to determine the impact, if any, on our financial statements. Because our Macau subsidiary is not directly or indirectly owned by a U.S. parent, there is no0 U.S. tax liability associated with the income generated in Macau.

Note 1915 - Earnings Per Share

We compute basic earnings per share using the weighted average number of shares of common stock

outstanding during the period. We compute diluted earnings per share using the weighted average

number of shares of common stock outstanding plus the effect of dilutive securities. Dilutive securities at any given point in time may consist of outstanding options to purchase common stock and issued and contingently issuable unvested ~~RSUs, PSUs, RSAs, PSAs~~restricted stock units, performance stock units, restricted stock awards and performance restricted stock awards and other stock based awards. Anti-dilutive securities are not included in the computation of diluted earnings per share under the treasury stock method. See Note 9 5

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to these condensed consolidated financial statements for more information regarding stock-based awards.

The following table presents our weighted average basic and diluted shares outstanding for the periods shown:


		Three Months Ended May 31,				Three Months Ended May 31,
(in thousands)	(in thousands)	2020	2019	(in thousands)	2021	2020
Weighted average shares outstanding, basic	Weighted average shares outstanding, basic	25,254	25,019	Weighted average shares outstanding, basic	24,349	25,254
Incremental shares from share-based compensation arrangements	Incremental shares from share-based compensation arrangements	143	226	Incremental shares from share-based compensation arrangements	287	143
Weighted average shares outstanding, diluted	Weighted average shares outstanding, diluted	25,397	25,245	Weighted average shares outstanding, diluted	24,636	25,397

Anti-dilutive securities	Anti-dilutive securities	262	352	Anti-dilutive securities	0	262

Note 16 - Subsequent Events

Divestiture of Personal Care Business

On June 7, 2021, we completed the sale of our Personal Care business, not including the Latin America and Caribbean regions, to HRB Brands LLC, for $44.7 million in cash. The sale also includes an option that provides HRB Brands LLC the right to purchase the Latin America and Caribbean Personal Care businesses no later than the end of fiscal 2022, subject to meeting certain agreed-upon conditions. The carrying amount of the identified assets and liabilities within the disposal group were classified as held for sale as of May 31, 2021. The transaction is not reflected in our condensed consolidated financial statements as of and for the period ended May 31, 2021. See Note 3 for additional information.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) ~~contains~~should be read in conjunction with our condensed consolidated financial statements included under Part I, Item 1., “Financial Statements.” The various sections of this MD&A contain a number of forward-looking statements, all of which are based on our current expectations. Actual results may differ materially due to a number of factors, including those discussed in Part II, Item 1A.,“Risk Factors,” and in the section entitled “Information Regarding Forward-Looking Statements” following this MD&A, and in Part I, Item ~~3 of this report.~~3., “Quantitative and Qualitative Disclosures ~~about~~About Market Risk” ~~and “Information Regarding Forward-Looking Statements”~~ in this report, ~~and~~as well as in Part II, Item IA., “Risk Factors” in the Company’s most recent annual report on Form 10-K for the fiscal year ended February ~~29, 2020~~28, 2021 (“Form 10-K”) and its other filings with the Securities and Exchange Commission (the “SEC”). ~~This discussion should be read in conjunction with our condensed consolidated financial statements included under Part I, Item 1 of this report.~~ When used in this MD&A, 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. Throughout this MD&A, we refer to our Leadership Brands, which are brands that have number-one and number-two positions in their respective categories and ~~consist of the~~include OXO, Honeywell, Braun, PUR, Hydro Flask, Vicks, Hot Tools and ~~Drybar brands.~~Drybar.

This MD&A, including the tables under the headings “Operating ~~income, operating margin, adjusted operating income~~Income, Operating Margin, Adjusted Operating Income (non-GAAP), and ~~adjusted operating margin~~Adjusted Operating Margin (non-GAAP) by ~~segment"~~Segment” and “Net Income, ~~diluted earnings per share ("EPS"), adjusted income~~Diluted EPS, Adjusted Income (non-GAAP), and ~~adjusted diluted~~Adjusted Diluted EPS (non-GAAP),” ~~respectively,~~ reports operating income, operating margin, net income and diluted earnings per share (“EPS”) without the impact of ~~non-cash asset impairment charges, acquisition-related expenses,~~EPA compliance costs, restructuring charges, tax reform, amortization of intangible assets, and non-cash share-based compensation for the periods presented, as applicable. These measures may be considered non-GAAP financial information as set forth in SEC Regulation G, Rule 100. The tables reconcile these measures to their corresponding GAAP-based measures presented in our condensed consolidated statements of income. We believe that adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS provide useful information to management and investors regarding financial and business trends relating to our financial condition and results of operations. We believe that these non-GAAP financial measures, in combination with our financial results calculated in accordance with GAAP, provide investors with additional perspective regarding the impact of such ~~charges/~~charges and benefits on applicable income, margin and earnings per share measures. We also believe that these non-GAAP measures facilitate a more direct comparison of our performance to our competitors. We further believe that including the excluded ~~charges/~~charges and benefits would not accurately reflect the underlying performance of our ~~continuing~~ operations for the period in which the charges and benefits are incurred, even though such ~~charges/~~charges and benefits may be incurred and reflected in our GAAP financial results in the near future. The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of our activities. Our adjusted operating income, adjusted operating margin, adjusted income, and adjusted diluted EPS are not prepared in accordance with GAAP, are not an alternative to GAAP financial information and may be calculated differently than non-GAAP financial information disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP information. These non-GAAP measures are discussed further and reconciled to their applicable ~~GAAP based~~GAAP-based measures contained in this MD&A beginning on page ~~33.~~ 30.

There were no material changes to the key financial measures discussed in our ~~annual report on~~ Form ~~10-K for the period ending February 29, 2020.~~10-K.

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~~OVERVIEW~~Overview

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 ~~well-recognized and widely-trusted~~ brands. We have built leading market positions through new product innovation, product quality and competitive pricing. We currently operate in three segments consisting of Housewares, Health & Home, and Beauty.

In fiscal 2015, we launched a five-year transformational strategy designed to improve the performance of our business segments and strengthen our shared service capabilities. Fiscal 2019 marked the completion of Phase I of our multi-year transformation strategy, which delivered performance across a wide range of measures. We improved organic sales growth by focusing on our Leadership Brands, made strategic acquisitions, became a more efficient operating company with strong global shared services, upgraded our organization and culture, improved inventory turns and return on invested capital, and returned capital to shareholders.

Fiscal 2020 began Phase II of our transformation, which is designed to drive the next five years of progress. The long-term objectives of Phase II include improved organic sales growth, continued margin expansion, and strategic and effective capital deployment. ~~We expect~~ Phase II ~~will include~~includes continued investment in our Leadership Brands, with a focus on growing them through consumer-centric innovation, expanding them more aggressively outside the United States of America (the “U.S.”), and adding new brands through acquisition. We ~~anticipate~~are building further shared service capability and operating efficiency, as well as focusing on attracting, retaining, unifying and training the best people. Additionally, we are enhancing and consolidating our environmental, social and governance efforts and accelerating programs related to diversity, equity and inclusion to support our Phase II transformation.

In fiscal 2018, we announced a restructuring plan (referred to as “Project Refuel”) intended to enhance the performance primarily in the Beauty and former Nutritional Supplements segments. Project Refuel includes charges for a reduction-in-force and the elimination of certain contracts. During the first quarter of fiscal 2019, we expanded Project Refuel to include the realignment and streamlining of our supply chain structure. We are targeting total annualized profit improvements of approximately ~~$9.0~~$10.5 million to ~~$11.0~~$12.5 million over the duration of the plan.

~~On January 23, 2020, we~~ We estimate the plan to be completed during fiscal 2022 and expect to incur total restructuring charges of approximately $10.3 million over the acquisition of Drybar Products LLC ("Drybar Products"), for approximately $255.9 million in cash, subject to certain customary closing adjustments. Drybar is a fast-growing, innovative, trend-setting prestige hair care and styling brand in the multi-billion-dollar beauty industry. As partduration of the ~~transaction, we granted a worldwide license~~plan, of which $9.2 million was incurred through the first quarter of fiscal 2022. See Note 7 to ~~Drybar Holdings LLC,~~ the owner and long-time operator of Drybar blowout salons, to use the Drybar trademark in their continued operation of Drybar salons. The salons will exclusively use, promote, and sell Drybar products globally.accompanying

condensed consolidated financial statements for additional information.

Consistent with our strategy of focusing resources on our Leadership Brands, during the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our Beauty segment's mass channel personal care business (“Personal ~~Care business.~~Care”). The net assets to be disposed of include intangible assets, inventory, ~~and~~certain net trade receivables, fixed assets and certain accrued sales discounts and allowances relating to our mass channel liquids, powder and aerosol products under brands such as Pert, Brut, Sure and Infusium. ~~We expect the divestiture to occur within fiscal 2021.~~ Accordingly, we ~~have~~ classified the identified net assets of the disposal group as held for sale.

On March 13, 2020, we entered into an amendment to our Credit Agreement with Bank of America, N.A., as administrative agent, and other lenders (as amended, the "Credit Agreement"). The amendment extended the maturity of the commitment under the Credit Agreement from DecemberJune 7, 2021, we completed the sale of our Personal Care business, not including the Latin America and Caribbean regions, to ~~March 13, 2025. Further,~~HRB Brands LLC, for $44.7 million in cash. The sale also includes an option that provides HRB Brands LLC the ~~amendment increased~~right to purchase the ~~unsecured revolving commitment from $1.0 billion~~Latin America and Caribbean Personal Care businesses no later than the end of fiscal 2022, subject to ~~$1.25 billion. The amount of the accordion was increased from $200 million to $300 million. The accordion permits the Company to request to increase its borrowing capacity, not to exceed the~~

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~~$300 million commitment in the aggregate, provided~~meeting certain conditions are met, including lender approval. Following the amendment, borrowings under the Credit Agreement bear interest at either the base rate or LIBOR, plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0%, respectively, for base rate and LIBOR borrowings.agreed-upon conditions. See Note 133 and Note 16 to the accompanying condensed consolidated financial statements for additional information.

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Significant Trends Impacting the Business

~~Potential~~ Impact of COVID-19

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus ~~(COVID-19)~~(“COVID-19”) to be a pandemic. ~~COVID-19 continues to spread throughout the United States and the world, with the continued potential for catastrophic impact.~~ The effects of the COVID-19 pandemic have had an unfavorable impact on certain parts of our business. The impact includes the effect of temporary closures of certain customer stores, or limited hours of operation, ~~which has resulted in~~and materially lower store ~~traffic. The economic impact of historic unemployment and consumer uncertainty has also resulted in reduced overall demand for our more discretionary product lines.~~traffic, primarily during fiscal 2021. Additionally, COVID-19 has ~~also~~ disrupted certain parts of our supply ~~chain,~~chain. Surges in demand and shifts in shopping patterns related to COVID-19, as well as other factors, have strained the global freight network, which is resulting in ~~certain cases has limited~~higher costs, less capacity, and longer lead times. These factors may impact our ability to fulfill ~~demand. COVID-19 has favorably impacted~~some orders on a timely basis. Additionally, the extent of COVID-19’s impact on the demand for certain of our product lines ~~that are more defensive, meet certain healthcare or healthy living needs, or meet~~in the ~~needs of consumers that are spending more time at home as a result~~future will depend on future developments, including the duration, spread and intensity of the ~~pandemic. COVID-19 has also favorably impacted~~pandemic, our ~~online channel in a meaningful way,~~continued ability to source and distribute our products, as ~~brick~~well as any future government actions affecting consumers and ~~mortar shopping options have been limited or considered unsafe by consumers. Although~~ the ~~favorable impacts~~global economy generally, all of ~~COVID-19 outweighed~~which are uncertain and difficult to predict considering the ~~unfavorable impacts in the first quarter of fiscal 2021, this situation is changing~~ rapidly ~~and additional impacts or more pronounced adverse impacts may arise that we are not currently aware of.~~evolving landscape. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.

