Edgar Filing: HELEN OF TROY LTD

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended February 28, 2019

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

Commission file number 001-14669

HELEN OF TROY LIMITED

(Exact name of the registrant as specified in its charter)



Bermuda (State or other jurisdiction of incorporation or organization)		74-2692550 (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 (Registrant’s United States Mailing Address)		79912 (Zip Code)

Registrant's telephone number, including area code: (915) 225-8000

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



Title of each class		Name of each exchange on which registered
Common Shares, $0.10 par value per share		The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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 x 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 x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K. ¨

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



Large accelerated filer x	Non-accelerated filer ¨	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 x

The aggregate market value of the voting and non-voting common shares held by non-affiliates of the registrant as of August 31, 2018, based upon the closing price of the common shares as reported by The NASDAQ Global Select Market on such date, was approximately $3,122,284,452.

As of April 22, 2019, there were 25,013,613 common shares, $0.10 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2019 Annual General Meeting of Shareholders to be filed within one hundred and twenty days of the fiscal year ended February 28, 2019 (2019 Proxy Statement) are incorporated by reference into Part III of this report to the extent described herein.

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			PAGE


PART I	Item 1.	Business	3
	Item 1A.	Risk Factors	8
	Item 1B.	Unresolved Staff Comments	18
	Item 2.	Properties	18
	Item 3.	Legal Proceedings	19
	Item 4.	Mine Safety Disclosures	19


PART II	Item 5.	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	20
	Item 6.	Selected Financial Data	23
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
	Item 8.	Financial Statements and Supplementary Data	52
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	97
	Item 9A.	Controls and Procedures	97


PART III	Item 10.	Directors, Executive Officers and Corporate Governance	99
	Item 11.	Executive Compensation	99
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	99
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	99
	Item 14.	Principal Accounting Fees and Services	99


PART IV	Item 15.	Exhibits, Financial Statement Schedules	100

		Signatures	105

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EXPLANATORY NOTE

In this report and the accompanying consolidated financial statements and 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. We refer to our common shares, par value $0.10 per share, as “common stock.” References to “EMEA” refer to the combined geographic markets of Europe, the Middle East and Africa. We use product and service names in this report for identification purposes only and they may be protected in the United States and other jurisdictions by trademarks, trade names, service marks, and other intellectual property rights of ours and other parties. The absence of a specific attribution in connection with any such mark does not constitute a waiver of any such right. All trademarks, trade names, service marks, and logos referenced herein belong to their respective owners. References to “fiscal” in connection with a numeric year number denotes our fiscal year ending on the last day of February, during the year number listed. References to “the FASB” refer to the Financial Accounting Standards Board. References to “GAAP” refer to 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” refer to the codification of GAAP in the Accounting Standards Codification issued by the FASB.

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PART I

Item 1. Business

Our Company

We incorporated in Texas in 1968 and were reorganized in Bermuda in 1994. We are a leading global consumer products company offering creative 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.

Segment and Geographic Information

We currently have three business segments, which are included in our financial statements in continuing operations:


•	Housewares: Provides a broad range of products to help with food preparation, cooking, cleaning, organization, beverage service, and other tasks to ease everyday living for families. Sales for the segment are primarily to retailers, with some direct-to-consumer product distribution.


•	Health & Home: Provides healthcare and home environment products. Sales for the segment are primarily to retailers, with some direct-to-consumer product distribution.


•	Beauty: Provides personal care and beauty appliance products including hair styling appliances, grooming tools, decorative haircare accessories, and liquid, solid and powder-based personal care products. This segment sells primarily to retailers and beauty supply wholesalers.

Prior to December 20, 2017, we operated a Nutritional Supplements segment. On December 20, 2017, we completed the divestiture of the Nutritional Supplements segment through the sale of Healthy Directions LLC and its subsidiaries to Direct Digital, LLC. Following the sale, we no longer consolidate our former Nutritional Supplements segment’s operating results. The Nutritional Supplements segment’s operating results are included in our financial statements and classified within discontinued operations. We have reallocated corporate overhead expenses to our continuing operating segments that were previously allocated to our former Nutritional Supplements segment. Unless otherwise noted, all amounts presented are from continuing operations. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and Note 4 of the accompanying consolidated financial statements for more information. Discontinued operations in this report on Form 10-K refers only to our discontinued Nutritional Supplements segment’s operations.

For more segment and geographic information concerning our net sales revenue, long-lived assets and operating income, refer to Note 18 in the accompanying consolidated financial statements.

Our Strategic Initiatives

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. This strategy has driven our decisions on where we will operate and how we will achieve our goals in markets around the world. The overall design of our business and organizational plan is intended to create sustainable and profitable growth and improve organizational capability.

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 core 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.

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expansion, and strategic and effective capital deployment. We expect Phase II will include continued investment in our Leadership Brands, with a focus on growing them through consumer-centric innovation, expanding them more aggressively outside the United States, and adding new brands through acquisition. We anticipate building further shared service capability and operating efficiency, as well as attracting, retaining, unifying and training the best people.

On March 11, 2019, we announced that we are in the process of exploring the divestiture of our Personal Care business, a subset of our Beauty Segment. The Personal Care business includes liquid, powder and aerosol products under brands such as Pert, Brut, Sure and Infusium. This potential divestiture advances our strategy to focus our resources on our Leadership Brands. Leadership Brands are brands which have number-one and number-two positions in their respective categories and include OXO, Honeywell, Braun, PUR, Hydro Flask, Vicks, and Hot Tools.

Our Products

The following table summarizes the types of products we sell by business segment:



Segment	Product Category	Primary Products
Housewares	Food Preparation and Storage	Food preparation tools and gadgets, food storage containers and storage and organization products
	Cleaning, Bath and Garden	Household cleaning products, shower organization, bathroom accessories, and gardening products
	Infant and Toddler	Feeding and drinking products, child seating, cleaning tools and nursery accessories
	Hot and Cold Beverage and Food Containers	Insulated water bottles, jugs, thermoses, drinkware, travel mugs and food containers
Health & Home	Healthcare	Thermometers, blood pressure monitors and humidifiers
	Water Filtration	Faucet mount water filtration systems and pitcher based water filtration systems
	Home Environment	Air purifiers, heaters, fans, humidifiers and dehumidifiers
Beauty	Appliances and Accessories	Hair, facial and skin care appliances, grooming brushes, tools and decorative hair accessories
	Personal Care	Liquid hair styling, treatment and conditioning products, shampoos, skin care products, fragrances, deodorants and antiperspirants

Our Trademarks

We market products under a number of trademarks that we own and sell certain of our products under trademarks licensed from third parties. We believe our principal trademarks, both owned and licensed, have high levels of brand name recognition among retailers and consumers throughout the world. Through our favorable partnerships with our licensors, we believe we have developed stable, enduring relationships that provide access to unique brands that complement our owned and internally developed trademarks.

