Helen of Troy(HELE) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance and position, including detailed statements and explanatory notes ITEM 1. FINANCIAL STATEMENTS Presents unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed explanatory notes Condensed Consolidated Balance Sheets (Unaudited) Presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates | Metric (in thousands) | August 31, 2025 | February 28, 2025 | Change | % Change | | :-------------------- | :-------------- | :---------------- | :----- | :------- | | Assets: | | | | | | Total assets, current | $938,129 | $931,712 | $6,417 | 0.7% | | Goodwill | $569,150 | $1,182,899 | $(613,749)| -51.9% | | Other intangible assets, net | $429,025 | $566,756 | $(137,731)| -24.3% | | Total assets | $2,407,554 | $3,132,083 | $(724,529)| -23.1% | | Liabilities: | | | | | | Total liabilities, current | $549,952 | $466,259 | $83,693 | 17.9% | | Long-term debt, excluding current maturities | $871,345 | $907,519 | $(36,174)| -4.0% | | Total liabilities | $1,481,272 | $1,448,644 | $32,628 | 2.3% | | Stockholders' Equity: | | | | | | Total stockholders' equity | $926,282 | $1,683,439 | $(757,157)| -45.0% | Condensed Consolidated Statements of (Loss) Income (Unaudited) Details the company's financial performance, including sales revenue, gross profit, operating income, and net (loss) income over specific periods | Metric (in thousands, except per share data) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :------------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Sales revenue, net | $431,781 | $474,221 | $803,436 | $891,068 | | Gross profit | $190,681 | $216,070 | $365,692 | $419,149 | | SG&A | $176,999 | $179,692 | $344,663 | $350,173 | | Asset impairment charges | $326,394 | $0 | $740,779 | $0 | | Operating (loss) income | $(315,717) | $34,852 | $(722,755) | $65,615 | | Net (loss) income | $(308,643) | $17,014 | $(759,361) | $23,218 | | Basic (Loss) earnings per share | $(13.44) | $0.75 | $(33.09) | $1.00 | | Diluted (Loss) earnings per share | $(13.44) | $0.74 | $(33.09) | $1.00 | Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) Outlines net (loss) income and other comprehensive (loss) income components, reflecting total comprehensive financial performance | Metric (in thousands) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net (loss) income | $(308,643) | $17,014 | $(759,361) | $23,218 | | Other comprehensive loss, net of tax | $(1,983) | $(4,312) | $(7,739) | $(3,614) | | Comprehensive (loss) income | $(310,626) | $12,702 | $(767,100) | $19,604 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Shows changes in common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive (loss) income over time | Metric (in thousands) | Balances at Feb 28, 2025 | Net Loss (6 months) | Other Comprehensive Loss (6 months) | Balances at Aug 31, 2025 | | :-------------------- | :----------------------- | :------------------ | :---------------------------------- | :----------------------- | | Common Stock Par Value | $2,286 | - | - | $2,296 | | Additional Paid in Capital | $367,106 | - | - | $377,039 | | Accumulated Other Comprehensive (Loss) Income | $2,278 | - | $(7,739) | $(5,461) | | Retained Earnings | $1,311,769 | $(759,361) | - | $552,408 | | Total Stockholders' Equity | $1,683,439 | $(759,361) | $(7,739) | $926,282 | Condensed Consolidated Statements of Cash Flows (Unaudited) Summarizes cash inflows and outflows from operating, investing, and financing activities, indicating changes in cash and cash equivalents | Metric (in thousands) | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :-------------------- | :---------------------------- | :---------------------------- | | Net cash provided by operating activities | $47,868 | $69,916 | | Net cash used by investing activities | $(20,975) | $(14,101) | | Net cash used by financing activities | $(23,390) | $(54,179) | | Net increase in cash and cash equivalents | $3,503 | $1,636 | | Cash and cash equivalents, ending balance | $22,370 | $20,137 | Note 1 - Basis of Presentation and Related Information Provides background on Helen of Troy Limited, its business segments, seasonal operations, supply chain, and recent acquisition of Olive & June - Helen of Troy Limited, incorporated in Bermuda in 1994, is a global consumer products company with brands like OXO, Hydro