~~These future~~Future developments are outside of our control, are highly uncertain and cannot be predicted. If the COVID-19 impact or ~~resulting~~potential economic downturn is prolonged, then it can further increase the difficulty of planning for operations. These and other potential impacts of the current public health crisis could therefore materially and adversely affect our business, financial condition, cash flows and results of operations.

~~During the first quarter of fiscal 2021, as part of a comprehensive approach~~Global Supply Chain and Cost Inflation Trends

Surges in demand and shifts in shopping patterns related to preserve our cash flow and adjust our cost structure to lower expected revenue, we implemented a number of temporary precautionary measures that will remain in place until there is greater certainty regarding the pandemic, a further re-opening of retail brick and mortar stores and improved consumer demand. These measures included the following:

•~~A graduated salary reduction for all associates, including named executive officers and the other members of the Company’s executive leadership team;~~

•~~A reduction in the cash compensation of the Company's Board of Directors;~~

•~~Suspension of merit increases, promotions and new associate hiring until further notice;~~

•~~The furlough of associates in specific areas directly tied to sales volume, with assistance to maintain health insurance coverage,~~COVID-19, as well as ~~a reduction~~other factors, have continued to strain the global supply chain network, which has resulted in carrier-imposed capacity restrictions, carrier delays, and longer lead times. Demand for Chinese imports has caused shipment receiving and unloading backlogs at many U.S. ports that have been unable to keep pace with unprecedented inbound container volume. The situation has been further exacerbated by COVID-19 illness and protocols at many port locations. Due to the backlog and increasing trade imbalance with China, many shipping containers are not being sent back to China, or are being sent to China empty. With continued increases in demand for containers, limited supply and freight vendors bearing the cost of ~~external temporary labor~~shipping empty containers, the market cost of inbound freight has increased by several multiples compared to calendar year 2020 averages. In addition to increasing cost trends, our third party manufacturing partners are not equipped to hold meaningful amounts of inventory and ~~reduced work hours;~~

•~~Reduction~~if shipping container capacity remains limited or ~~deferral of marketing expense, while continuing~~unavailable, they could pause manufacturing, which could ultimately impact our ability to ~~support brands with strong~~meet consumer demand on a timely basis. Demand for raw materials, components and ~~to keep brands top~~semiconductor chips impacted by the supply chain challenges described above have created surges in prices and shortages of ~~mind with the consumer;~~

•~~Limited reduction of investment in new product development and launches, in anticipation of~~these materials may become more ~~normalized economic activity;~~

•~~Elimination of travel expense~~significant which could further increase our costs. Further, in the ~~short term,~~U.S., the surge in demand along with ~~a significant reduction planned for the second half~~COVID-19 related government stimulus and rising hourly labor wages, are creating labor shortages and higher labor costs. The majority of ~~fiscal 2021;~~our hourly labor is employed in our distribution centers and

•~~Reduction of consulting fees~~ these factors may increase our costs and ~~capital expenditures for projects that are not critical.~~negatively impact our ability to attract and retain qualified associates.

EPA Compliance Costs

Some of our product lines within our Health & Home segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the U.S. Environmental Protection Agency (the “EPA”), U.S. Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.

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~~These~~Health & Home segment that are sold in the U.S. The EPA has not raised any product quality, safety or performance issues. We expect these products to be available for distribution with the only changes being modified labeling or different packaging. As a result of these discussions, on May 27, 2021, we voluntarily implemented a temporary ~~measures~~stop shipment action across this line of products in the U.S. while we ensure that all labeling is in compliance and we work with the EPA towards an expedient resolution. The EPA has approved modest changes to our labeling claims on our existing water filtration packaging, which we have begun to implement. We resumed shipment of these products and are actively working towards similar agreements regarding our air filtration and humidification packaging in continued collaboration with the EPA. At our request, the EPA issued a Stop Sale, Use or Removal Order on June 29, 2021, which, among other things, allows for the movement of certain of our products among our warehouses and will facilitate rework of the affected air filtration packaging once agreed to with the EPA. We believe this is meaningful progress towards a final resolution with the EPA. The stop shipment will remain in effect until we implement an approved labeling and repackaging plan. We expect that our consolidated and Health & Home segment’s fiscal 2022 net sales revenue, gross profit and operating income will be materially and adversely impacted by the stop shipment. The extent to which net sales revenue will be impacted will primarily depend on the duration of time required for the EPA to act on our proposed solutions and the related implementation schedule. In addition, our net sales revenue could be materially and adversely impacted by customer returns, an increase in sales discounts and allowances and by the potential impact of distribution losses at certain retailers.

During the first quarter of fiscal 2022, we recorded a $13.1 million charge to write-off the obsolete packaging for the affected products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022. The charge was recognized in cost of goods sold and is referred to throughout this Form 10-Q as “EPA compliance costs.” We expect to incur additional compliance costs, which may include costs to relabel or repackage our existing inventory as well as incremental freight and storage costs, among other things. Costs to repackage our existing inventory will be capitalized into inventory; however, many of the other potential incremental EPA compliance costs will be expensed as incurred and could materially and adversely impact our consolidated and Heath & Home segment's gross profit and operating income. Additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today. Accordingly, our business, results of operations and financial condition could be adversely and materially impacted by our actions or in ways that we are not able to predict today.

At this time, we are not aware of any fines or penalties related to this matter imposed against us by the EPA. While we do not ~~change~~anticipate material fines or penalties, there can be no assurances that such fines or penalties will not be imposed.

See Note 8 to our ~~view of the Phase~~condensed consolidated financial statements for additional information and Part II, ~~transformation plan and the longer-term opportunities we see to further grow~~Item 1A., “Risk Factors” in this Form 10-Q for additional information on our ~~business.~~related material risks.

Potential Impact of Tariffs

During fiscal ~~2019~~2021, 2020 and ~~2020,~~2019, the Office of the U.S. Trade Representative ~~("USTR"~~(“USTR”) ~~has~~ imposed, and in certain cases subsequently reduced or removed, additional tariffs on products imported from China. We purchase a high concentration of our products from unaffiliated manufacturers located in China. This concentration exposes us to risks associated with doing business globally, including changes in tariffs. Any alteration of trade agreements and terms between China and the ~~United States,~~U.S., including limiting trade with China, imposing additional tariffs on imports from China and potentially imposing other restrictions on exports from China to the ~~United States~~U.S. may result in further and/or higher tariffs or retaliatory trade measures by China. Furthermore, in certain cases, we have been ~~somewhat~~ successful in obtaining tariff exclusions from the USTR on certain products that we import. These exclusions generally expire after a ~~certain~~designated period of ~~time and must be re-approved by~~time. In the ~~USTR, otherwise~~case that a tariff exclusion is not granted or extended, higher tariffs ~~will~~would be assessed on ~~our products upon expiration of~~ the ~~exclusions. All of these factors could have a material adverse effect on our business and results of operations.~~related products.

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Foreign Currency Exchange Rate Fluctuations

Due to the nature of our operations, we have exposure to the impact of fluctuations in exchange rates from transactions that are denominated in a currency other than our ~~reporting~~functional currency (the U.S. Dollar). Such transactions include sales, certain inventory purchases and operating expenses. The most significant currencies affecting our operating results are the British Pound, Euro, Canadian Dollar, and Mexican Peso.

For the three months ended May 31, ~~2020,~~2021, changes in foreign currency exchange rates had ~~an unfavorable~~a favorable year-over-year impact on consolidated U.S. Dollar reported net sales revenue of approximately ~~$4.8~~$5.5 million, or 1.3%, compared to an unfavorable impact of ~~$2.5~~$4.8 million, or ~~0.7%~~1.3% for the same period last year.

Consumer Spending and Changes in Shopping Preferences

Our business depends upon discretionary consumer demand for most of our products and primarily operates within mature and highly developed consumer markets. The principal driver of our operating performance is the strength of the U.S. retail economy. ~~For the three months ended May 31, 2020~~Approximately 75% and ~~2019, U.S. shipments were approximately~~ 77% ~~and 78%~~ of our consolidated net sales revenue were from U.S. shipments during the three month periods ended May 31, 2021 and 2020, respectively.

Our concentration of sales reflects the evolution of consumer shopping preferences to online or multichannel shopping experiences. For the three ~~months~~month periods ended May 31, ~~2020~~2021 and ~~2019,~~2020, our net sales to retail customers fulfilling end-consumer online orders and online sales directly to consumers comprised approximately ~~28%~~22% and ~~23%~~28%, respectively, of our total consolidated net sales revenue, and grew approximately ~~33%~~4% and ~~28%~~33%, respectively, over the same periods in the prior ~~year.~~years.

With the continued growth in online sales across the retail landscape, many brick and mortar retailers are aggressively looking for ways to improve their customer delivery capabilities to be able to meet customer expectations. As a result, it will become increasingly important for us to leverage our distribution capabilities in order to meet the changing demands of our customers, as well as to increase our online capabilities to support our direct-to-consumer sales channels and online channel sales by our retail customers.

Variability of the Cough/Cold/Flu Season

Sales in several of our Health & Home segment categories are highly correlated to the severity of winter weather and cough/cold/flu incidence. In the U.S., the cough/cold/flu season historically runs from November through March, with peak activity normally in January to March. The 2020-2021 cough/cold/flu season experienced historically low incidence levels due to COVID-19 prevention measures including mask-wearing, remote learning, work from home, and reduced travel, brick and mortar shopping, and group gatherings. For the 2019-2020 season, cough/cold/flu incidence was slightly higher than the

2018-2019 season, which was a below average season.

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RESULTS OF OPERATIONS

The following ~~tables provide~~table provides selected operating data, in U.S. Dollars, as a percentage of net sales

revenue, and as a year-over-year percentage ~~change:~~change.

Three Months Ended May 31, % of Sales Revenue, net
(in thousands) 2020 (1) 2019 $ Change % Change 2020 2019
Sales revenue by segment, net
Housewares $ 140,628 $ 144,942 $ (4,314) (3.0) % 33.4 % 38.5 %
Health & Home 199,956 154,943 45,013 29.1 % 47.5 % 41.2 %
Beauty 80,251 76,450 3,801 5.0 % 19.1 % 20.3 %
Total sales revenue, net 420,835 376,335 44,500 11.8 % 100.0 % 100.0 %
Cost of goods sold 241,534 222,608 18,926 8.5 % 57.4 % 59.2 %
Gross profit 179,301 153,727 25,574 16.6 % 42.6 % 40.8 %
Selling, general and administrative expense ("SG&A") 121,989 105,901 16,088 15.2 % 29.0 % 28.1 %
Restructuring charges 333 619 (286) (46.2) % 0.1 % 0.2 %
Operating income 56,979 47,207 9,772 20.7 % 13.5 % 12.5 %
Non-operating income, net 236 132 104 78.8 % 0.1 % — %
Interest expense (3,846) (3,308) (538) 16.3 % (0.9) % (0.9) %
Income before income tax 53,369 44,031 9,338 21.2 % 12.7 % 11.7 %
Income tax expense (benefit) (6,917) 3,337 (10,254) * (1.6) % 0.9 %
Net income $ 60,286 $ 40,694 $ 19,592 48.1 % 14.3 % 10.8 %

~~(1)~~Includes a full quarter of operating results for Drybar Products, which was acquired on January 23, 2020, with no comparable results in the same period last year. For additional information regarding the Drybar Products acquisition, see Note 7 to the accompanying condensed consolidated financial statements.