The Beauty and Health & Home segments rely on the continued use of trademarks licensed under various agreements for a substantial portion of their net sales revenue. New product introductions under licensed trademarks require approval from the respective licensors. The licensors must also approve the product packaging. Many of our license agreements require us to pay minimum royalties, meet minimum sales volumes and some require us to make minimum levels of advertising expenditures.

The following table lists our key trademarks by segment:



Segment	Owned	Licensed
Housewares	OXO, Good Grips, Hydro Flask, Soft Works, OXO tot
Health & Home	PUR	Honeywell , Braun, Vicks
Beauty	Hot Tools, Brut, Pert, Sure, Infusium	Revlon, Bed Head

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Patents and Other Intellectual Property

We maintain utility and design patents in the United States and several foreign countries. We also protect certain details about our processes, products and strategies as trade secrets, keeping confidential the information that we believe provides us with a competitive advantage.

Sales and Marketing

We currently market our products in over 90 countries throughout the world. Sales within the United States comprised approximately 78%, 79% and 79% of total net sales revenue in fiscal 2019, 2018 and 2017, respectively. Our segments primarily sell their products through mass merchandisers, drugstore chains, warehouse clubs, home improvement stores, grocery stores, specialty stores, beauty supply retailers, e-commerce retailers, wholesalers, and various types of distributors, as well as directly to consumers. We collaborate extensively with our retail customers and, in many instances, produce specific versions of our product lines with exclusive designs and packaging for their stores, which are appropriately priced for their respective customer bases. We market products principally through the use of outside sales representatives and our own internal sales staff, supported by our internal marketing, category management, engineering, creative services, and customer and consumer service staff. These groups work closely together to develop pricing and distribution strategies, to design packaging and to help develop product line extensions and new products.

Research and Development

Our research and development activities focus on new, differentiated and innovative products designed to drive sustained organic growth. We continually invest to strengthen our product design and research and development capabilities, including extensive study to gain consumer insight. Research and development expenses consist primarily of salary and employee benefit expenses and contracted development and testing efforts associated with development of products.

Manufacturing and Distribution

We contract with unaffiliated manufacturers, primarily in China and Mexico, to manufacture a significant portion of our finished goods for the Beauty appliances and accessories, Housewares, Healthcare, Water Filtration, and Home Environment product categories. The North American region of the Personal Care category of the Beauty segment sources most of its products from U.S. manufacturers. For fiscal 2019, 2018 and 2017, finished goods manufactured by vendors in the Far East comprised approximately 74%, 74% and 71%, respectively, of total finished goods purchased.

In total, we occupy approximately 4,219,800 square feet of owned and leased distribution space in various locations to support our operations. These facilities include a 1,200,000 square foot distribution center in Southaven, Mississippi, and a 1,300,000 square foot distribution center in Olive Branch, Mississippi, used to support a significant portion of our domestic distribution.

Customers

Sales to Walmart, Inc. (including its worldwide affiliates) accounted for approximately 16%, 17% and 17% of our consolidated net sales revenue in fiscal 2019, 2018 and 2017, respectively. Sales to Amazon.com Inc. accounted for approximately 16%, 13% and 10% of our consolidated net sales revenue in fiscal 2019, 2018 and 2017, respectively. Sales to Target Corporation accounted for approximately 10% of our consolidated net sales revenue in fiscal 2019, 2018 and 2017, respectively. No other customers accounted for 10% or more of consolidated net sales revenue during those fiscal years. Sales to our top five customers accounted for approximately 51%, 49% and 48% of our consolidated net sales revenue in fiscal 2019, 2018 and 2017, respectively.

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Order Backlog

When placing orders, our individual consumer, retail and wholesale customers usually request that we ship the related products within a short time frame. As such, there usually is no significant backlog of orders in any of our distribution channels.

Seasonality



SEASONALITY AS A PERCENTAGE OF ANNUAL NET SALES REVENUE
	Fiscal Years Ended February 28,
Fiscal Quarter Ended	2019		2018		2017
May	22.7	%	22.0	%	22.2	%
August	25.2	%	23.3	%	23.8	%
November	27.6	%	28.5	%	29.3	%
February	24.6	%	26.2	%	24.7	%

Our sales are seasonal due to different calendar events, holidays and seasonal weather patterns. Historically, the third fiscal quarter produces the highest net sales revenue during the fiscal year.

Competitive Conditions

We sell our products in markets that are very competitive and mature. Our products compete against similar products of many large and small companies, including well-known global competitors. In many of the markets and industry segments in which we sell our products we compete against other branded products as well as retailers' private-label brands. We believe that we have certain key competitive advantages, such as well recognized brands, engineering expertise and innovation, sourcing and supply chain know-how, and productive co-development relationships with our Far East manufacturers. We support our products with advertising, promotions and other marketing activities, as well as an extensive sales force in order to build awareness and to encourage new consumers to try our brands and products. We are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. We believe these advantages allow us to bring our retailers a differentiated value proposition.

The following table summarizes our primary competitors by business segment:



Segment		Competitor
Housewares		Lifetime Brands, Inc. (KitchenAid), Newell Brands Inc., Simple Human LLC, Yeti Holdings, Inc. (Yeti), Can't Live Without It, Inc. (S'well), Bradshaw Home, Inc. (BradshawHome), Hewy Wine Chillers, LLC (Corkcicle)
Health & Home		Exergen Corporation, Omron Healthcare, Inc., Crane Engineering, Newell Brands, Inc., Lasko Products, LLC., The Clorox Company (Brita), Zero Technologies, LLC, Vornado Air Circulation Systems, Dyson Ltd, Unilever (Blueair), Guardian Technologies LLC.
Beauty		Conair, Spectrum Brands Holdings Inc. (Remington), Newell Brands, Inc., The Procter & Gamble Company, Unilever N.V., Colgate-Palmolive Company

Environmental and Health and Safety Matters

Our operations are subject to national, state, local, and provincial jurisdictions’ environmental, health and safety laws and regulations. Many of the products we sell are subject to a number of 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 and labeling requirements.

Additionally, an emerging trend with both governments and our retail customers is to prescribe public and private social accountability reporting requirements regarding our worldwide business activities. In our

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product space, some requirements have already been mandated and we believe others may become required. Examples of current requirements include conflict minerals content reporting, customer reporting of foreign fair labor practices in connection with our supply chain vendors, and evaluating the risks of human trafficking and slavery.

We believe that we are in material compliance with these laws, regulations and other reporting requirements. Further, the cost of maintaining compliance has not had a material adverse effect on our business, consolidated results of operations and consolidated financial condition, nor do we expect it to do so in the foreseeable future. Due to the nature of our operations and the frequently changing nature of compliance and social reporting standards and technology, we cannot predict with any certainty that future material capital or operating expenditures will not be required in order to comply with applicable laws, regulations and other reporting mandates.