Flask, Osprey, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar, Curlsmith, Revlon, and Olive & June. It operates two reportable segments: Home & Outdoor and Beauty & Wellness[17][18] - The company's business is seasonal, with the highest sales volume and operating income typically occurring in the third fiscal quarter (ending November 30th). Products are primarily purchased from manufacturers in China, Mexico, Vietnam, and the U.S[19] - On December 16, 2024, the company acquired Olive & June, an omni-channel nail care brand, for an initial cash consideration of $224.7 million and contingent cash consideration of up to $15.0 million. This acquisition was added to the Beauty & Wellness segment[20] Note 2 - New Accounting Pronouncements Discusses recently issued accounting standards, ASU 2025-05 and ASU 2025-06, and their expected impact on the company's financial reporting - ASU 2025-05 (Financial Instruments – Credit Losses) was issued in July 2025, allowing entities to assume current conditions for accounts receivable and contract assets when estimating credit losses. It is effective for fiscal years beginning after December 15, 2025, and is not expected to have a material impact[24] - ASU 2025-06 (Intangibles – Goodwill and Other – Internal-Use Software) was issued in September 2025, requiring capitalization of software costs when management authorizes funding and project completion is probable. It is effective for fiscal years beginning after December 15, 2027, and the company is evaluating its impact[25] Note 3 - Accrued Expenses and Other Current Liabilities Details the composition and changes in various accrued expenses and other current liabilities, including compensation, sales allowances, and advertising | (in thousands) | August 31, 2025 | February 28, 2025 | Change | % Change | | :------------- | :-------------- | :---------------- | :----- | :------- | | Accrued compensation, benefits and payroll taxes | $26,760 | $16,096 | $10,664 | 66.3% | | Accrued sales discounts and allowances | $46,035 | $36,600 | $9,435 | 25.8% | | Accrued sales returns | $21,559 | $20,190 | $1,369 | 6.8% | | Accrued advertising | $29,199 | $25,716 | $3,483 | 13.5% | | Other | $73,111 | $62,138 | $10,973 | 17.7% | | Total accrued expenses and other current liabilities | $196,664 | $160,740 | $35,924 | 22.3% | Note 4 - Acquisition of Olive & June Provides details on the acquisition of Olive & June, including initial and contingent cash consideration, funding, and recognized goodwill and intangible assets - On December 16, 2024, Helen of Troy acquired Olive & June, an omni-channel nail care brand, for an initial cash consideration of $224.7 million (net of cash acquired and a favorable post-closing adjustment of $3.9 million) and contingent cash consideration of up to $15.0 million[27] - The acquisition was funded by cash on hand and borrowings from the existing revolving credit facility. The contingent consideration is subject to Olive & June achieving certain annual adjusted EBITDA targets for calendar years 2025-2027[27][28] - Goodwill of $150.7 million was recognized, primarily attributable to expected synergies from leveraging operational scale, customer relationships, and distribution capabilities. Acquired intangible assets included trade names ($51.0 million), customer relationships ($8.0 million), and non-compete agreements ($1.6 million)[29][31] Note 5 - Goodwill and Intangibles Reports significant asset impairment charges for goodwill and other intangible assets across Home & Outdoor and Beauty & Wellness segments due to market conditions - During the first and second quarters of fiscal 2026, the company recognized pre-tax asset impairment charges totaling $326.4 million for the three months ended August 31, 2025, and $740.8 million for the six months ended August 31, 2025, due to a sustained decline in stock price, downward revisions to internal forecasts, and macroeconomic factors[33][35][36] | Segment (in thousands) | Three Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2025 | | :--------------------- | :------------------------------ | :---------------------------- | | Home & Outdoor | $85,537 | $304,632 | | Beauty & Wellness | $240,857 | $436,147 | | Total | $326,394 | $740,779 | - Goodwill impairment charges for the six months ended August 31, 2025, totaled $609.6 million, with $229.1 million in Home & Outdoor (Hydro Flask, Osprey) and $380.5 million in Beauty & Wellness (Health & Wellness, Drybar, Curlsmith). The Hydro Flask reporting unit's goodwill was reduced to zero[37][39] - Other intangible asset impairment charges for the six months ended August 31, 2025, totaled $131.2 million, affecting trade names (Hydro Flask, Osprey, PUR), trademark licenses (Revlon), customer relationships (Drybar, Hydro Flask), and other intangibles (Drybar, Hydro Flask)[39][41] Note 6 - Share-Based Compensation Plans Outlines the 2025 Stock Incentive Plan, share-based compensation expense, and unrecognized compensation, including various award types - The 2025 Stock Incentive Plan replaced the 2018 Plan on August 20, 2025, with 1,155,478 shares available for future issuance. During the first quarter of fiscal 2026, 272,909 service condition awards, 191,946 performance-based awards, and 128,081 market condition awards were granted[43][44] | (in thousands) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Share-based compensation expense | $9,372 | $5,487 | $9,668 | $11,320 | | Less: income tax benefits | $(445) | $(221) | $(602) | $(485) | | Net expense | $8,927 | $5,266 | $9,066 | $10,835 | - Total unrecognized share-based compensation was $26.6 million as of August 31, 2025, to be recognized over a weighted average amortization period of 2.1 years. This includes estimates for target achievement for fiscal 2026 and 2025 awards, and zero percent for fiscal 2024 awards[46] Note 7 - Repurchases of Common Stock Details the common stock repurchase authorization, remaining availability, and shares acquired in connection with share-based compensation - In August 2024, the Board authorized the repurchase of up to $500 million of common stock over three years, replacing a former authorization. As of August 31, 2025, $498.4 million remained available under this authorization[47] | (in thousands, except share and per share data) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Common stock repurchased on the open market: | | | | | | Number of shares | — | — | — | 1,011,243 | | Aggregate value of shares | $— | $— | $— | $100,019 | | Common stock received in connection with share-based compensation: | | | | | | Number of shares | 5,279 | 1,403 | 29,939 | 26,775 | | Aggregate value of shares | $151 | $109 | $1,482 | $3,125 | Note 8 - Restructuring Plan Describes Project Pegasus, a global restructuring plan completed in fiscal 2025, aimed at improving efficiency and reducing costs - Project Pegasus, a global restructuring plan initiated in fiscal 2023 to improve efficiency and reduce costs, was completed in the fourth quarter of fiscal 2025. Targeted savings are expected through fiscal 2027[50] | Metric (in thousands) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Pre-tax restructuring costs | $3,005 | $1,526 | $3,005 | $3,361 | | Cash restructuring payments | N/A | N/A | $4,000 | $5,600 | | Remaining liability (as of Aug 31, 2025) | N/A | N/A | $3,700 | N/A | Note 9 - Commitments and Contingencies Discusses ongoing legal proceedings, including patent litigation with Brita LP, and discussions with the EPA regarding product packaging claims - The company is involved in patent litigation with Brita LP regarding PUR water filtration systems. The ITC initially ruled against the company but later issued a Final Determination in its favor on September 19, 2023. Brita LP is appealing this decision to the Federal Circuit, with oral arguments held on August 5, 2025[53] - Discussions with the U.S. Environmental Protection Agency (EPA) regarding packaging claims on certain air/water filtration and humidifier products were ongoing. The company voluntarily stopped shipments, repackaged products, and expects potential future fines or penalties, though these cannot be reasonably estimated[54][55] Note 10 - Long-Term Debt Provides details on the company's Credit Agreement, revolving and term loans, interest rates, and anticipated amendment due to covenant compliance concerns | (in thousands) | August 31, 2025 | February 28, 2025 | Change | % Change | | :------------- | :-------------- | :---------------- | :----- | :------- | | Revolving loans | $411,900 | $678,100 | $(266,200)| -39.3% | | Term loans | $486,719 | $243,750 | $242,969 | 99.7% | | Total borrowings under Credit Agreement | $898,619 | $921,850 | $(23,231)| -2.5% | | Total long-term debt | $893,220 | $916,894 | $(23,674)| -2.6% | | Long-term debt, excluding current maturities | $871,345 | $907,519 | $(36,174)| -4.0% | - The company has a $1.5 billion Credit Agreement maturing on February 15, 2029, comprising a $1.0 billion revolving credit facility, a $250 million term loan, and a $250 million delayed draw term loan facility. Borrowings bear floating interest rates, with $625 million (as of Aug 31, 2025) hedged by interest rate swaps[57][59] - As of August 31, 2025, the company was in compliance with all debt covenants. However, due to negative sales trends and macroeconomic conditions, the company anticipates seeking an amendment to the Credit Agreement in the third fiscal quarter to extend temporary adjustments to the maximum leverage ratio and reduce the minimum interest coverage ratio[63] Note 11 - Fair Value Explains the fair value hierarchy for financial instruments and details non-recurring fair value measurements related to significant asset impairment charges - The company classifies financial assets and liabilities into a fair value hierarchy (Level 1, 2, or 3). U.S. Treasury Bills are Level 1, most other financial instruments are Level 2, and the contingent consideration liability from the Olive & June acquisition is Level 3 due to unobservable inputs (projected adjusted EBITDA)[64][70] | (in thousands) | August 31, 2025 | February 28, 2025 | | :------------- | :-------------- | :---------------- | | Assets: | | | | Cash equivalents (money market accounts) | $3,882 | $3,852 | | U.S. Treasury Bills | $11,562 | $11,268 | | Interest rate swaps | $743 | $1,065 | | Foreign currency derivatives | $149 | $2,163 | | Total assets | $16,336 | $18,348 | | Liabilities: | | | | Interest rate swaps | $106 | $221 | | Contingent consideration | $4,100 | $4,100 | | Foreign currency derivatives | $7,692 | $119 | | Total liabilities | $11,898 | $4,440 | - During the six months ended August 31, 2025, non-recurring fair value measurements resulted from impairment charges of $609.6 million for goodwill, $73.0 million for indefinite-lived intangible assets, and $58.2 million for definite-lived intangible assets[72][73] Note 12 - Financial Instruments and Risk Management Describes the company's use of foreign currency forward contracts and interest rate swaps to manage foreign currency and interest rate risks - Approximately 14% and 15% of net sales revenue for the three and six months ended August 31, 2025, respectively, were denominated in foreign currencies (primarily Euros, Canadian Dollars, British Pounds). The company uses foreign currency forward contracts to mitigate foreign currency exchange rate risk[77][78] - Foreign currency exchange rate net gains of $2.9 million (3 months) and $9.5 million (6 months) were recorded in income tax expense for the period ended August 31, 2025, compared to net losses in the prior year[78] - Interest on outstanding debt is based on floating rates, with $625 million (as of Aug 31, 2025) hedged by interest rate swaps to fix rates. Both foreign currency contracts and interest rate swaps are designated as cash flow hedges, with changes in fair value recorded in OCI[79] Note 13 - Accumulated Other Comprehensive Income (Loss) Details the components and changes in accumulated other comprehensive income (loss), primarily influenced by foreign currency contracts | (in thousands) | Balance at Feb 29, 2024 | Other comprehensive income (loss) before reclassification (6 months) | Amounts reclassified out of AOCI (6 months) | Tax effects (6 months) | Balance at Aug 31, 2025 | | :------------- | :---------------------- | :--------------------------------------------------- | :---------------------------------------- | :--------------------- | :---------------------- | | Interest Rate Swaps | $1,917 | $1,870 | $(2,077) | $50 | $489 | | Foreign Currency Contracts | $182 | $(12,075) | $2,493 | $2,000 | $(5,950) | | Total | $2,099 | $(10,205) | $416 | $2,050 | $(5,461) | - The balance of Accumulated Other Comprehensive Income (Loss) shifted from a gain of $2.1 million at February 29, 2024, to a loss of $5.5 million at August 31, 2025, primarily driven by a significant other comprehensive loss before reclassification from foreign currency contracts[84] Note 14 - Segment and Geographic Information Provides financial data by reportable segment (Home & Outdoor, Beauty & Wellness) and geographic region, including sales