	Three Months Ended May 31,								% of Sales Revenue, net
(in thousands)	2021		2020		$ Change		% Change		2021		2020
Sales revenue by segment, net
Housewares	$	193,644	$	140,628	$	53,016	37.7	%	35.8	%	33.4	%
Health & Home	204,096		199,956		4,140		2.1	%	37.7	%	47.5	%
Beauty	143,483		80,251		63,232		78.8	%	26.5	%	19.1	%
Total sales revenue, net	541,223		420,835		120,388		28.6	%	100.0	%	100.0	%
Cost of goods sold	320,631		241,534		79,097		32.7	%	59.2	%	57.4	%
Gross profit	220,592		179,301		41,291		23.0	%	40.8	%	42.6	%
Selling, general and administrative expense (“SG&A”)	155,751		121,989		33,762		27.7	%	28.8	%	29.0	%

Restructuring charges	6		333		(327)		(98.2)	%	—	%	0.1	%
Operating income	64,835		56,979		7,856		13.8	%	12.0	%	13.5	%
Non-operating income, net	102		236		(134)		(56.8)	%	—	%	0.1	%
Interest expense	2,995		3,846		(851)		(22.1)	%	0.6	%	0.9	%
Income before income tax	61,942		53,369		8,573		16.1	%	11.4	%	12.7	%
Income tax expense (benefit)	4,970		(6,917)		11,887		*		0.9	%	(1.6)	%


Net income	$	56,972	$	60,286	$	(3,314)	(5.5)	%	10.5	%	14.3	%

* Calculation is not meaningful.

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First Quarter Fiscal ~~2021~~2022 Financial Results

•Consolidated net sales revenue increased ~~11.8%~~28.6%, or ~~$44.5~~$120.4 million, to ~~$420.8~~$541.2 million for the three months ended May 31, ~~2020,~~2021, compared to ~~$376.3~~$420.8 million for the same period last year.

•Consolidated operating income increased ~~20.7%~~13.8%, or ~~$9.8~~$7.9 million, to ~~$57.0~~$64.8 million for the three months ended May 31, ~~2020,~~2021, compared to ~~$47.2~~$57.0 million for the same period last year. Consolidated operating margin ~~increased 1.0~~decreased 1.5 percentage ~~point~~points to ~~13.5%~~12.0% of consolidated net sales revenue for the three months ended May 31, ~~2020,~~2021, compared to ~~12.5%~~13.5% for the same period last year.

•Consolidated adjusted operating income increased ~~19.8%~~33.6%, or ~~$11.8~~$23.9 million, to ~~$71.1~~$95.0 million for the three months ended May 31, ~~2020,~~2021, compared to ~~$59.3~~$71.1 million for the same period last year. Consolidated adjusted operating margin increased ~~1.1~~0.6 percentage points to ~~16.9%~~17.5% of consolidated net sales revenue for the three months ended May 31, ~~2020,~~2021, compared to ~~15.8%~~16.9% for the same period last year.

•Net income ~~increased 48.1%~~decreased 5.5%, or ~~$19.6~~$3.3 million, to ~~$60.3~~$57.0 million for the three months ended May 31, ~~2020,~~2021, compared to ~~$40.7~~$60.3 million for the same period last year. Diluted EPS ~~increased 47.2%~~decreased 2.5% to ~~$2.37~~$2.31 for the three months ended May 31, ~~2020,~~2021, compared to ~~$1.61~~$2.37 for the same period last year.

•Adjusted ~~net~~ income increased ~~23.2%~~33.7%, or ~~$12.1~~$21.7 million, to ~~$64.2~~$85.8 million for the three months ended May 31, ~~2020,~~2021, compared to ~~$52.1~~$64.2 million for the same period last year. Adjusted diluted EPS increased ~~22.8%~~37.5% to ~~$2.53~~$3.48 for the three months ended May 31, ~~2020,~~2021, compared to ~~$2.06~~$2.53 for the same period last year.

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Consolidated and Segment Net Sales Revenue

The following table summarizes the impact that ~~acquisitions~~Organic business and foreign currency had on our net sales revenue by segment:

Three Months Ended May 31,
(in thousands) Housewares Health & Home Beauty Total
Fiscal 2020 sales revenue, net $ 144,942 $ 154,943 $ 76,450 $ 376,335
Organic business (1) (3,927) 46,778 (1,176) 41,675
Impact of foreign currency (387) (1,765) (2,612) (4,764)
Acquisition (2) — — 7,589 7,589
Change in sales revenue, net (4,314) 45,013 3,801 44,500
Fiscal 2021 sales revenue, net $ 140,628 $ 199,956 $ 80,251 $ 420,835
Total net sales revenue growth (decline) (3.0) % 29.1 % 5.0 % 11.8 %
Organic business (2.7) % 30.2 % (1.5) % 11.1 %
Impact of foreign currency (0.3) % (1.1) % (3.4) % (1.3) %
Acquisition — % — % 9.9 % 2.0 %

~~(1)Previously referred to as "Core" business, as described below.~~

~~(2)~~Represents a full quarter of net sales revenue for Drybar Products, which was acquired on January 23, 2020, with no comparable results in the three month period ended May 31, 2019. For additional information on the Drybar Products acquisition, see Note 7 to the accompanying condensed consolidated financial statements.


	Three Months Ended May 31,
(in thousands)	Housewares			Health & Home			Beauty			Total
Fiscal 2021 sales revenue, net	$	140,628		$	199,956		$	80,251		$	420,835
Organic business	52,127			1,203			61,552			114,882
Impact of foreign currency	889			2,937			1,680			5,506

Change in sales revenue, net	53,016			4,140			63,232			120,388
Fiscal 2022 sales revenue, net	$	193,644		$	204,096		$	143,483		$	541,223

Total net sales revenue growth	37.7		%	2.1		%	78.8		%	28.6		%
Organic business	37.1		%	0.6		%	76.7		%	27.3		%
Impact of foreign currency	0.6		%	1.5		%	2.1		%	1.3		%

In the above table, Organic business refers to our net sales revenue associated with product lines or brands after the first twelve months from the date the product line or brand iswas acquired, excluding the impact that foreign currency ~~re-measurement~~remeasurement had on reported net ~~sales.~~sales revenue. Net sales revenue from internally developed brands or product lines is considered Organic business activity.

We ~~previously referred to Organic business sales as~~define Core business ~~sales. In conjunction with this change, we now define Core~~ as strategic business that we expect to be an ongoing part of our operations, and Non-Core business as business or net assets (including net assets held for sale) that we expect to divest within a year of its designation as Non-Core. During the fourth quarter of fiscal 2020, we

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committed to a plan to divest certain assets within our Personal Care business. As a result, sales from our Personal Care business are included in Non-Core business for all periods presented.

The following table summarizes the impact that Core business and Non-Core (Personal Care) business had on our net sales revenue by segment:


		Three Months Ended May 31,																						Three Months Ended May 31,
(in thousands)	(in thousands)	Housewares			Health & Home			Beauty			Total			(in thousands)	Housewares			Health & Home			Beauty			Total
Fiscal 2020 sales revenue, net		$	144,942		$	154,943		$	76,450		$	376,335
Fiscal 2021 sales revenue, net														Fiscal 2021 sales revenue, net	$	140,628		$	199,956		$	80,251		$	420,835
Core business	Core business	(4,314)			45,013			5,244			45,943			Core business	53,016			4,140			64,429			121,585
Non-core business (Personal Care)		—			—			(1,443)			(1,443)
Non-Core business (Personal Care)														Non-Core business (Personal Care)	—			—			(1,197)			(1,197)
Change in sales revenue, net	Change in sales revenue, net	(4,314)			45,013			3,801			44,500			Change in sales revenue, net	53,016			4,140			63,232			120,388
Fiscal 2021 sales revenue, net		$	140,628		$	199,956		$	80,251		$	420,835
Fiscal 2022 sales revenue, net														Fiscal 2022 sales revenue, net	$	193,644		$	204,096		$	143,483		$	541,223

Total net sales revenue growth (decline)	Total net sales revenue growth (decline)	(3.0)		%	29.1		%	5.0		%	11.8		%	Total net sales revenue growth (decline)	37.7		%	2.1		%	78.8		%	28.6		%
Core business	Core business	(3.0)		%	29.1		%	6.9		%	12.2		%	Core business	37.7		%	2.1		%	80.3		%	28.9		%
Non-core business (Personal Care)		—		%	—		%	(1.9)		%	(0.4)		%
Non-Core business (Personal Care)														Non-Core business (Personal Care)	—		%	—		%	(1.5)		%	(0.3)		%

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Leadership Brand and Other Net Sales Revenue

The following table summarizes our Leadership Brand and other net ~~sales:~~sales revenue:

Three Months Ended May 31,
(in thousands) 2020 2019 $ Change % Change
Leadership Brand sales revenue, net (1) $ 349,030 $ 301,559 $ 47,471 15.7 %
All other sales revenue, net 71,805 74,776 (2,971) (4.0) %
Total sales revenue, net $ 420,835 $ 376,335 $ 44,500 11.8 %

~~(1)~~The three months ended May 31, 2020 includes a full quarter of net sales revenue for Drybar Products, which was acquired on January 23, 2020, with no comparable results in the three month period ended May 31, 2019. For additional information on the Drybar Products acquisition, see Note 7 to the accompanying condensed consolidated financial statements.


	Three Months Ended May 31,
(in thousands)	2021		2020		$ Change		% Change
Leadership Brand sales revenue, net	$	429,056	$	349,030	$	80,026	22.9	%
All other sales revenue, net	112,167		71,805		40,362		56.2	%
Total sales revenue, net	$	541,223	$	420,835	$	120,388	28.6	%

Consolidated Net Sales Revenue

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Consolidated net sales revenue increased ~~$44.5~~$120.4 million, or ~~11.8%~~28.6%, to ~~$420.8~~$541.2 million, compared to ~~$376.3~~$420.8 million. ~~The growth~~Growth was driven by an Organic business increase of ~~$41.7~~$114.9 million, or ~~11.1%~~27.3%, primarily ~~reflecting:~~due to:

•higher consolidated brick and mortar sales in our Beauty and Housewares segments due to the favorable comparative impact of COVID-19 related store closures and reduced store traffic in the prior year period;

•an increase in consolidated international sales;

•higher sales in the club and closeout channels;

•growth in consolidated online sales; and

•~~an increase~~the favorable impact of orders that were not able to be shipped at the end of the fourth quarter of fiscal 2021 due to the impact of the late-February winter storm in ~~domestic brick and mortar sales and overall international sales in our Health and Home segment.~~

~~Net sales of $7.6 million, or 2.0% of consolidated net sales revenue, from~~ the ~~Drybar Products acquisition also contributed to consolidated net sales growth.~~U.S. (“Winter Storm Uri”).