Employees

As of February 28, 2019, we employed approximately 1,500 full-time employees worldwide. We also use temporary, part-time and seasonal employees as needed. None of our U.S. employees are covered by a collective bargaining agreement. Certain of our employees in Europe are covered by collective arrangements or works counsel in accordance with local practice. We have never experienced a work stoppage, and we believe that we have satisfactory working relations with our employees.

Available Information

We maintain our main Internet site at: http://www.helenoftroy.com. The information contained on this website is not included as a part of, or incorporated by reference into, this report. We make available on or through our main website’s Investor Relations page under the heading “SEC Filings” certain reports and amendments to those reports that we file with, or furnish to, the SEC in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, our proxy statements on Schedule 14A, amendments to these reports, and the reports required under Section 16 of the Exchange Act of transactions in our common stock by directors and officers. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. Also, on the Investor Relations page, under the heading “Corporate Governance,” are our Code of Ethics, Corporate Governance Guidelines and the Charters of the Committees of the Board of Directors.

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Item 1A. Risk Factors

Carefully consider the risks described below and all of the other information included in our report on Form 10-K when deciding whether to invest in our securities or otherwise evaluating our business. If any of the following risks or other events or circumstances described elsewhere in this report materialize, our business, operating results or financial condition may suffer. In this case, the trading price of our common stock and the value of your investment might significantly decline. The risks listed below are not the only risks that we face. Additional risks unknown to us or that we currently believe are insignificant may also affect our business.

Our ability to deliver products to our customers in a timely manner and to satisfy our customers’ fulfillment standards are subject to several factors, some of which are beyond our control.

Retailers place great emphasis on timely delivery of our products for specific selling seasons, especially during our third fiscal quarter, and on the fulfillment of consumer demand throughout the year. We cannot control all of the various factors that might affect product delivery to retailers. Vendor production delays, difficulties encountered in shipping from overseas, customs clearance delays, and operational issues with any of the third-party logistics providers we use in certain countries are on-going risks of our business. We also rely upon third-party carriers for our product shipments from our distribution centers to customers. In certain circumstances, we rely on the shipping arrangements our suppliers have made in the case of products shipped directly to retailers from the suppliers. Accordingly, we are subject to risks, including labor disputes, inclement weather, natural disasters, possible acts of terrorism, availability of shipping containers, and increased security restrictions associated with the carriers’ ability to provide delivery services to meet our shipping needs. Further, our delivery process must often accommodate special vendor requirements to use specific carriers and delivery schedules. Failure to deliver products to our retailers in a timely and effective manner could damage our reputation and brands and result in loss of customers or reduced orders, which could have a material adverse effect on our business, operating results and financial condition.

Large customers may take actions that adversely affect our gross profit and operating results.

With the continuing trend towards retail trade consolidation, we are increasingly dependent upon key customers whose bargaining strength is substantial and growing. We may be negatively affected by changes in the policies of our customers, such as on-hand inventory reductions, limitations on access to shelf space, use of private label brands, price and term demands, and other conditions, which could negatively impact our business, operating results and financial condition.

In addition, the growth in e-commerce sales, both by large traditional retailers and pure-play online retailers, has increased the size and influence of these types of customers. Certain of these customers source and sell products under their own private label brands that compete with our products. As certain large customers and online retailers grow even larger and become more sophisticated, they may continue to demand lower pricing, special packaging, shorter lead times for the delivery of products, smaller more frequent shipments, or impose other requirements on product suppliers. These business demands may relate to inventory practices, logistics or other aspects of the customer-supplier relationship. If we do not effectively respond to these demands, these customers could decrease their purchases from us. A reduction in the demand for our products by these customers and the costs of complying with their business demands could have a material adverse effect on our business, operating results and financial condition.

We are subject to risks related to our dependence on the strength of retail economies and may be vulnerable in the event of a prolonged economic downturn.

Our business depends on the strength of the retail economies in various parts of the world, primarily in North America and to a lesser extent EMEA, Asia and Latin America. These retail economies are affected for the most part by factors such as consumer demand and the condition of the retail industry, which, in turn, are affected by general economic conditions and specific events such as natural disasters, terrorist

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attacks and political unrest. Consumer spending in any geographic region is generally affected by a number of factors, including local economic conditions, government actions, inflation, interest rates, energy costs, unemployment rates, gasoline prices, and consumer confidence, all of which are beyond our control. Consumer purchases of discretionary items tend to decline during recessionary periods, when disposable income is lower, and may impact sales of our products. Any sustained economic downturn in the United States or any of the other countries in which we conduct significant business, may cause significant readjustments in both the volume and mix of our product sales, which could materially and adversely affect our business, operating results and financial condition.

Our operating results are dependent on sales to several large customers and the loss of, or substantial decline in, sales to a top customer could have a material adverse effect on our revenues and profitability.

A few customers account for a substantial percentage of our net sales revenue. Our financial condition and operating results could suffer if we lost all or a portion of the sales to any one of these customers. In particular, sales to our two largest customers accounted for approximately 32% of our consolidated net sales revenue in fiscal 2019. While only three customers individually accounted for 10% or more of our consolidated net sales revenue in fiscal 2019, sales to our top five customers in aggregate accounted for approximately 51% of fiscal 2019 consolidated net sales revenue. We expect that a small group of customers will continue to account for a significant portion of our net sales revenue. Although we have long-standing relationships with our major customers, we generally do not have written agreements that require these customers to buy from us or to purchase a minimum amount of our products. A substantial decrease in sales to any of our major customers could have a material adverse effect on our financial condition and operating results. We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate. Despite these efforts, a deterioration in the credit worthiness or bankruptcy filing of a key customer could have a material adverse effect on our business, operating results and financial condition.

Expectations regarding recent acquisitions, and any future acquisitions or divestitures, including our ability to realize related synergies, along with our ability to effectively integrate acquired businesses or disaggregate divested businesses, may adversely affect the price of our common stock.

We continue to look for opportunities to make strategic business and/or brand acquisitions. Additionally, we frequently evaluate our portfolio of business products and may consider divestitures or exits of businesses that we no longer believe to be an appropriate strategic fit, including the potential divestiture of our Personal Care business. Our financial results could be impacted in the event that changes in the cash flows or other market-based assumptions or conditions cause the value of acquired assets to fall below book value, or we are not able to deliver the expected benefits or synergies associated with acquisition transactions, which could also have an impact on associated goodwill and intangible assets. Any acquisition or divestiture, if not favorably received by consumers, shareholders, analysts, and others in the investment community, could have a material adverse effect on the price of our common stock.

In addition, any acquisition involves numerous risks, including:


•	difficulties in the assimilation of the operations, technologies, products, and personnel associated with the acquisitions;


•	challenges in integrating distribution channels;


•	diversion of management's attention from other business concerns;


•	difficulties in transitioning and preserving customer, contractor, supplier, and other important third-party relationships;


•	challenges realizing anticipated cost savings, synergies and other benefits related to an acquisition;

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•	risks associated with subsequent losses or operating asset write-offs, contingent liabilities and impairment of related acquired intangible assets;


•	risks of entering markets in which we have no or limited experience; and


•	potential loss of key employees associated with the acquisitions.