revenue and operating income - The company operates two reportable segments: Home & Outdoor and Beauty & Wellness. Segment performance is assessed by the Chief Operating Decision Maker (CODM) using segment operating income, which includes net sales revenue, cost of goods sold, SG&A, asset impairment, and restructuring charges[85][86] | (in thousands) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Sales revenue, net: | | | | | | Home & Outdoor | $208,721 | $241,944 | $386,704 | $440,403 | | Beauty & Wellness | $223,060 | $232,277 | $416,732 | $450,665 | | Operating (loss) income: | | | | | | Home & Outdoor | $(72,578) | $31,152 | $(286,371) | $47,002 | | Beauty & Wellness | $(243,139) | $3,700 | $(436,384) | $18,613 | | (in thousands) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Domestic sales revenue, net | $330,496 (76.5%) | $365,750 (77.1%) | $608,456 (75.7%) | $666,430 (74.8%) | | International sales revenue, net | $101,285 (23.5%) | $108,471 (22.9%) | $194,980 (24.3%) | $224,638 (25.2%) | Note 15 - Income Taxes Discusses the company's tax structure, impact of global tax reforms, and the effect of goodwill and intangible asset impairment charges on income tax benefits - The company's foreign income is largely not subject to U.S. taxation, and intangible assets are primarily owned by foreign affiliates, leading to higher earnings in lower tax jurisdictions[91] - Global tax reform initiatives, including OECD's Pillar Two (global minimum corporate income tax of 15%), are expected to increase the fiscal 2026 effective tax rate. Barbados and Bermuda have enacted 9% and 15% corporate income tax rates, respectively, effective fiscal 2025/2026[93][96][97][98] - During the three and six months ended August 31, 2025, the company recognized $326.4 million and $740.8 million, respectively, in goodwill and other intangible asset impairment charges, including $246.0 million and $511.0 million of non-deductible goodwill. A valuation allowance of $13.5 million (3 months) and $30.0 million (6 months) was recorded on a related deferred tax asset[100][101] - The income tax benefit as a percentage of loss before income tax was 6.4% for the three months ended August 31, 2025 (vs. 22.0% expense YoY), and (1.2)% for the six months ended August 31, 2025 (vs. 42.1% expense YoY), primarily due to impairment charges and increased tax benefits for discrete items, partially offset by valuation allowances[102][103] Note 16 - Earnings Per Share Presents basic and diluted weighted average shares outstanding and explains the exclusion of anti-dilutive securities due to net losses | (in thousands) | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Weighted average shares outstanding, basic | 22,959 | 22,814 | 22,951 | 23,169 | | Weighted average shares outstanding, diluted | 22,959 | 22,839 | 22,951 | 23,236 | | Anti-dilutive securities | 454 | 155 | 442 | 140 | - Due to net losses for the three and six months ended August 31, 2025, incremental shares from share-based compensation arrangements (53 thousand and 41 thousand, respectively) were excluded from diluted EPS computation as their effect would be anti-dilutive[105] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Provides management's perspective on financial condition, results of operations, key trends, liquidity, and critical accounting estimates Overview Introduces Helen of Troy as a global consumer products company, highlights recent CEO appointment, significant asset impairment charges, and the Olive & June acquisition - Helen of Troy is a global consumer products company with a diversified brand portfolio across Home & Outdoor and Beauty & Wellness segments. G. Scott Uzzell was appointed as the new CEO effective September 1, 2025[109][110] - The company recorded pre-tax asset impairment charges of $326.4 million (Q2 FY26) and $740.8 million (YTD FY26) due to a sustained decline in stock price and revised internal forecasts[111] - The acquisition of Olive & June on December 16, 2024, for $224.7 million (initial cash) and up to $15.0 million (contingent), was added to the Beauty & Wellness segment, aiming to broaden the beauty portfolio and accelerate growth[113] Significant Trends Impacting the Business Examines the impact of U.S. tariff policies, macroeconomic conditions, consumer spending shifts, increased competition, and the Project Pegasus restructuring plan - Evolving U.S. tariff policies, including IEEPA and Section 232 tariffs, have increased costs and negatively impacted sales. The company is diversifying production outside China and implementing cost reductions and price increases to mitigate risks[114][115][116][118][120] - Macroeconomic trends like high inflation, interest rates, and geopolitical events have negatively impacted consumer disposable income and spending, adversely affecting the business. The company has implemented cost reduction measures and optimized marketing investments[121][122] - Consumer spending shifts and increased competition led to reduced replenishment orders from retailers and declines in online channel net sales (down 22% for Q2 FY26 YoY). The company has invested in distribution capabilities and a centralized e-commerce platform[124][125][128] - Project Pegasus, a restructuring plan completed in Q4 FY25, aims for $75-85 million in annualized pre-tax operating profit improvements by end of fiscal 2027, primarily through reduced cost of goods sold (60%) and lower SG&A (40%)[129][132] - The company is awaiting the Federal Circuit's opinion on Brita LP's appeal regarding the PUR water filtration patent litigation, which could have a material adverse impact if adversely determined[133] RESULTS OF OPERATIONS Analyzes consolidated net sales revenue, gross profit, operating (loss) income, and net (loss) income, detailing the impact of asset impairment charges and acquisitions | Metric (in thousands) | Q2 FY26 | Q2 FY25 | YTD FY26 | YTD FY25 | | :-------------------- | :------ | :------ | :------- | :------- | | Sales revenue, net | $431,781| $474,221| $803,436 | $891,068 | | Cost of goods sold | $241,100| $258,151| $437,744 | $471,919 | | Gross profit | $190,681| $216,070| $365,692 | $419,149 | | SG&A | $176,999| $179,692| $344,663 | $350,173 | | Asset impairment charges | $326,394| $— | $740,779 | $— | | Restructuring charges | $3,005 | $1,526 | $3,005 | $3,361 | | Operating (loss) income | $(315,717)| $34,852 | $(722,755)| $65,615 | | Net (loss) income | $(308,643)| $17,014 | $(759,361)| $23,218 | | Diluted (Loss) earnings per share | $(13.44)| $0.74 | $(33.09) | $1.00 | - Consolidated net sales revenue decreased 8.9% in Q2 FY26 and 9.8% in YTD FY26, primarily due to a 16.0% (Q2) and 16.5% (YTD) decline in Organic business, partially offset by the Olive & June acquisition (7.0% Q2, 6.8% YTD contribution)[149][151] - Consolidated operating loss was $315.7 million (Q2 FY26) and $722.8 million (YTD FY26), largely driven by significant asset impairment charges. Adjusted operating income decreased 41.9% (Q2) and 51.8% (YTD) due to higher retail trade/promotional expense, tariffs, increased share-based compensation, and unfavorable operating leverage[145][173][174] - Net loss was $308.6 million (Q2 FY26) and $759.4 million (YTD FY26), resulting in diluted loss per share of $13.44 (Q2) and $33.09 (YTD), primarily due to asset impairment charges and lower operating income[145][206][208] Liquidity and Capital Resources Discusses the company's cash flow from operations, investing and financing activities, debt facilities, and anticipated need for Credit Agreement amendments - The company relies on cash flow from operations and borrowings under its Credit Agreement to finance operations, capital expenditures, acquisitions, and share repurchases. Cash and cash equivalents totaled $22.4 million as of August 31, 2025[210] | Cash Flow Activity (in thousands) | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Net cash provided by operating activities | $47,868 | $69,916 | | Net cash used by investing activities | $(20,975) | $(14,101) | | Net cash used by financing activities | $(23,390) | $(54,179) | - Investing activities used $21.0 million (YTD FY26), an increase from $14.1 million (YTD FY25), primarily due to increased capital and intangible asset expenditures for manufacturing diversification outside of China[215][216] - Financing activities used $23.4 million (YTD FY26), a decrease from $54.2 million (YTD FY25), mainly due to fewer common stock repurchases, partially offset by net repayments of long-term debt[217] - As of August 31, 2025, $578.6 million was available for revolving loans under the Credit Agreement, and $212.7 million was available per the maximum leverage ratio. The company expects to seek an amendment to its Credit Agreement due to