These factors were partially offset ~~by:~~

•by a net ~~declines~~sales revenue decline in ~~Housewares and Organic Beauty sales due to COVID-19 store closures by key brick and mortar customers and lower discretionary demand due to high unemployment and consumer uncertainty; and~~

•~~the unfavorable impact from foreign currency fluctuations of approximately $4.8 million, or 1.3%.~~Non-Core business.

Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately

$5.5 million, or 1.3%.

Net sales revenue from our Leadership Brands ~~were $349.0~~was $429.1 million, compared to ~~$301.6~~$349.0 million for the same period last year, representing growth of ~~15.7%~~22.9%.

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Segment Net Sales Revenue

Housewares

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Net sales revenue ~~decreased $4.3~~increased $53.0 million, or ~~3.0%~~37.7%, to ~~$140.6~~$193.6 million, compared to ~~$144.9~~$140.6 million. ~~The decline~~Growth was driven by an Organic business ~~decrease~~increase of ~~$3.9~~$52.1 million, or ~~2.7%~~37.1%, primarily due ~~to the temporary closure of key domestic~~to:

•an increase in brick and mortar ~~customers~~sales for both OXO and Hydro Flask brands due to the favorable comparative impact of COVID-19 related store closures and ~~a decrease~~reduced store traffic in the prior year period;

•growth in international ~~sales. The OXO brand experienced growth as consumers spent more time at home cooking, cleaning, organizing~~sales;

•higher sales in the club and ~~pantry loading. This growth was more than offset by~~ closeout channels; and

•the favorable impact of ~~brick and mortar store closures on~~orders that were not able to be shipped at the ~~Hydro Flask and OXO brands. Sales were also unfavorably impacted by net foreign currency fluctuations~~end of ~~approximately $0.4 million, or 0.3%.~~the fourth quarter of fiscal 2021 due to Winter Storm Uri.

These factors were partially offset ~~by:~~

•~~an increase~~by a decrease in online sales ~~for both OXO and Hydro Flask;~~

•~~higher club sales; and~~

•~~new product introductions.~~due to the unfavorable comparative impact of a shift towards online shopping in the prior year period due to COVID-19 related store closures.

Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately

$0.9 million, or 0.6%.

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Health & Home

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Net sales revenue increased ~~$45.0~~$4.1 million, or ~~29.1%~~2.1%, to ~~$200.0~~$204.1 million, compared to ~~$154.9~~$200.0 million. Growth was driven by an Organic business increase of $1.2 million, or 0.6%, primarily due to:

•an increase in sales of air purifiers;

•growth in international sales; and

•the favorable impact of orders that were not able to be shipped at the end of the fourth quarter of fiscal 2021 due to Winter Storm Uri.

These factors were partially offset by stronger COVID-19 driven demand for healthcare and healthy living products in the comparative prior period.

Net sales revenue was also favorably impacted by net foreign currency fluctuations of approximately

$2.9 million, or 1.5%.

Beauty

Comparison of First Quarter Fiscal 2022 to First Quarter Fiscal 2021

Net sales revenue increased $63.2 million, or 78.8%, to $143.5 million, compared to $80.3 million. The increase was driven by an Organic business increase of ~~$46.8~~$61.6 million, or ~~30.2%, due to consumer demand for healthcare and healthy living products~~76.7%. The Organic business increase primarily reflects:

•an increase in ~~domestic and international markets, in both~~ brick and mortar ~~and online channels,~~sales due ~~primarily~~ to ~~COVID-19. The~~the favorable comparative impact of ~~brick~~COVID-19 related store closures and ~~mortar closures was less pronounced~~reduced store traffic in the ~~Health and Home segment as key retailers such as Walmart, Amazon, Target, Home Depot~~prior year period;

•growth in the volumizer franchise due to continued high consumer demand, expanded distribution primarily in the club channel, new product introductions, and the ~~drug store~~favorable comparative impact of constrained supply levels in the prior year period;

•an increase in Drybar sales;

•an increase in online channel ~~all remained open during~~ sales;

•higher international sales; and

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•the favorable impact of orders that were not able to be shipped at the end of the fourth quarter ~~and generally experienced strong traffic.~~of fiscal 2021 due to Winter Storm Uri.

These factors were partially ~~offset~~offset by ~~net distribution changes year-over-year and the unfavorable impact of net foreign currency fluctuations of approximately $1.8 million, or 1.1%.~~a decline in Non-Core business.

~~Beauty~~

~~Comparison of First Quarter Fiscal 2021 to First Quarter Fiscal 2020~~

Net sales revenue ~~increased $3.8 million, or 5.0%, to $80.3 million, compared to $76.5 million. The increase~~ was driven by the net sales revenue contribution of $7.6 million from the Drybar Products acquisition. This was partially offset by a decline in Organic business sales of $1.2 million, or 1.5%, primarily due to the closure of key domestic brick and mortar customers, a decline in the Personal Care business, a supply constraint related to a key product and lower overall discretionary demand due to high unemployment and consumer uncertainty as a result of COVID-19. Segment net sales were also ~~unfavorably~~favorably impacted by net foreign currency fluctuations of approximately ~~$2.6~~

$1.7 million, or ~~3.4%~~2.1%.

~~These factors were partially offset by growth in online sales and new product introductions.~~

Consolidated Gross Profit Margin

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Consolidated gross profit margin ~~increased~~decreased 1.8 percentage points to ~~42.6%~~40.8%, compared to ~~40.8%~~42.6%. The ~~increase~~decrease in consolidated gross profit margin was primarily due to:

•~~a favorable product mix within the Health~~higher inbound freight expense due to rising freight costs and ~~Home segment and Organic Beauty business;~~container supply shortages;

•EPA compliance costs in the ~~favorable impact~~Health & Home segment of ~~the Drybar Products acquisition;~~$13.1 million; and

•a less favorable channel mix ~~within~~in the Housewares ~~segment; and~~

•~~lower air freight expense.~~segment.

These factors were partially offset ~~by:~~

•~~an unfavorable mix of Housewares sales within total consolidated net sales;~~

•~~an unfavorable~~by a more favorable product mix ~~within~~in the ~~Housewares segment;~~

•~~higher direct import sales; and~~

•~~the unfavorable impact of foreign currency on net sales.~~Beauty segment.

Consolidated SG&A

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Consolidated SG&A ratio ~~increased 0.9 percentage~~decreased 0.2 percentage points to ~~29.0%~~28.8%, compared to ~~28.1%~~29.0%. The ~~increase~~decrease in the consolidated SG&A ratio was primarily due to:

•~~the unfavorable impact of foreign currency exchange and forward contract settlements;~~

•~~higher freight and distribution expense;~~favorable operating leverage;

•~~higher bad debt expense;~~reduced royalty expense as a result of the amendment of the Revlon trademark license;

•~~higher product liability~~lower amortization expense; and

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•~~higher long-term performance-based incentive compensation~~a decrease in bad debt expense.

These factors were partially offset by by:

•the impact of higher personnel and advertising expenses due to cost reduction initiatives ~~including temporary personnel, advertising and travel expense reductions due~~in the prior year period related to the uncertainty of ~~COVID-19.~~COVID-19; and

•higher distribution expenses.

Restructuring Charges

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

~~For the three month periods ended May 31, 2020 and 2019, we~~We incurred ~~$0.3 million and $0.6 million, respectively,~~an immaterial amount of pre-tax restructuring costs ~~related~~under Project Refuel for the three month period ended May 31, 2021, compared to ~~employee severance and termination benefits.~~

$0.3 million for the same period last year.

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Operating ~~income, operating margin, adjusted operating income~~Income, Operating Margin, Adjusted Operating Income (non-GAAP), and ~~adjusted operating margin~~Adjusted Operating Margin (non-GAAP) by ~~segment~~Segment

In order to provide a better understanding of the comparative impact of certain items on our operating income, the tables that follow report the comparative ~~before-tax~~pre-tax impact of ~~non-cash asset impairment charges, acquisition-related expenses,~~EPA compliance costs, restructuring charges, amortization of intangible assets, and non-cash share-based compensation, as applicable, on operating income and operating margin for each segment and in total for the periods ~~covered~~presented below. Adjusted operating income and adjusted operating margin 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 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Three Months Ended May 31, 2020
(In thousands) Housewares Health & Home Beauty Total
Operating income, as reported (GAAP) $ 23,233 16.5 % $ 31,533 15.8 % $ 2,213 2.8 % $ 56,979 13.5 %
Restructuring charges 238 0.2 % — — % 95 0.1 % 333 0.1 %
Subtotal 23,471 16.7 % 31,533 15.8 % 2,308 2.9 % 57,312 13.6 %
Amortization of intangible assets 498 0.4 % 2,452 1.2 % 1,524 1.9 % 4,474 1.1 %
Non-cash share-based compensation 3,421 2.4 % 3,314 1.7 % 2,556 3.2 % 9,291 2.2 %
Adjusted operating income (non-GAAP) $ 27,390 19.5 % $ 37,299 18.7 % $ 6,388 8.0 % $ 71,077 16.9 %


		Three Months Ended May 31, 2019																																		Three Months Ended May 31, 2021
(In thousands)	(In thousands)	Housewares						Health & Home						Beauty								Total						(In thousands)	Housewares					Health & Home				Beauty	Total
Operating income, as reported (GAAP)	Operating income, as reported (GAAP)	$	31,200	21.5	%	$	15,056	9.7	%	$	951	1.2	%	$	47,207	12.5	%	Operating income, as reported (GAAP)	$	27,143	14.0		%	$	11,249	5.5	%		$	26,443	`	18.4	%	$	64,835	12.0	%

EPA compliance costs																		EPA compliance costs	—		—		%	13,112		6.4	%		—			—	%	13,112		2.4	%
Restructuring charges	Restructuring charges	88		0.1	%	—		—	%	531		0.7	%	619		0.2	%	Restructuring charges	—		—		%	—		—	%		6			—	%	6		—	%
Subtotal	Subtotal	31,288		21.6	%	15,056		9.7	%	1,482		1.9	%	47,826		12.7	%	Subtotal	27,143		14.0		%	24,361		11.9	%		26,449			18.4	%	77,953		14.4	%
Amortization of intangible assets	Amortization of intangible assets	518		0.4	%	2,798		1.8	%	560		0.7	%	3,876		1.0	%	Amortization of intangible assets	518		0.3		%	567		0.3	%		1,898			1.3	%	2,983		0.6	%
Non-cash share-based compensation	Non-cash share-based compensation	2,574		1.8	%	3,374		2.2	%	1,656		2.2	%	7,604		2.0	%	Non-cash share-based compensation	5,551		2.9		%	4,880		2.4	%		3,589			2.5	%	14,020		2.6	%
Adjusted operating income (non-GAAP)	Adjusted operating income (non-GAAP)	$	34,380	23.7	%	$	21,228	13.7	%	$	3,698	4.8	%	$	59,306	15.8	%	Adjusted operating income (non-GAAP)	$	33,212	17.2		%	$	29,808	14.6	%		$	31,936		22.3	%	$	94,956	17.5	%


	Three Months Ended May 31, 2020
(In thousands)	Housewares				Health & Home				Beauty				Total
Operating income, as reported (GAAP)	$	23,233	16.5	%	$	31,533	15.8	%	$	2,213	2.8	%	$	56,979	13.5	%



Restructuring charges	238		0.2	%	—		—	%	95		0.1	%	333		0.1	%
Subtotal	23,471		16.7	%	31,533		15.8	%	2,308		2.9	%	57,312		13.6	%
Amortization of intangible assets	498		0.4	%	2,452		1.2	%	1,524		1.9	%	4,474		1.1	%
Non-cash share-based compensation	3,421		2.4	%	3,314		1.7	%	2,556		3.2	%	9,291		2.2	%
Adjusted operating income (non-GAAP)	$	27,390	19.5	%	$	37,299	18.7	%	$	6,388	8.0	%	$	71,077	16.9	%

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Consolidated Operating Income

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Consolidated operating income was $64.8 million, or 12.0% of net sales revenue, compared to $57.0 million, or 13.5% of net sales ~~compared to $47.2 million, or 12.5% of net sales.~~revenue. The ~~increase~~decrease in consolidated operating margin was ~~driven by the following factors:~~primarily due to:

•~~a favorable product mix within~~higher inbound freight expense due to rising freight costs and container supply shortages;

•EPA compliance costs in the Health ~~and~~& Home ~~and Beauty segments;~~segment of $13.1 million;

•a less favorable channel mix ~~within~~in the Housewares segment;

•higher personnel and advertising expenses due to cost reduction initiatives in the ~~favorable impact that higher overall net sales had on operating leverage;~~prior year period related to the uncertainty of COVID-19; and

•~~the impact of cost reduction initiatives including temporary personnel, advertising and travel expense reductions due to the uncertainty of COVID-19.~~higher distribution expenses.