If our goodwill, indefinite-lived intangible assets or other long-term assets become impaired, we will be required to record impairment charges, which may be significant.

A significant portion of our long-term assets consists of goodwill and other indefinite-lived intangible assets recorded as a result of past acquisitions. We do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If such circumstances or conditions exist, further steps are required in order to determine whether the carrying value of each of the individual assets exceeds its fair market value. If our analysis indicates that an individual asset’s carrying value does exceed its fair market value, the next step is to record a loss equal to the excess of the individual asset’s carrying value over its fair value. The analysis required by GAAP entails significant amounts of judgment and subjectivity.

We complete our analysis of the carrying value of our goodwill and other intangible assets during the fourth quarter of our fiscal year, or more frequently, whenever events or changes in circumstances indicate their carrying value may not be recoverable. Events and changes in circumstances that may indicate there is impairment and which may indicate interim impairment testing is necessary include, but are not limited to: strategic decisions to exit a business or dispose of an asset made in response to changes in economic, political and competitive conditions; the impact of the economic environment on our customer base and on broad market conditions that drive valuation considerations by market participants; our internal expectations with regard to future revenue growth and the assumptions we make when performing our impairment reviews; a significant decrease in the market price of our assets; a significant adverse change in the extent or manner in which our assets are used; a significant adverse change in legal factors or the business climate that could affect our assets; an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset; and significant changes in the cash flows associated with an asset. We analyze these assets at the individual asset, reporting unit and company levels. As a result of such circumstances, we may be required to record a significant charge to net income in our financial statements during the period in which any impairment of our goodwill, indefinite-lived intangible assets or other long-term assets is determined. Any such impairment charges could have a material adverse effect on our business, results of operations and financial condition.

We rely on our Chief Executive Officer and a limited number of other key senior officers to operate our business. The loss of any of these individuals could have a material adverse effect on our business.

The loss of our Chief Executive Officer or any of our key senior officers could have a material adverse effect on our business, operating results and financial condition, particularly if we are unable to hire and integrate suitable replacements on a timely basis. Further, as we continue to grow our business, we will continue to adjust our senior management team. If we are unable to attract or retain the right individuals for the team, it could hinder our ability to grow our business and could disrupt our operations or otherwise have a material adverse effect on our business.

Our operating results may be adversely affected by foreign currency exchange rate fluctuations.

Our functional currency is the U.S. Dollar. Changes in the relation of other foreign currencies to the U.S. Dollar will affect our sales and profitability and can result in exchange losses because we have operations and assets located outside the United States. We transact a portion of our international business in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales, certain inventory purchases and operating expenses. As a result, portions of our cash, trade accounts receivable and trade accounts payable are denominated in foreign currencies. Accordingly, foreign

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operations will continue to expose us to foreign currency fluctuations, both for purposes of actual conversion and financial reporting purposes. Additionally, we purchase a substantial amount of our products from Chinese manufacturers in U.S Dollars. The Chinese Renminbi has fluctuated against the U.S. Dollar in recent years. During fiscal 2019 the Chinese Renminbi strengthened against the U.S. dollar by approximately 6.0%. Chinese Renminbi currency fluctuations have the potential to add volatility to our product costs over time.

Where operating conditions permit, we seek to reduce foreign currency risk by purchasing most of our inventory with U.S. Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars. We use derivative financial instruments including forward contracts, cross currency debt swaps and zero-cost collars to hedge against certain foreign currency exchange rate-risk inherent in our transactions denominated in currencies other than the U.S. Dollar. We enter into these types of agreements to partially mitigate our exposure to foreign currency exchange risk. It is not practical for us to hedge all our exposures, nor are we able to accurately project the possible effect of all foreign currency fluctuations on translated amounts or future net income due to our constantly changing exposure to various currencies, the fact that each foreign currency reacts differently to the U.S. Dollar and the significant number of currencies involved.

The impact of future foreign currency exchange rate fluctuations on our results of operations cannot be accurately predicted. Accordingly, there can be no assurance that foreign currency exchange rates:


•	will be stable in the future;


•	can be mitigated with currency hedging or other risk management strategies; or


•	will not have a material adverse effect on our business, operating results and financial condition.

Our business is subject to weather conditions, the duration and severity of the cold and flu season and other related factors, which can cause our operating results to vary from quarter to quarter and year to year.

Sales in our Health & Home segment are influenced by weather conditions. Sales volumes for thermometry, humidifiers and heating appliances are higher during, and subject to, the severity of the cold weather months, while sales of fans and insect control devices are higher during, and subject to, weather conditions in spring and summer months. Weather conditions can also more broadly impact sales across the organization. For instance, natural disasters (such as wildfires, hurricanes and ice storms) or unusually severe winter weather may result in temporary unanticipated fluctuations in retail traffic and consumer demand, may impact our ability to staff our distribution facilities or could otherwise impede timely transport and delivery of products from our distribution facilities. Sales in our Health & Home segment are also impacted by cough, cold and flu seasonal trends, including the duration and severity of the cold and flu season. These factors could have a material adverse effect on our business, operating results and financial condition.

We are dependent on third-party manufacturers, most of which are located in the Far East, and any inability to obtain products from such manufacturers could have a material adverse effect on our business, operating results and financial condition.

All of our products are manufactured by unaffiliated companies, most of which are in the Far East, principally in China. For fiscal 2019, finished goods manufactured in the Far East comprised of approximately 74% of total finished goods purchased. This concentration exposes us to risks associated with doing business globally, including: changing international political relations; labor availability and cost; changes in laws, including tax laws, regulations and treaties; changes in labor laws, regulations and policies; changes in customs duties, additional tariffs and other trade barriers; changes in shipping costs; currency exchange fluctuations; local political unrest; an extended and complex transportation cycle; the impact of changing economic conditions; and the availability and cost of raw materials and merchandise. The political, legal and cultural environment in the Far East is rapidly evolving, and any change that impairs our ability to obtain products from manufacturers in that region, or to obtain products at

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marketable rates, could have a material adverse effect on our business, operating results and financial condition.

With most of our manufacturers located in the Far East, our production lead times are relatively long. Therefore, we must commit to production in advance of customer orders. If we fail to forecast customer or consumer demand accurately, we may encounter difficulties in filling customer orders on a timely basis or in liquidating excess inventories. We may also find that customers are canceling orders or returning products. Any of these results could have a material adverse effect on our business, operating results and financial condition.

Increased costs of raw materials and energy may adversely affect our operating results and cash flow.