potential covenant compliance issues from negative sales trends and macroeconomic conditions[221][223] Critical Accounting Policies and Estimates Explains critical accounting judgments, particularly regarding goodwill and intangible asset impairment testing, fair value determination, and related uncertainties - During Q1 and Q2 FY26, a goodwill impairment triggering event occurred due to a sustained decline in stock price and downward revisions to internal forecasts, leading to quantitative impairment testing[224][225] - Pre-tax asset impairment charges totaled $326.4 million (Q2 FY26) and $740.8 million (YTD FY26), impacting both Home & Outdoor and Beauty & Wellness segments[226] - Goodwill impairment charges for YTD FY26 were $609.6 million, with Hydro Flask's goodwill reduced to zero. The fair value of the OXO reporting unit was 107% of its carrying value, with a hypothetical 10% sales decline potentially leading to a $156.3 million impairment[229][230][232] - Intangible asset impairment charges for YTD FY26 totaled $73.0 million for indefinite-lived assets (trade names like Hydro Flask, Osprey, PUR) and $35.1 million for definite-lived assets (Revlon, Curlsmith, Drybar trade names). Customer relationships and other intangibles for Drybar and Hydro Flask were reduced to zero[237][238][239][240] - Management judgment in estimating future cash flows, discount rates, and other assumptions for fair value determination is critical and subject to uncertainty from factors like tariffs, economic conditions, and consumer demand, which could lead to further material impairment charges[233][234][244][245] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reports no material changes in market risk disclosures since the Form 10-K filing - No material changes in market risk disclosures since the last Form 10-K filing[250] ITEM 4. CONTROLS AND PROCEDURES CEO and CFO concluded disclosure controls were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at the reasonable assurance level as of August 31, 2025[251] - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report on Form 10-Q[251] PART II. OTHER INFORMATION This section provides additional information beyond financial statements, covering legal proceedings, risk factors, equity sales, and other disclosures ITEM 1. LEGAL PROCEEDINGS Details ongoing legal claims and proceedings, noting no material changes since the Form 10-K filing - No material changes in legal proceedings since the Form 10-K, with updates detailed in Note 9[252] ITEM 1A. RISK FACTORS Refers to risk factors in Form 10-K, confirming no material changes since its filing - No material changes in risk factors since the Form 10-K filing[253] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Outlines the common stock repurchase program and shares acquired for tax withholding, with no open market repurchases - A $500 million common stock repurchase authorization became effective in August 2024, with $498.4 million remaining as of August 31, 2025[254][257] | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | | :----- | :----------------------------------- | :--------------------------- | | June 1 through June 30, 2025 | 2,929 | $30.72 | | July 1 through July 31, 2025 | 1,701 | $26.84 | | August 1 through August 31, 2025 | 649 | $24.06 | | Total | 5,279 | $28.65 | - Shares purchased include those acquired from associates to satisfy tax withholding on equity awards; there were no common stock open market repurchases during the three months ended August 31, 2025[256] ITEM 5. OTHER INFORMATION Confirms no Rule 10b5-1 trading plans were adopted or terminated by officers or directors during the period - No Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements were adopted or terminated by officers or directors during the three months ended August 31, 2025[258] ITEM 6. EXHIBITS Lists exhibits filed with the Form 10-Q, including the 2025 Stock Incentive Plan, CEO employment agreement, and certifications - Key exhibits include the 2025 Stock Incentive Plan, CEO employment agreement, CEO/CFO certifications (Rule 13a-14(a) and 18 U.S.C. Section 1350), and iXBRL formatted financial statements[259] SIGNATURES The report was duly signed on October 9, 2025, by the Chief Executive Officer and Chief Financial Officer - The report was signed on October 9, 2025, by G. Scott Uzzell (CEO) and Brian L. Grass (CFO)[264]