These factors were partially offset by:

•~~an unfavorable mix of Housewares sales within total consolidated net sales;~~

•~~an unfavorable~~a more favorable product mix in the ~~Housewares~~Beauty segment;

•~~higher bad debt expense;~~favorable operating leverage;

•~~higher product liability expense;~~reduced royalty expense as a result of the amendment of the Revlon trademark license;

•~~increased long-term performance-based incentive compensation~~lower amortization expense;

•~~the net unfavorable impact of foreign currency fluctuations;~~ and

•~~higher freight and distribution~~a decrease in bad debt expense.

Consolidated adjusted operating income increased ~~19.8%~~33.6% to $95.0 million, or 17.5% of net sales revenue, compared to $71.1 million, or 16.9% of net sales ~~compared to $59.3 million, or 15.8% of net sales.~~ revenue.

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Housewares

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Operating income was $27.1 million, or 14.0% of segment net sales revenue, compared to $23.2 million, or 16.5% of segment net sales ~~compared~~revenue. The 2.5 percentage point decrease in segment operating margin was primarily due to:

•a less favorable channel mix;

•higher inbound freight expense due to ~~$31.2~~rising freight costs and container supply shortages;

•higher distribution costs;

•an increase in marketing expense; and

•higher personnel expense.

These factors were partially offset by lower bad debt expense and favorable operating leverage.

Adjusted operating income increased 21.3%to $33.2 million, or ~~21.5%~~17.2% of segment net ~~sales.~~sales revenue, compared to $27.4 million, or 19.5% of segment net sales revenue.

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Health & Home

Comparison of First Quarter Fiscal 2022 to First Quarter Fiscal 2021

Operating income was $11.2 million, or 5.5% of segment net sales revenue, compared to $31.5 million, or 15.8% of segment net sales revenue. The ~~5.0~~10.3 percentage point decrease in segment operating margin was primarily due to:

•a less favorable product mix;

•~~the net unfavorable impact~~EPA compliance costs of ~~tariff and related pricing actions;~~$13.1 million;

•higher ~~bad debt expense;~~inbound freight expense due to rising freight costs and container supply shortages;

•higher ~~customer chargeback activity;~~distribution costs;

•an increase in marketing expense; and

•higher ~~freight and distribution expense to support strong direct-to-consumer demand; and~~

•~~the unfavorable impact that lower sales had on operating leverage.~~personnel expenses.

These factors were partially offset ~~by the impact of cost reduction initiatives including temporary personnel, advertising and travel expense reductions due to the uncertainty of COVID-19.~~by:

•lower product liability claim costs;

•reduced amortization expense;

•a decrease in royalty expense; and

•the favorable impact of foreign currency fluctuations.

Adjusted operating income decreased ~~20.3%~~20.1% to ~~$27.4~~$29.8 million, or ~~19.5%~~14.6% of segment net sales revenue, compared to ~~$34.4~~$37.3 million, or ~~23.7%~~18.7% of segment net ~~sales.~~sales revenue.

~~Health & Home~~Beauty

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Operating income was ~~$31.5~~$26.4 million, or ~~15.8%~~18.4% of segment net sales revenue, compared to ~~$15.1~~$2.2 million, or ~~9.7%~~2.8% of segment net ~~sales.~~sales revenue. The ~~6.1~~15.6 percentage point increase in segment operating margin was primarily due to:

•~~the impact of~~ favorable operating leverage;

•a more favorable product mix;

•reduced royalty expense as a result of the amendment of the Revlon trademark license;

•lower inventory obsolescence costs;

•the favorable impact ~~that higher overall net sales had on operating leverage;~~of foreign currency fluctuations; and

•~~the impact of cost reduction initiatives including temporary personnel, advertising and travel expense reductions due to the uncertainty of COVID-19.~~

These factors were partially offset by higher product liability expense, higher royalty expense, the net unfavorable impact of foreign currency fluctuations, and higher freight expense to support increased retail customer shipments.

~~Adjusted operating income increased 75.7% to $37.3 million, or 18.7% of segment net sales, compared to $21.2 million, or 13.7% of segment net sales.~~

~~Beauty~~

~~Comparison of First Quarter Fiscal 2021 to First Quarter Fiscal 2020~~

~~Operating income was $2.2 million, or 2.8% of segment net sales, compared to $1.0 million, or 1.2% of segment net sales. The 1.6 percentage point increase~~a decrease in segment operating margin was primarily due to the margin impact of a more favorable product mix, lower air freight expense and the impact of cost reduction initiatives including temporary personnel, advertising and travel expense reductions due to the uncertainty of COVID-19.bad debt expense.

These factors were partially offset by:

•~~the net unfavorable impact of foreign currency fluctuations;~~higher inbound freight expense due to rising freight costs and container supply shortages;

•~~higher personnel expense related to the acquisition of Drybar Products;~~

•~~higher amortization expense;~~

•~~higher long-term performance based incentive compensation~~increased marketing expense; and

•~~higher outbound freight~~increased personnel expense.

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Adjusted operating income increased ~~72.7%~~$25.5 million to $31.9 million, or 22.3% of segment net sales revenue, compared to $6.4 million, or 8.0% of segment net sales ~~compared to $3.7 million, or 4.8% of segment net sales.~~revenue.

Interest Expense

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Interest expense was ~~$3.8~~$3.0 million, compared to ~~$3.3~~$3.8 million. The ~~increase~~decrease in interest expense was primarily due to lower average interest rates, partially offset by higher average levels of debt outstanding ~~which was partially offset by lower average interest rates.~~compared to the same period last year.

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Income Tax Expense

The period-over-period comparison of our effective tax rate is often impacted by the mix of taxable 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 intellectual property is largely owned by our foreign subsidiaries, resulting in proportionally higher earnings in jurisdictions with lower statutory tax rates, which decreases our overall effective tax rate.

~~During fiscal 2017, we received an assessment from a state~~jurisdictions and excess tax ~~authority~~benefits associated with share-based compensation recognized in the period in which adjusted taxable income applicable to the particular state resulting from interpretations of certain state income tax provisions applicable to our legal structure. We believe we have accurately reported our taxable income and are vigorously protesting the assessment through administrative processes with the state. We believe it is ~~unlikely that the outcome of these matters will have a material adverse effect on our consolidated financial position, results of operations, or liquidity.~~settled.

Our Macau subsidiary generates income from the sale of the goods that it has sourced and procured.This subsidiary is responsible for the sourcing and procurement of a large portion of the products that we sell.We ~~currently have~~previously had an indefinite tax holiday in Macau conditioned on the subsidiary meeting certain

employment and investment thresholds. The Macau Offshore Law and its supplementary regulations that

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end of the calendar year 2020. Beginning in calendar year 2021, our Macau subsidiary ~~will become~~transitioned to onshore status and is now subject to a statutory corporate income tax of ~~approximately~~ 12%. ~~The ultimate~~We expect the impact of this change ~~if any, on~~to increase our overall effective tax rate ~~will depend~~by 1.5 to 2.0 percentage points on ~~a variety of factors including~~an annual basis, beginning with our mix of income by jurisdiction, transfer pricing considerations and the specific tax regulations applicable to us when we are no longer under the Macau Offshore regime. We are in the process of completing our transfer pricing analysis to determine the impact, if any, on our financial statements.fiscal 2022. Because our Macau subsidiary is not directly or indirectly owned by a U.S. parent, there is no U.S. tax liability associated with the income generated in Macau.

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Net Income, ~~diluted earnings per share ("EPS"), adjusted income~~Diluted EPS, Adjusted Income (non-GAAP), and ~~adjusted diluted~~Adjusted Diluted EPS (non-GAAP)

In order to provide a better understanding of the impact of certain items on our ~~net~~ income and diluted EPS, the ~~analysis~~tables that ~~follows reports~~follow report the comparative after-tax impact of EPA compliance costs, restructuring charges, tax reform, amortization of intangible assets, and non-cash share-based compensation, as applicable, on ~~net~~ income and diluted EPS for the periods ~~covered~~presented below. For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 2,2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


		Three Months Ended May 31, 2020																								Three Months Ended May 31, 2021
		Income										Diluted EPS											Income					Diluted EPS
(in thousands, except per share data)	(in thousands, except per share data)	Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax		(in thousands, except per share data)	Before Tax		Tax		Net of Tax		Before Tax		Tax			Net of Tax
As reported (GAAP)	As reported (GAAP)	$	53,369	$	(6,917)	$	60,286	$	2.10	$	(0.27)	$	2.37	As reported (GAAP)	$	61,942	$	4,970	$	56,972	$	2.51	$	0.20		$	2.31

EPA compliance costs														EPA compliance costs	13,112		197		12,915		0.53		0.01			0.52
Restructuring charges	Restructuring charges	333		2		331		0.01		—		0.01		Restructuring charges	6		—		6		—		—			—
Tax reform		—		9,357		(9,357)		—		0.37		(0.37)

Subtotal	Subtotal	53,702		2,442		51,260		2.11		0.10		2.02		Subtotal	75,060		5,167		69,893		3.05		0.21			2.84
Amortization of intangible assets	Amortization of intangible assets	4,474		241		4,233		0.18		0.01		0.17		Amortization of intangible assets	2,983		208		2,775		0.12		0.01			0.11
Non-cash share-based compensation	Non-cash share-based compensation	9,291		606		8,685		0.37		0.02		0.34		Non-cash share-based compensation	14,020		859		13,161		0.57		0.03			0.53
Adjusted (non-GAAP)	Adjusted (non-GAAP)	$	67,467	$	3,289	$	64,178	$	2.66	$	0.13	$	2.53	Adjusted (non-GAAP)	$	92,063	$	6,234	$	85,829	$	3.74	$	0.25		$	3.48

Weighted average shares of common stock used in computing diluted EPS	Weighted average shares of common stock used in computing diluted EPS																							25,397	Weighted average shares of common stock used in computing diluted EPS				24,636