Significant increases in the costs and availability of raw materials and energy may negatively affect our operating results. Our suppliers purchase significant amounts of metals and plastics to manufacture our products. In addition, they also purchase significant amounts of electricity to supply the energy required in their production processes. Middle East tensions and related political instabilities may drive up fuel prices resulting in higher transportation prices and product costs. The cost of these raw materials and energy, in the aggregate, represents a significant portion of our cost of goods sold and certain operating expenses, which we may not be able to pass on to our customers. Our operating results could be adversely affected by future increases in these costs.

If significant tariffs or other restrictions are placed on imports from China or any retaliatory trade measures are taken by China, our business and results of operations could be materially and adversely affected.

We purchase our products from unaffiliated manufacturers, most of which are located in China, Mexico and the United States. This concentration exposes us to risks associated with doing business globally, including changes in tariffs. The Office of the United States Trade Representative identified certain Chinese imported goods for additional tariffs to address China’s trade policies and practices. These tariffs could have a material adverse effect on our business and results of operations. Additionally, the Trump Administration continues to signal that it may alter trade agreements and terms between China and the United States, 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. Consequently, it is possible further and or higher tariffs will be imposed on products imported from foreign countries, including China, or that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs. This may cause us to raise prices or make changes to our operations, any of which could have a material adverse effect on our business and results of operations.

Certain of our U.S. distribution facilities are geographically concentrated and operate during peak shipping periods at or near capacity. These factors increase our risk that disruptions could occur and significantly affect our ability to deliver products to our customers in a timely manner. Such disruptions could have a material adverse effect on our business.

Most of our U.S. distribution, receiving and storage functions are consolidated into two distribution facilities in northern Mississippi. Approximately 60% of our consolidated gross sales volume shipped from facilities in this region in fiscal 2019. For this reason, any disruption in our distribution process in either of these facilities, even for a few days, could adversely affect our business, operating results and financial condition.

Additionally, our U.S. distribution operations may incur capacity constraints during peak shipping periods as we continue to grow our sales revenue through a combination of organic growth and acquisitions. These and other factors described above could cause delays in the delivery of our products and increases in shipping and storage costs that could have a material and adverse effect on our business, operating results and financial condition.

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Our projections of product demand, sales and net income are highly subjective in nature and our future sales and net income could vary in a material amount from our projections.

From time to time, we may provide financial projections to our shareholders, lenders, investment community, and other stakeholders of our future sales and net income. Since we do not require long-term purchase commitments from our major customers and the customer order and ship process is very short, it is difficult for us to accurately predict the demand for many of our products, or the amount and timing of our future sales, related net income and cash flows. Our projections are based on management’s best estimate of sales using historical sales data and other relevant information available at the time. These projections are highly subjective since sales to our customers can fluctuate substantially based on the demand of their retail consumers and related ordering patterns, as well as other risks described in this report. Additionally, changes in retailer inventory management strategies could make our inventory management more difficult. Due to these factors, our future sales and net income could vary materially from our projections.

We rely on licensed trademarks from third parties and license certain trademarks to third parties in exchange for royalty income, the loss of which could have a material adverse effect on our revenues and profitability.

A substantial portion of our sales revenue comes from selling products under licensed trademarks, particularly in the Beauty and Health & Home segments. As a result, we are dependent upon the continued use of these trademarks. Additionally, we license certain owned trademarks to third parties in exchange for royalty income. It is possible that certain actions taken by us, our licensors, licensees, or other third parties might diminish greatly the value of any of our licensed trademarks. Some of our licensors and licensees also have the ability to terminate their license agreements with us at their option subject to each parties’ right to continue the license for a limited period of time following notice of termination. If we or our licensees were unable to sell products under these licensed trademarks, or one or more of our license agreements were terminated or the value of the trademarks were diminished, the effect on our business, operating results and financial condition could be both negative and material.

To compete successfully, we must develop and introduce a continuing stream of innovative new products to meet changing consumer preferences.

Our long-term success in the competitive retail environment depends on our ability to develop and commercialize a continuing stream of innovative new products that meet changing consumer preferences and take advantage of opportunities sooner than our competition. We face the risk that our competitors will introduce innovative new products that compete with our products. There are numerous uncertainties inherent in successfully developing and commercializing new products on a continuing basis and new product launches may not deliver expected growth in sales or operating income. If we are unable to develop and introduce a continuing stream of competitive new products, it may have an adverse effect on our business, operating results and financial condition.

Our operating results may be adversely affected by trade barriers, exchange controls, expropriations, and other risks associated with domestic and foreign operations.

The economies of foreign countries important to our operations, including countries in Asia, EMEA and Latin America, could suffer slower economic growth or economic, social and/or political instability or hyperinflation in the future. Our international operations in countries in Asia, EMEA and Latin America, including manufacturing and sourcing operations (and the international operations of our customers), are subject to inherent risks which could adversely affect us. Additionally, there may be uncertainty resulting from recent political changes in the U.S. and abroad, the Brexit referendum in the United Kingdom (the “U.K.”), ongoing terrorist activity, and other global events. The potential exit of the U.K. from European Union (the “EU”) membership (commonly referred to as “Brexit”) could cause disruptions to and create uncertainty surrounding our business, including affecting our relationships with our existing and future customers, suppliers and employees, which could have an adverse effect on our business, financial

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results and operations. These factors are outside of our control, but may nonetheless cause us to adjust our strategy in order to compete effectively in global markets.

The domestic and foreign risks of these changes include, among other things:


•	protectionist policies restricting or impairing the manufacturing, sales or import and export of our products;


•	new restrictions on access to markets;


•	lack of required infrastructure;


•	inflation (including hyperinflation) or recession;


•	changes in, and the burdens and costs of compliance with, a variety of U.S. and foreign laws and regulations, including tax laws, accounting standards, environmental laws, and occupational health and safety laws;


•	social, political or economic instability;


•	acts of war and terrorism;


•	natural disasters or other crises;


•	reduced protection of intellectual property rights in some countries;


•	increases in duties and taxation;


•	restrictions on transfer of funds or exchange of currencies;


•	currency devaluations;


•	expropriation of assets; and


•	other adverse changes in policies, including monetary, tax or lending policies, encouraging foreign investment or foreign trade by our host countries.

Should any of these events occur, our ability to sell or export our products or repatriate profits could be impaired, we could experience a loss of sales and profitability from our domestic or international operations, and/or we could experience a substantial impairment or loss of assets, any of which could materially and adversely affect our business, operating results and financial condition.

Our liquidity may be materially adversely affected by constraints in the capital and credit markets and limitations under our financing arrangements.