Three Months Ended May 31, 2019
Income Diluted EPS
(in thousands, except per share data) Before Tax Tax Net of Tax Before Tax Tax Net of Tax
As reported (GAAP) $ 44,031 $ 3,337 $ 40,694 $ 1.74 $ 0.13 $ 1.61
Restructuring charges 619 2 617 0.02 — 0.02
Subtotal 44,650 3,339 41,311 1.77 0.13 1.64
Amortization of intangible assets 3,876 121 3,755 0.15 — 0.15
Non-cash share-based compensation 7,604 576 7,028 0.30 0.02 0.28
Adjusted (non-GAAP) $ 56,130 $ 4,036 $ 52,094 $ 2.22 $ 0.16 $ 2.06
Weighted average shares of common stock used in computing diluted EPS 25,245


	Three Months Ended May 31, 2020
	Income						Diluted EPS
(in thousands, except per share data)	Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax
As reported (GAAP)	$	53,369	$	(6,917)	$	60,286	$	2.10	$	(0.27)	$	2.37



Restructuring charges	333		2		331		0.01		—		0.01
Tax reform	—		9,357		(9,357)		—		0.37		(0.37)
Subtotal	53,702		2,442		51,260		2.11		0.10		2.02
Amortization of intangible assets	4,474		241		4,233		0.18		0.01		0.17
Non-cash share-based compensation	9,291		606		8,685		0.37		0.02		0.34
Adjusted (non-GAAP)	$	67,467	$	3,289	$	64,178	$	2.66	$	0.13	$	2.53

Weighted average shares of common stock used in computing diluted EPS											25,397

Comparison of First Quarter Fiscal ~~2021~~2022 to First Quarter Fiscal ~~2020~~2021

Net Income was ~~$60.3~~$57.0 million, compared to ~~$40.7~~$60.3 million. Diluted EPS was ~~$2.37,~~$2.31, compared to ~~$1.61.~~$2.37. Diluted EPS ~~increased~~decreased primarily due to lower operating income in the Health & Home segment and the comparative impact from the Tax reform benefit recognized in the prior year period, partially offset by higher operating income in the ~~Health~~Beauty and ~~Home segment and discrete income tax benefits recorded in the first quarter of fiscal 2021. This was partially offset by~~Housewares segments, lower ~~operating income in the Housewares segment, higher~~ interest expense and ~~higher~~lower weighted average diluted shares outstanding.

Adjusted income increased ~~$12.1~~$21.7 million, or ~~23.2%~~33.7%, to ~~$64.2~~$85.8 million, compared to ~~$52.1~~$64.2 million. Adjusted diluted EPS increased ~~22.8%~~37.5% to ~~$2.53,~~$3.48, compared to ~~$2.06.~~ $2.53.

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Financial Condition, Liquidity and Capital Resources

Selected measures of our liquidity and capital resources are shown for the periods below:

Three Months Ended May 31,
2020 2019
Accounts Receivable Turnover (Days) (1) 67.5 66.8
Inventory Turnover (Times) (1) 3.2 3.2
Working Capital (in thousands)
$ 391,107 $ 346,936
Current Ratio 2.1:1 2.2:1
Ending Debt to Ending Equity Ratio 26.6 % 31.0 %
Return on Average Equity (1) 15.2 % 17.1 %

~~_____________________~~


	Three Months Ended May 31,
	2021		2020
Accounts receivable turnover (days) (1)	67.4		67.5
Inventory turnover (times) (1)	3.0		3.2
Working capital (in thousands)	$	484,339	$	391,107
Current ratio	1.8:1		2.1:1
Ending debt to ending equity ratio	42.5%		26.6%
Return on average equity (1)	20.3%		15.2%

(1)Accounts receivable turnover, inventory turnover and return on average equity computations use 12 month trailing net sales revenue, cost of goods sold or net income components as required by the particular measure. The current and four prior quarters' ending balances of accounts receivable, inventory and equity are used for the purposes of computing the average balance component as required by the particular measure.

We principally rely ~~principally~~ on our cash flow from operations and borrowings under our ~~credit facility~~Credit Agreement (as defined below) to finance our operations, ~~acquisitions, and capital expenditures. We believe our cash flow from operations and availability under our credit facility are sufficient to meet our working capital and capital expenditure needs.~~

~~Operating Activities~~

Operating activities provided net cash of $92.8 million for the three months ended May 31, 2020, compared to $15.7 million for the same period last year. The increase is primarily due to higher net income, increased cash from accounts payable and less cash used for inventory.

~~Investing Activities~~

~~During the three months ended May 31, 2020, we invested in~~ capital and intangible asset expenditures, ~~of $6.5 million, compared to $3.7 million for the same period last year. The increase is primarily for molds~~acquisitions and ~~production equipment, distribution center automation equipment, information technology equipment and software, leasehold improvements, furniture and other equipment.~~

~~Financing Activities~~

~~Financing activities used $22.3 million~~share repurchases. Historically, our principal uses of cash ~~during~~to fund our operations have included operating expenses, primarily SG&A, and working capital, predominantly for inventory purchases and the ~~three months ended~~extension of credit to our retail customers. We have been able to typically 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 had $37.4 million in cash and cash equivalents at May 31, 2020, compared to $5.5 million for the same period last year. The increase in cash used is primarily due to the net repayment of debt and payment of financing fees associated with the amendment to the revolving credit facility. During the first quarter of fiscal 2021, we increased our net borrowings as a precautionary approach to increase our cash position and maximize our financial flexibility in light of the volatility in the global markets resulting from the COVID-19 outbreak.

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~~Credit and Other Debt Agreements~~

~~Credit Agreement~~

As of February 29, 2020, we had a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and other lenders that provided for an unsecured total revolving commitment of $1.0 billion. Borrowings accrued interest under one of two alternative methods (based upon a base rate or LIBOR) as described in the Credit Agreement. With each borrowing against our credit line, we could elect the interest rate method based on our funding needs at the time. We also incurred loan commitment and letter of credit fees under the Credit Agreement. Outstanding letters of credit reduced the borrowing availability under the Credit Agreement on a dollar-for-dollar basis. We were able to repay amounts borrowed at any time without penalty.

On March 13, 2020, we entered into an amendment to the Credit Agreement. The amendment extended the maturity of the commitment under the Credit Agreement from December 7, 2021 to March 13, 2025. Further, the amendment increased the unsecured revolving commitment from $1.0 billion to $1.25 billion. The accordion was amended to increase it from $200 million to $300 million and to include the ability to use it for term loan commitments. The accordion permits the Company to request to increase its borrowing capacity, not to exceed the $300 million commitment in the aggregate, provided certain conditions are met, including lender approval. Any increase to term loan commitments and revolving loan commitments must be made on terms identical to the revolving loans under the Credit Agreement and must have a maturity date of no earlier than March 13, 2025. Following the amendment, borrowings under the Credit Agreement bear interest at either the base rate or LIBOR, plus a margin based on the Net Leverage Ratio (as defined in the Credit Agreement) of 0% to 1.0% and 1.0% to 2.0%, respectively, for base rate and LIBOR borrowings.

2021. As of May 31, ~~2020, the outstanding revolving loan principal balance was~~ $311.0 million (excluding prepaid financing fees) and the balance of outstanding letters of credit was $9.0 million. For the three months ended May 31, 2020, borrowings under the Credit Agreement incurred interest expense at rates ranging from 1.2% to 4.8%. As of May 31, 2020, the amount available for borrowings under the Credit Agreement was $930.0 million. Covenants in the Credit Agreement limit2021, the amount of ~~total indebtedness we can incur. As of May 31, 2020, these covenants effectively limited~~cash and cash equivalents held by our ~~ability to incur more than $731.7~~foreign subsidiaries was $26.5 million, of ~~additional debt from all sources, including~~which an immaterial amount was held in foreign countries where the ~~Credit Agreement, or $930.0 million in the event a qualified acquisition is consummated.~~

~~Other Debt Agreements~~

As of May 31, 2020, we have an aggregate principal balance of $18.6 million (excluding prepaid financing fees) under a loan agreement (the “MBFC Loan”) with the Mississippi Business Finance Corporation (the “MBFC”), which was enteredfunds may not be readily convertible into in connection with the issuance by MBFC of taxable industrial development revenue bonds (the “Bonds”). The borrowings were used to fund construction of our Olive Branch, Mississippi distribution facility. Since March 2018, the MBFC Loan can be called by the holder at any time. The remaining loan balance is payable as follows: $1.9 million annually on March 1, 2021 and 2022; and $14.8 million on March 1, 2023. Any remaining outstanding principal and interest is due upon maturity on March 1, 2023.

On May 14, 2020, Helen of Troy Limited and certain of its subsidiaries entered into the Sixth Amendment to Guaranty Agreement (the “Amended Guaranty”) in favor of Bank of America, N.A. The Amended Guaranty amends the Guaranty Agreement (as amended, the “Guaranty Agreement”), dated March 1, 2013, made by the Company and certain of its subsidiaries in favor of Bank of America, N.A. and other lenders. Certain of the representations and warranties, and covenants in the Guaranty Agreement were amended by the Amended Guaranty to include or modify certain baskets, exceptions and other customary provisions.

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The Bonds were issued under a Trust Indenture, dated as of March 1, 2013 (as supplemented, the “Indenture”), by and between MBFC and U.S. Bank National Association, as trustee (the “Trustee”). On May 14, 2020, MBFC and U.S. Bank National Association, as Trustee, entered into the Fifth Supplemental Trust Indenture, effective May 14, 2020 (the “Fifth Supplemental Indenture”), with the consent of Kaz USA, Inc. (“Kaz USA”) and Bank of America, N.A., the purchaser of the Bonds. The Base Rate (as defined in the Indenture) and Eurodollar Rate (as defined in the Indenture) each was amended. As amended by the Fifth Supplemental Indenture, the Bonds and the related loans to Kaz USA will bear interest at a Base Rate or Eurodollar Rate plus a margin based on the Net Leverage Ratio (as defined in the Fifth Supplemental Indenture). The Fifth Supplemental Indenture amended the pricing grid for the Eurodollar and Base Rate margins.

All of our debt is unconditionally guaranteed, on a joint and several basis, by the Company and certain of its subsidiaries. Our debt agreements require the maintenance of certain key financial covenants, defined in the table below. Our debt agreements also contain other customary covenants, including, among other things, covenants restricting or limiting us, except under certain conditions set forth therein, from (1) incurring debt, (2) incurring liens on our properties, (3) making certain types of investments, (4) selling certain assets or making other fundamental changes relating to mergers and consolidations, and (5) repurchasing shares of our common stock and paying dividends. Our debt agreements also contain customary events of default, including failure to pay principal or interest when due, among others. Our debt agreements are cross-defaulted to each other. Upon an event of default under our debt agreements, the holders or lenders may, among other things, accelerate the maturity of any amounts outstanding under our debt agreements. 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.

~~The table below provides the formulas currently in effect for certain key financial covenants as defined under our debt agreements:~~


~~Applicable Financial Covenant~~	~~Credit Agreement and MBFC Loan~~
~~Minimum Interest Coverage Ratio~~	~~EBIT (1)~~÷~~Interest Expense (1)~~
		~~Minimum Required: 3.00 to 1.00~~
~~Maximum Leverage Ratio~~	~~Total Current and Long Term Debt (2)~~ ÷
		~~EBITDA (1) + Pro Forma Effect of Transactions~~
		~~Maximum Currently Allowed: 3.50 to 1.00 (3)~~

~~Key Definitions:~~

~~EBIT: Earnings + Interest Expense + Taxes + Non-Cash~~

~~Charges (4) + Certain Allowed Addbacks (4) - Certain Non-Cash Income (4)~~

~~EBITDA: EBIT + Depreciation and Amortization Expense~~

~~Pro Forma Effect of Transactions: For any acquisition, pre-acquisition EBITDA of the acquired business is included so that the~~

EBITDA of the acquired business included in the computation equals its twelve month trailing total. In addition, the amount of certain pro forma run-rate cost savings for acquisitions or dispositions may be added to EBIT and EBITDA.