We need sufficient sources of liquidity to fund our working capital requirements, service our outstanding indebtedness and finance business opportunities. Without sufficient liquidity, we could be forced to curtail our operations, or we may not be able to pursue business opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash, credit facilities, and other debt arrangements. If our sources of liquidity do not satisfy our requirements, we may need to seek additional financing. The future availability of financing will depend on a variety of factors, such as economic and market conditions, the regulatory environment for banks and other financial institutions, the availability of credit and our reputation with potential lenders. Further, disruptions in national and international credit markets could result in limitations on credit availability, tighter lending standards, higher interest rates on consumer and business loans, and higher fees associated with obtaining and maintaining credit availability. Disruptions may also materially limit consumer credit availability and restrict credit availability to us and our customer base. In addition, in the event of disruptions in the financial markets, current or future lenders may become unwilling or unable to continue to advance funds under any agreements in place, increase their commitments under existing credit arrangements or enter into new financing arrangements. These factors could materially adversely affect our liquidity, costs of borrowing and our ability to pursue business opportunities or grow our business, and threaten our ability to meet our obligations as they become due. In addition, covenants in our debt agreements could restrict or delay our ability to respond to business opportunities, or in the event of a failure to comply with such covenants, could result in an event of default, which if not cured or waived, could have a material adverse effect on us.

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We rely on central Global Enterprise Resource Planning (“ERP”) systems and other peripheral information systems. Obsolescence or interruptions in the operation of our computerized systems or other information technologies could have a material adverse effect on our operations and profitability.

Our operations are largely dependent on our ERP system. We continuously make adjustments to improve the effectiveness of the ERP and other peripheral information systems, including the installation of significant new subsystems. Any failures or disruptions in the ERP and other information systems or any complications resulting from ongoing adjustments to our systems could cause interruption or loss of data in our information or logistical systems that could materially impact our ability to procure products from our factories and suppliers, transport them to our distribution centers, and store and deliver them to our customers on time and in the correct amounts. In addition, natural disasters or other extraordinary events may disrupt our information systems and other infrastructure, and our data recovery processes may not be sufficient to protect against loss.

Failure to maintain cybersecurity and the integrity of internal or customer data could have a material adverse effect on our operations and profitability and may result in faulty business decisions, operational inefficiencies, damage to our reputation and/or subject us to costs, fines, or lawsuits.

Information systems require constant updates to their security policies and hardware systems to reduce the risk of unauthorized access, malicious destruction of data or information theft. We rely on commercially available systems, software, tools, and monitoring to provide security for processing, transmission and storage of confidential information and data. While we have security measures in place, our systems and networks have been and will continue to be subject to ongoing threats. Therefore, our security measures may be breached as a result of employee error, failure to implement appropriate processes and procedures, advances in computer and software capabilities and encryption technology, new tools and discoveries, malfeasance, third-party action, including cyber-attacks or other international misconduct by computer hackers or otherwise. This could result in one or more third-parties obtaining unauthorized access to our customer or supplier data or our internal data, including personally identifiable information, intellectual property and other confidential business information. Third-parties may also attempt to fraudulently induce employees into disclosing sensitive information such as user names, passwords or other information in order to gain access to customer or supplier data or our internal data, including intellectual property and other confidential business information. Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative or mitigation measures. Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain performance, reliability, security and availability of our network infrastructure or otherwise to maintain the confidentiality, security, and integrity of data that we store or otherwise maintain on behalf of third-parties may harm our reputation and our customer and consumer relationships.

If such unauthorized disclosure or access does occur, we may be required to notify our customers, consumers, or those persons whose information was improperly used, disclosed or accessed. We may also be subject to claims of breach of contract for such use or disclosure, investigation and penalties by regulatory authorities and potential claims by persons whose information was improperly used or disclosed. We could also become the subject of regulatory action or litigation from our consumers, customers, employees, suppliers, service providers, and shareholders, which could damage our reputation, require significant expenditures of capital and other resources, and cause us to lose business and revenue. Additionally, an unauthorized disclosure or use of information could cause interruptions in our operations and might require us to spend significant management time and other resources investigating the event and dealing with local and federal law enforcement. Regardless of the merits and ultimate outcome of these matters, we may be required to devote time and expense to their resolution. In addition, the increase in the number and the scope of data security incidents has increased regulatory and industry focus on security requirements and heightened data security industry practices. New

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regulation, evolving industry standards, and the interpretation of both, may cause us to incur additional expense in complying with any new data security requirements. As a result, the failure to maintain the integrity of and protect customer or supplier data or our internal data could have a material adverse effect on our business, operating results and financial condition.

Recent 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.

As a global company, we are subject to global privacy and data security laws, regulations, and codes of conduct that apply to our various business units. These laws and regulations may be inconsistent across jurisdictions and are subject to evolving and differing interpretations. Government regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. This increased scrutiny may result in new interpretations of existing laws, thereby further impacting our business.

Globally, new and emerging laws, such as the General Data Protection Regulation in Europe, state laws in the U.S. on privacy, data and related technologies, such as the California Consumer Privacy Act, as well as industry self-regulatory codes create new compliance obligations and expand the scope of potential liability, either jointly or severally with our customers and suppliers. While we have invested in readiness to comply with applicable requirements, these new and emerging laws, regulations and codes may affect our ability to reach current and prospective consumers, to respond to consumer requests under the laws (such as individual rights of access, correction, and deletion of their personal information), and to implement our business models effectively. The costs of compliance or failure to comply with such laws, regulations, codes of conduct and expectations could have a material adverse impact on our financial condition and results of operations.

Our business involves the potential for product recalls, product liability and other claims against us, which could materially and adversely affect our business, operating results and financial condition.

We are, from time to time, involved in various claims, litigation matters and regulatory proceedings that arise in the ordinary course of our business and that could have a material adverse effect on us. These matters may include personal injury and other tort claims, deceptive trade practices disputes, intellectual property disputes, product recalls, contract disputes, warranty disputes, employment and tax matters and other proceedings and litigation, including class actions. It is not possible to predict the outcome of pending or future litigation. As with any litigation, it is possible that some of the actions could be decided unfavorably, resulting in significant liability and, regardless of the ultimate outcome, can be costly to defend. Our results and our business could also be negatively impacted if one of our brands suffers substantial damage to its reputation due to a significant product recall or other product-related litigation and if we are unable to effectively manage real or perceived concerns about the safety, quality, or efficacy of our products.

We also face exposure to product liability and other claims in the event that one of our products is alleged to have resulted in property damage, bodily injury or other adverse effects. Although we maintain liability insurance in amounts that we believe are reasonable, that insurance is, in most cases, subject to large self-insured retentions for which we are responsible. We cannot provide assurance that we will be able to maintain such insurance on acceptable terms, if at all in the future, or that product liability or other claims will not exceed the amount of insurance coverage, or that all such matters would be covered by our insurance. As a result, these types of claims could have a material adverse effect on our business, operating results and financial condition.

Our judgments regarding the accounting for tax positions and the resolution of tax disputes may impact our net earnings and cash flow.

Significant judgment is required to determine our effective tax rate and evaluate our tax positions. We provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or

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measurement criteria prescribed by applicable accounting standards. Fluctuations in federal, state, local and foreign taxes or a change to uncertain tax positions, including related interest and penalties, may impact our effective tax rate and financial results. Additionally, we are subject to audits in the various taxing jurisdictions in which we conduct business. In cases where audits are conducted and issues are raised, a number of years may elapse before such issues are finally resolved. Unfavorable resolution of any tax matter could increase the effective tax rate, which could have an adverse effect on our operating results and cash flow. For additional information regarding our taxes, see Note 20 to the accompanying consolidated financial statements.

Changes in laws, including tax laws, and the costs and complexities of compliance with such laws could have a material adverse impact on our business.

The impact of future legislation in the U.S. or abroad, including such things as employment and health insurance laws, climate change related legislation, tax legislation, regulations or treaties is always uncertain. Federal and local legislative agendas from time to time contain numerous proposals dealing with taxes, financial regulation, energy policy, environmental policy, transportation policy and infrastructure policy, among others that, if enacted into law, could increase our costs of doing business.

As additional regulatory guidance is issued by the applicable taxing authorities, accounting treatment is clarified, we perform additional analysis on the application of the law, and we refine estimates in calculating the effect, our final analysis may be different from provisional amounts, which could materially affect our tax obligations and effective tax rate in the period completed.

Under current tax law, favorable tax treatment of our non-U.S. income is dependent on our ability to avoid classification as a Controlled Foreign Corporation. Changes in the composition of our stock ownership could have an impact on our classification. If our classification were to change, it could have a material adverse effect on the largest U.S. shareholders and, in turn, on our business.

A non-U.S. corporation, such as ours, will constitute a “controlled foreign corporation” or “CFC” for U.S. federal income tax purposes if its largest U.S. shareholders together own more than 50 percent of the stock outstanding. A U.S. shareholder is defined as any U.S. person who owns directly, indirectly, or constructively: (1) 10 percent or more of the total combined voting power of all classes of stock, or (2) 10 percent or more of the total value of shares of all classes of stock. If the IRS or a court determined that we were a CFC at any time during the tax year, then each of our U.S. shareholders as defined above would be required to include in gross income for U.S. federal income tax purposes its pro rata share of our “subpart F income” (and the subpart F income of any of our subsidiaries determined to be a CFC) for the period during which we (and our non-U.S. subsidiaries) were deemed a CFC. In addition, any gain on the sale of our shares realized by such a shareholder may be treated as ordinary income to the extent of the shareholder’s proportionate share of our and our CFC subsidiaries’ undistributed earnings and profits accumulated during the shareholder’s holding period of the shares while we were deemed to be a CFC.

Legislation enacted in Bermuda and Barbados in response to the European Union’s review of harmful tax competition could adversely affect our operations.

In December 2017, the EU Economic and Financial Affairs Council (“ECOFIN”) released a list of non-cooperative jurisdictions for tax purposes. The stated aim of this list, and accompanying report, was to promote good governance worldwide in order to maximize efforts to prevent tax fraud and tax evasion. Our jurisdiction of organization is Bermuda and one of our subsidiaries is organized in Barbados, two of the countries identified in the ECOFIN report. As of the date of this report, Bermuda and Barbados are each listed on the “black list” of non-cooperative jurisdictions for tax purposes. Bermuda was listed on this “black list” of non-cooperative jurisdictions for having a tax regime that facilitates offshore structures which attract profits without real economic activity and failing to timely satisfy its commitment to remedy the shortcomings to the satisfaction of the EU. Barbados was listed on this “black list” of non-cooperative jurisdictions for

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having a “harmful preferential tax regime” and its attempts to amend or abolish such regime being unsatisfactory to the EU.

In connection with the release of the ECOFIN findings, Bermuda and Barbados each enacted legislation that requires certain entities engaged in “relevant activities” in Bermuda and Barbados to maintain a substantial economic presence in the country, and to satisfy economic substance requirements. The list of “relevant activities” in the respective statutes includes carrying on as a business any one or more of several enumerated activities, such as headquarters, shipping, distribution and service center, intellectual property and holding entities. Any entity that is required to satisfy economic substance requirements but fails to do so could face automatic disclosure to competent authorities in the EU of the information filed by any entity with the Bermuda Registrar of Companies and the Ministry of International Business and Industry in Barbados, as applicable, in connection with the economic substance requirements and may also face financial penalties, restriction or regulation of its business activities and/or may be struck off as a registered entity in Bermuda or Barbados.

As the local authorities have not released implementing guidelines, the impact of the foregoing legislation and developments is unclear, including whether additional or revised requirements may be enacted by Bermuda or Barbados in response to being included on the EU’s “black list” of non-cooperative jurisdictions for tax purposes. Accordingly, we cannot predict the effect of Bermuda’s or Barbados’s current or future economic substance requirements on our business, which may impact the manner and jurisdictions in which we operate, which could adversely affect our business, financial condition or results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of February 28, 2019, we own, lease or otherwise utilize through third-party management service agreements, a total of 38 properties worldwide, which include selling, procurement, research and development, administrative, distribution facilities, and 31 acres of land held for expansion. All properties operated by us are adequate for their intended purpose.

Properties we own by location, type and use, segment and approximate size are listed below:



Location	Type and Use	Business Segment	Approximate Size (Square Feet)
Owned Properties
El Paso, Texas, USA	Land & Building - U.S. Headquarters	All Segments	135,000
El Paso, Texas, USA	Land & Building - Distribution Facility	Housewares, Health & Home and Beauty	408,000
Olive Branch, Mississippi, USA	Land & Building - Distribution Facility	Health & Home and Beauty	1,300,000
Southaven, Mississippi, USA	Land & Building - Distribution Facility	Housewares and Beauty	1,200,000
Sheffield, England	Land & Building - Office Space	Housewares, Health & Home and Beauty	10,400
Mexico City, Mexico	Land & Building - Office Space	Health & Home and Beauty	3,900

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The number of properties we lease or otherwise utilize by type and use and segment are listed below:



Segments Served	Office Space	Distribution Facility	Total
All Segments	5	1	6
Multiple Segments	—	1	1
Housewares	5	6	11
Health & Home	4	1	5
Beauty	4	5	9
Other	18	14	32

Approximate square footage of all properties leased or otherwise utilized	232,900	1,311,800	1,544,700

Item 3. Legal Proceedings

We are involved in various legal claims and proceedings in the normal course of operations. In the opinion of management, the outcome of these matters will not have a material adverse effect on our consolidated financial position, operating results or liquidity. See Note 13 to the accompanying consolidated financial statements for a further discussion.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our common stock is listed on the NASDAQ Global Select Market under symbol: HELE.

Approximate Number of Equity Security Holders of Record

Our common stock is our only class of equity security outstanding at February 28, 2019. As of April 22, 2019, there were 144 holders of record of our common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders whose shares are held of record by banks, brokers and other financial institutions.

Cash Dividends

Our current policy is to retain earnings to provide funds for the operation and expansion of our business, common stock repurchases and for potential acquisitions. We have not paid any cash dividends on our common stock since inception. Any change in dividend policy will depend upon future conditions, including earnings and financial condition, general business conditions, any applicable contractual limitations, and other factors deemed relevant by our Board of Directors.