~~Notes:~~

~~(1)Computed using totals for the latest reported four consecutive fiscal quarters.~~

~~(2)Computed using the ending balances as of the latest reported fiscal quarter.~~

~~(3)~~In the event a qualified acquisition is consummated, the maximum leverage ratio is 4.25 to 1.00 for the first fiscal quarter after the qualified acquisition and then steps down until the maximum leverage ratio is 3.75 to 1.00 at the end of the fifth fiscal quarter after the qualified acquisition is consummated.

~~(4)As described in the Credit Agreement and Guaranty Agreement.~~

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~~Contractual Obligations~~

As of May 31, 2020, there have been no material changes from the information provided in our latest annual report on Form 10-K. Additional information regarding contractual obligations can be found in Notes 12, 13, 14 and 15 to the accompanying condensed consolidated financial statements.

~~Off-Balance Sheet Arrangements~~

currencies. We have no existing activities involving special purpose entities or off-balance sheet financing.

~~Current and Future Capital Needs~~

Based on our current financial condition and current operations, we believe that cash ~~flow~~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 expect our capital needs to stem primarily from the need to purchase sufficient levels of inventory and to carry normal levels of accounts receivable on our balance sheet.~~

On March 24, 2020, we borrowed approximately $200 million under the Credit Agreement as part of a comprehensive precautionary approach to increase our cash position and maximize our financial flexibility in light of the volatility in the global markets resulting from the COVID-19 outbreak. We subsequently repaid the majority of this amount during May 2020.

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~~Directors' authorization, subject to limitations contained in our debt agreements and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. We may finance share repurchases with available cash, additional debt or other sources of financing. For additional information, see Part II, Item 5,5. “Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities” in our ~~latest annual report on~~ Form 10-K and Part II, Item ~~2, "Unregistered~~2., “Unregistered Sales of Equity Securities and Use of Proceeds" in this report.

Operating Activities

Operating activities used net cash of $63.4 million for the three months ended May 31, 2021, compared to net cash provided of $92.8 million for the same period last year. The decrease in cash provided by operating activities was primarily driven by an increase in cash used for working capital, incentive

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compensation payments and tax withholding settlements, partially offset by an increase in accrued income taxes.

Investing Activities

During the three months ended May 31, 2021, we made investments in capital and intangible asset expenditures of $4.0 million, compared to $6.5 million for the same period last year. Capital and intangible asset expenditures during both periods were primarily for tools, molds, and other production equipment and computer, software, furniture and other equipment.

Financing Activities

Financing activities provided cash of $59.6 million during the three months ended May 31, 2021, compared to used cash of $22.3 million for the same period last year. The increase in cash provided by financing activities is primarily due to a net increase in proceeds from our line of credit partially offset by open market repurchases of common stock.

Credit and Other Debt Agreements

Credit Agreement

We have a credit agreement (the "Credit Agreement") with Bank of America, N.A., as administrative agent, and other lenders that provides for an unsecured total revolving commitment of $1.25 billion. As of May 31, ~~2020,~~2021, the outstanding revolving loan principal balance was $498.0 million (excluding prepaid financing fees), the balance of outstanding letters of credit was $19.2 million and the amount available for borrowings was $732.8 million. Covenants in the Credit Agreement limit the amount of ~~cash and cash equivalents held by~~total indebtedness we can incur. As of May 31, 2021, these covenants did not limit our ~~foreign subsidiaries was $24.4 million.~~ ability to incur $732.8 million of additional debt under the Credit Agreement.

Other Debt Agreements

As of May 31, 2021, we have an aggregate principal balance of $16.7 million (excluding prepaid financing fees) under an unsecured loan agreement with the Mississippi Business Finance Corporation.

As of May 31, 2021, there have been no material changes to the information provided in our Form 10-K.

New Accounting Guidance

For information on recently adopted and issued accounting pronouncements, see Note 2 to the accompanying condensed consolidated financial statements.

Information Regarding Forward-Looking Statements

Certain written and oral statements may constitute ~~"forward-looking statements"~~“forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. This includes statements made in this report, in other filings with the ~~Securities and Exchange Commission (the "SEC"),~~SEC, in press releases, and in certain other oral and written presentations. Generally, the words ~~"anticipates"~~“anticipates”, ~~"believes"~~“believes”, ~~"expects"~~“expects”, ~~"plans"~~“plans”, ~~"may"~~“may”, ~~"will"~~“will”, ~~"should"~~“would”, ~~"seeks"~~“should”, ~~"estimates"~~“seeks”, ~~"project"~~“estimates”, ~~"predict"~~“project”, ~~"potential"~~“predict”, ~~"continue"~~“potential”, ~~"intends"~~“currently”, “continue”, “intends”, and other similar words identify forward-looking statements. All statements that address operating results, events or developments that may occur in the future, including statements related to sales, earnings per share

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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

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for our expectations and assumptions, but there can be no assurance that we will realize our expectations or that our assumptions will prove correct. Forward-looking statements are subject to risks that could cause them to differ materially from actual results. Accordingly, we caution readers not to place undue reliance on forward-looking statements. We believe that these risks include but are not limited to the risks described in this report 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.

Such risks are not limited to, but may include:

•our ability to successfully manage the demand, supply and operational challenges associated with the actual or perceived effects of COVID-19 and any similar future public health crisis, pandemic or epidemic;

•our ability to deliver products to our customers in a timely manner and according to their fulfillment standards;

•~~the costs of complying with the business demands~~actions taken by large customers that may adversely affect our gross profit and ~~requirements of large sophisticated customers;~~operating results;

•our dependence on the strength of retail economies and vulnerabilities to any prolonged economic downturn, including from the effects of COVID-19;

•our ~~relationships with key customers and licensors;~~

•~~our~~ dependence on sales to several large customers and the risks associated with any loss of, or substantial decline in, sales to top customers;

•expectations regarding recent ~~pending~~acquisitions and any future acquisitions or divestitures, including our ability to realize ~~anticipated cost savings,~~related synergies ~~and other benefits~~ along with our ability to effectively integrate acquired businesses or ~~separate~~disaggregate divested businesses;

•~~circumstances which may contribute~~our reliance on our Chief Executive Officer and a limited number of other key senior officers to ~~future impairment of goodwill, intangible or other long-lived assets;~~operate our business;

•obsolescence or interruptions in the ~~retention~~operation of our central global Enterprise Resource Planning systems and ~~recruitment of key personnel;~~

•~~the costs, complexity and challenges of upgrading and managing our global~~other peripheral information systems;

•~~the risks associated with~~occurrence of cyber incidents or failure by us or our third-party service providers to maintain cybersecurity and ~~information security breaches;~~the integrity of confidential internal or customer data;

•our dependence on third-party manufacturers, most of which are located in the Asia Pacific market, and any inability to obtain products from such manufacturers;

•the risks associated with global legal developments regarding privacy and data security could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business;

•~~risks associated with foreign currency exchange rate fluctuations;~~

•~~the risks associated with accounting for tax positions, tax audits and related disputes with taxing authorities;~~

•the risks of potential changes in laws in the U.S. or abroad, including tax laws, regulations or treaties, employment and health insurance laws and regulations, laws relating to environmental policy, personal data, financial regulation, transportation policy and infrastructure policy along with the costs and complexities of compliance with such laws;

•~~our ability to continue to avoid classification as a controlled foreign corporation;~~

•~~the risks of new legislation enacted in Bermuda and Barbados in response to the European Union’s review of harmful tax competition;~~

•risks associated with weather conditions, the duration and severity of the cold and flu season and other related factors;

•our dependence on foreign sources of supply and foreign manufacturing, and associated operational risks including, but not limited to, long lead times, consistent local labor availability and capacity, and timely availability of sufficient shipping carrier capacity;

•~~the impact of changing costs of raw materials, labor and energy on cost of goods sold and certain operating expenses;~~

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•~~the risks associated with significant tariffs or other restrictions on imports from China or any retaliatory trade measures taken by China;~~

•~~the risks associated with~~ the geographic concentration and peak season capacity of certain U.S. distribution ~~facilities;~~

•facilities which increase our ~~projections of product demand, sales and net income are highly subjective in nature and future sales and net income~~risk to disruptions that could ~~vary~~affect the our ability to deliver products in a ~~material amount from such projections;~~timely manner;

•the risks associated with the use of licensed trademarks ~~licensed~~ from ~~and~~or to third parties;

•our ability to develop and introduce a continuing stream of innovative new products to meet changing consumer preferences;

•the risks associated with trade barriers, exchange controls, expropriations, and other risks associated with ~~U.S.~~domestic and foreign operations;

•the risks associated with significant changes in or our compliance with regulations, interpretations or product certification requirements;

•the risks associated with our discussions with the EPA on the development and implementation of compliance plans related to certain of our products within the Health & Home segment;

•the risks associated with global legal developments regarding privacy and data security that could result in changes to our ~~liquidity~~business practices, penalties, increased cost of operations, or otherwise harm our business;

•the risks associated with accounting for tax positions and the resolution of tax disputes;

•the risks of potential changes in laws and regulations, including environmental, health and safety and tax laws, and the costs and complexities of compliance with such laws;

•our ability to continue to avoid classification as a ~~result~~Controlled Foreign Corporation;

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•the risks associated with legislation enacted in Bermuda and Barbados in response to ~~capital market conditions and~~the European Union’s review of harmful tax competition;

•the risks of significant tariffs or other ~~constraints~~restrictions being placed on imports from China or ~~events that impose constraints on our cash resources and ability to operate our business;~~Mexico or any retaliatory trade measures taken by China or Mexico;

•the risks associated with product recalls, product liability and other claims ~~and related litigation~~ against us;

•associated financial risks including but not limited to, significant impairment of our goodwill, indefinite-lived and definite-lived intangible assets or other long-lived assets;

•the risks associated with foreign currency exchange rate fluctuations;

•increased costs of raw materials, energy and transportation;

•projections of product demand, sales and net income, which are highly subjective in nature, and from which future sales and net income could vary in a material amount; and

•the risks to our liquidity or cost of capital which may be materially adversely affected by constraints or changes in ~~regulations or product certifications.~~the capital and credit markets and limitations under our financing arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the information provided in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in our Form 10-K. Additional information regarding our risk management activities can be found in Notes ~~13, 14~~9, 10 and 1511 to the accompanying unaudited condensed consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), maintains disclosure controls and procedures as defined in ~~Rules~~Rule 13a-15(e) under the Securities Exchange Act of 1934 ~~("Exchange Act"~~(the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Our management, including our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended May 31, ~~2020.~~2021. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective at a reasonable level of assurance as of May 31, ~~2020,~~2021, the end of the period covered by this quarterly report on Form 10-Q.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

In connection with the evaluation described above, we identified no change in our internal control over financial reporting as defined in Rule 13a-15(f) ofunder the Exchange Act that occurred during our fiscal quarter ended May 31, ~~2020,~~2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

EPA Regulatory Matter

We are currently in discussions with the EPA regarding the compliance of packaging claims on certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Health & Home segment that are sold in the U.S. The EPA has not raised any product quality, safety or performance issues. We expect these products to be available for distribution with the only changes being modified labeling or different packaging. As a result of these discussions, on May 27, 2021, we voluntarily implemented a temporary stop shipment action across this line of products in the U.S. while we ensure that all labeling is in compliance and we work with the EPA towards an expedient resolution. The EPA has approved modest changes to our labeling claims on our existing water filtration packaging, which we have begun to implement. We resumed shipment of these products and are actively working towards similar agreements regarding our air filtration and humidification packaging in continued collaboration with the EPA. At our request, the EPA issued a Stop Sale, Use or Removal Order on June 29, 2021, which, among other things, allows for the movement of certain of our products among our warehouses and will facilitate rework of the affected air filtration packaging once agreed to with the EPA. We believe this is meaningful progress towards a final resolution with the EPA. The stop shipment will remain in effect until we implement an approved labeling and repackaging plan. We expect that our consolidated and Health & Home segment’s fiscal 2022 net sales revenue, gross profit and operating income will be materially and adversely impacted by the stop shipment. The extent to which net sales revenue will be impacted will primarily depend on the duration of time required for the EPA to act on our proposed solutions and the related implementation schedule. At this time, we are not aware of any fines or penalties related to this matter imposed against us by the EPA. While we do not anticipate material fines or penalties, there can be no assurances that such fines or penalties will not be imposed.

See Note 8 to our condensed consolidated financial statements, Part I, Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including “EPA Compliance Costs” and Part II, Item 1A., “Risk Factors” in this Form 10-Q for additional information.

ITEM 1A. RISK FACTORS

The ownership of our common stock involves a number of risks and uncertainties. When evaluating the Company and our business before making an investment decision regarding our securities, potential investors should carefully consider the risk factors and uncertainties described in Part 1, Item 1A. “Risk Factors” of our annual report on Form 10-K for the fiscal year ended February ~~29, 2020.~~28, 2021 (“Form 10-K”). Since the filing of our ~~annual report on~~ Form 10-K, there have been no material changes in our risk factors from those disclosed ~~therein.~~therein except as follows.

Significant changes in or our compliance with regulations, interpretations or product certification requirements could adversely impact our operations.

As a global company, we are subject to U.S. and foreign regulations, including environmental, health and safety laws, and industry-specific product certifications. Many of the products we sell are subject to product safety laws and regulations in various jurisdictions. These laws and regulations specify the maximum allowable levels of certain materials that may be contained in our products, provide statutory prohibitions against misbranded and adulterated products, establish ingredients and manufacturing

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procedures for certain products, specify product safety testing requirements, and set product identification, labeling and claim requirements. For example, thermometers distributed by our Health & Home segment must comply with various regulations governing the production and distribution of medical devices.

Additionally, some of our product lines within our Health & Home segment are subject to product identification, labeling and claim requirements, which are monitored and enforced by regulatory agencies, such as the U.S. Environmental Protection Agency (the “EPA”), U.S. Customs and Border Protection, the U.S. Food and Drug Administration, and the U.S. Consumer Product Safety Commission.

We are currently in discussions with the EPA regarding the compliance of packaging claims of certain of our products in the air and water filtration categories and a limited subset of humidifier products within the Health & Home segment that are sold in the U.S. The EPA has not raised any product quality, safety or performance issues. As a result of these discussions, on May 27, 2021, we voluntarily implemented a temporary stop shipment action across this line of products in the U.S. while we ensure that all labeling is in compliance and we work with the EPA towards an expedient resolution. The EPA has approved modest changes to our labeling claims on our existing water filtration packaging, which we have begun to implement. We resumed shipment of these products and are actively working towards similar agreements regarding our air filtration and humidification packaging in continued collaboration with the EPA. At our request, the EPA issued a Stop Sale, Use or Removal Order on June 29, 2021.The stop shipment will remain in effect until we implement an approved labeling and repackaging plan. We expect that our consolidated and Health & Home segment’s fiscal 2022 net sales revenue, gross profit and operating income will be materially and adversely impacted by the stop shipment. The extent to which net sales revenue will be impacted will primarily depend on the duration of time required for the EPA to approve our proposed solutions and the related implementation schedule. In addition, our net sales revenue could be materially and adversely impacted by customer returns, increase in sales discounts and allowances and by the potential impact of distribution losses at certain retailers. There can also be no assurance that fines or penalties will not be imposed by the EPA.

During the first quarter of fiscal 2022, we recorded a $13.1 million charge to write-off the obsolete packaging for the affected products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022. We expect to incur additional compliance costs, which may include costs to relabel or repackage our existing inventory as well as incremental freight and storage costs, among other things. Costs to repackage our existing inventory will be capitalized into inventory; however, many of the other potential incremental EPA compliance costs will be expensed as incurred. The consequences of the compliance requirements and other matters pertaining to our discussions with the EPA are inherently uncertain. Accordingly, additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today. As a result, our business, results of operations and financial condition could be adversely and materially impacted by these actions or in ways that we are not able to predict today. 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” in this Form 10-Q.

The ongoing compliance efforts with the EPA related to our Health & Home products, as well as significant new regulations, material changes to existing regulations, or greater oversight, enforcement or changes in interpretation of existing regulations, could further delay or interrupt distribution of our products in the U.S. and other countries, result in fines or penalties or cause our costs of compliance to increase. Additionally, we cannot guarantee that our products will receive regulatory approval in all countries. Similarly, some of our Beauty segment’s customers require that our Beauty appliances comply with various safety certifications, including UL certifications. Significant new certification requirements or changes to existing certification requirements could further delay or interrupt distribution of our products, or make them more costly to produce.

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We are not able to predict the nature of potential changes to, or enforcement of laws, regulations, product certification requirements, repeals or interpretations. Nor are we able to predict the impact that any of these changes would have on our business in the future. Further, if we were found to be noncompliant with applicable laws and regulations in these or other areas, we could be subject to governmental or regulatory actions, including fines, import detentions, injunctions, product withdrawals or recalls or asset seizures, any of which could have a material adverse effect on our business, results of operations and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In May 2019, our Board of Directors authorized the repurchase of up to $400 million of our outstanding common stock. The authorization is effective until May 2022 and replaced our former repurchase authorization, of which approximately $107.4 million was outstanding at the time the new authorization was approved. These repurchases may include open market purchases, privately negotiated transactions, block trades, accelerated stock repurchase transactions, or any combination of such methods. The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. See Note 106 to the accompanying condensed consolidated financial statements for additional information.

Our current equity-based compensation plans include provisions that allow for the ~~"net exercise"~~“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~~equity holder can be 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.

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

Period Total Number of
Shares Purchased (1) Average Price
Paid per Share Total Number of
Shares Purchased as Part of Publicly
Announced Plans
or Programs Maximum Dollar Value of
Shares that May
Yet be Purchased
Under the Plans
or Programs
(in thousands) (2)
March 1 to March 31, 2020 16,593 $ 164.60 16,593 $ 390,248
April 1 to April 30, 2020 183 160.83 183 390,219
May 1 to May 31, 2020 44,069 164.56 44,069 382,967
Total 60,845 $ 164.56 60,845


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (2)
March 1 to March 31, 2021	12,766	$	219.88	12,766	$	186,878
April 1 to April 30, 2021	55,930	212.32		55,930	175,003
May 1 to May 31, 2021	433,790	219.91		433,790	79,611
Total	502,486	$	219.06	502,486

(1)The number of shares above includes shares of common stock acquired from employees who tendered shares to: (i) satisfy the tax withholding on equity awards as part of our long-term incentive plans or (ii) satisfy the exercise price on stock option exercises. For the three months ended May 31, ~~2020, 60,845~~2021, 65,644 shares were acquired at a weighted average per share price of ~~$164.56.~~$222.26.

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(2)Reflects the remaining dollar value of shares that could be purchased under our current stock repurchase authorization through the expiration or termination of the plan. For additional information, see Note 106 to the accompanying condensed consolidated financial statements.

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ITEM 6.

EXHIBITS

(a)

Exhibits

~~10.1~~

Third Amendment and Commitment Increase to Amended and Restated Credit Agreement dated March 13, 2020, by and among Helen of Troy Texas Corporation, a Texas corporation, Helen of Troy Limited, a Bermuda company, Bank of America, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 17, 2020).

~~10.2~~

Sixth Amendment to Guaranty Agreement, dated May 14, 2020, made by Helen of Troy Limited and certain of its subsidiaries in favor of Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 20, 2020).

~~10.3~~

Fifth Supplemental Trust Indenture, dated May 14, 2020, by and between Mississippi Business Finance Corporation and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 20, 2020).

~~10.4*†~~

Waiver Letter, dated March 30, 2020, to the Amended and Restated Employment Agreement among Helen of Troy Nevada Corporation, Helen of Troy Limited, a Bermuda company, Helen of Troy Limited, a Barbados company, and Julien Mininberg.

~~10.5*†~~

~~Waiver Letter, dated March 30, 2020, to the Severance Agreement among Helen of Troy Nevada Corporation, Helen of Troy Limited, a Bermuda company, and Brian L. Grass.~~

31.1*

Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32**

Joint certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended May 31, ~~2020,~~2021, formatted in Inline eXtensible Business Reporting Language ~~("iXBRL"~~(“iXBRL”): (i) Condensed Consolidated Balance ~~Sheet,~~Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders' Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to the Condensed Consolidated Financial Statements.

104

Cover Page, Interactive Data File formatted in iXBRL and contained in Exhibit 101.

* Filed herewith.

** Furnished herewith.

~~† Management contracts or compensatory plans or arrangements.~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		HELEN OF TROY LIMITED
		(Registrant)

Date:	July ~~10, 2020~~9, 2021	/s/ Julien R. Mininberg
		Julien R. Mininberg
		Chief Executive Officer, Director and Principal Executive Officer

Date:	July ~~10, 2020~~9, 2021	/s/ Brian L. Grass
		Brian L. Grass
		Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer


(in thousands)	Estimated Useful Lives (Years)					May 31, 2020		February 29, 2020
Land		-		$	12,644	$	12,644
Building and improvements	3	-	40	115,744		115,592
Computer, software, furniture and other equipment	3	-	15	90,327		89,257
Tools, molds and other production equipment	3	-	7	41,276		37,652
Construction in progress		-		10,282		9,302
Property and equipment, gross				270,273		264,447
Less accumulated depreciation				(136,898)		(132,340)
Property and equipment, net				$	133,375	$	132,107


	Fair Values (1)
(in thousands)	May 31, 2020		February 29, 2020

Assets:
Money market accounts	$	62,351	$	2,648
Interest rate swaps	—		—
Foreign currency contracts	2,373		2,083
Total assets	$	64,724	$	4,731

Liabilities:
Floating rate debt	$	324,883	$	339,305
Interest rate swaps	14,123		10,717
Foreign currency contracts	400		159
Total liabilities	$	339,406	$	350,181


	Three Months Ended May 31,
	Gain (Loss) Recognized in OCI (effective portion)					Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income									Gain (Loss) Recognized As Income
(in thousands)	2020		2019		Location	2020		2019		Location	2020		2019
Currency contracts - cash flow hedges	$	74	$	(186)	SG&A	$	(765)	$	(1,218)		$	—	$	—
Interest rate swaps - cash flow hedges	(3,407)		(5,200)		Interest expense	—		—		Interest expense	(726)		154
Cross-currency debt swaps - principal	—		—			—		—		SG&A	(149)		464
Cross-currency debt swaps - interest	—		—			—		—		Interest Expense	74		74
Total	$	(3,333)	$	(5,386)		$	(765)	$	(1,218)		$	(801)	$	692