Issuer Purchases of Equity Securities

On May 10, 2017, our Board of Directors authorized the repurchase of up to $400 million of our outstanding common stock. The authorization is effective until May 2020 and replaced our former repurchase authorization. As of February 28, 2019, our repurchase authorization allowed for the purchase of $110.5 million of common stock. 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 11 to the accompanying consolidated financial statements for additional information.

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

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Share repurchase activity during the three months ended February 28, 2019, was as follows:



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) (2)
December 1 through December 31, 2018	108	$	122.22	108	$	185,593
January 1 through January 31, 2019	615,081	114.46		615,081	115,192
February 1 through February 28, 2019	40,113	116.26		40,113	110,529
Total	655,302	$	114.57	655,302

(1)

The number of shares above includes shares of common stock acquired from employees who tendered shares to: 1) satisfy the tax withholding on equity awards as part of our long-term incentive plans or 2) satisfy the exercise price on stock option exercises. For the three months ended February 28, 2019 and for the full year fiscal 2019, 554 and 59,024 shares were acquired from employees at a weighted average per share price of $116.44 and $91.70, respectively.


(2)	Reflects the remaining dollar value of shares that may yet be purchased under our Stock Repurchase Plan through the end of February 28, 2019 as authorized by the Company's Board of Directors in May 2017. For additional information, see Note 11 to the accompanying consolidated financial statements.

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



	Fiscal Years Ended February 28,
(in thousands, except share and per share data)	2019		2018		2017
Common stock repurchased on the open market:
Number of shares	1,875,469		717,300		922,731
Aggregate value of shares	$	212,080	$	65,795	$	75,000
Average price per share	$	113.08	$	91.73	$	81.28

Common stock received in connection with share-based compensation:
Number of shares	59,024		75,785		6,286
Aggregate value of shares	$	5,413	$	7,258	$	595
Average price per share	$	91.70	$	95.77	$	94.61

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Performance Graph

The graph below compares the cumulative total return of our Company to the NASDAQ Market Index and a Peer Group Index, assuming $100 was invested on February 28, 2014. The Peer Group Index is the Dow Jones - U.S. Personal Products, Broad Market Cap, Yearly, and Total Return Index. The comparisons in this table are required by the SEC and are not intended to forecast or be indicative of the possible future performance of our common stock.

The Performance Graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of Section 18 under the Exchange Act. In addition, it shall not be deemed incorporated by reference by any statement that incorporates this annual report on Form 10-K by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that we specifically incorporate this information by reference.

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Item 6. Selected Financial Data

The selected consolidated statements of income and cash flow data for fiscal 2019, 2018 and 2017, and the selected consolidated balance sheet data as of the end of fiscal 2019 and 2018, have been derived from our audited consolidated financial statements included in this report. The selected consolidated statements of income and cash flow data for fiscal 2016 and 2015, and the selected consolidated balance sheet data as of the end of fiscal 2017, 2016 and 2015, have been derived from our audited consolidated financial statements, which are not included in this report. This information should be read together with the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes to those statements included in this report. All currency amounts are denominated in U.S. Dollars. In December 2017, we sold our former Nutritional Supplements segment. The operating results of this segment are presented as discontinued operations for all applicable periods presented. Additional information related to the sale of our former Nutritional Supplement segment is included in Note 4 to the accompanying consolidated financial statements.



(in thousands, except per share data)	2019 ⁽¹⁾⁽²⁾			2018 ^(1)(2)(3)			2017^(1)(2)(3)			2016 ^(1)(2)(3)		2015 ⁽¹⁾⁽²⁾
Income Statement Data:
Housewares	$	523,807		$	459,004		$	418,558		$	311,023	296,491
Health & Home	695,217			674,062			626,982			637,427		607,567
Beauty	345,127			345,779			351,995			434,943		430,912
Sales revenue, net	1,564,151			1,478,845			1,397,535			1,383,393		1,334,970
Gross profit	641,106			611,199			573,416			516,551		516,906
Asset impairment charges	—			15,447			2,900			6,000		9,000
Restructuring charges	3,586			1,857			—			—		—
Operating income	199,379			169,062			169,664			116,294		152,215
Interest expense	11,719			13,951			14,361			10,581		14,079
Income tax expense	13,776			26,556			11,407			13,021		12,332
Income from continuing operations	174,224			128,882			144,310			92,991		126,322
Income (loss) from discontinued operations, net of tax	(5,679		)	(84,436		)	(3,621		)	8,237		4,842
Net income	168,545			44,446			140,689			101,228		131,164
Earnings (loss) per share - basic
Continuing operations	$	6.68		$	4.76		$	5.24		$	3.29	$	4.42
Discontinued operations	(0.22		)	(3.12		)	(0.13		)	0.29		0.17
Net income	$	6.46		$	1.64		$	5.11		$	3.58	$	4.59
Earnings (loss) per share - diluted
Continuing operations	$	6.62		$	4.73		$	5.17		$	3.23	$	4.35
Discontinued operations	(0.22		)	(3.10		)	(0.13		)	0.29		0.17
Net income	$	6.41		$	1.63		$	5.04		$	3.52	$	4.52

Weighted average shares outstanding - basic	26,073			27,077			27,522			28,273		28,579
Weighted average shares outstanding - diluted	26,303			27,254			27,891			28,749		29,035

Cash Flow Data from Continuing Operations:
Depreciation and amortization	$	29,927		$	33,730		$	36,175		$	34,889	$	34,213
Net cash provided by operating activities⁽³⁾	200,568			218,609			212,491			170,263		171,742
Capital and intangible asset expenditures	26,385			13,605			15,507			16,676		5,908
Payments to acquire businesses, net of cash acquired	—			—			209,267			43,150		195,943
Net amounts borrowed (repaid)	29,900			(197,000		)	(133,200		)	190,700		240,600

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(in thousands)	2019 ⁽¹⁾⁽²⁾		2018 ^(1)(2)(3)		2017 ^(1)(2)(3)		2016 ^(1)(2)(3)		2015 ⁽¹⁾⁽²⁾
Balance Sheet Data from Continuing Operations:
Working capital ⁽⁴⁾	$	292,828	$	258,222	$	267,896	$	487,861	$	308,895
Goodwill and other intangible assets	893,846		905,235		938,324		762,879		746,542
Total assets ⁽⁴⁾	1,649,535		1,623,717		1,616,235		1,639,673		1,444,163
Long-term debt ⁽⁴⁾	318,900		287,985		461,211		600,107		411,307
Stockholders' equity ⁽⁵⁾	996,637		1,014,459		1,020,766		930,043		904,565


(1)	We adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) in the first quarter of fiscal 2019 and have reclassified amounts in the prior year’s statements of income to conform to the current period’s presentation. For additional information see Note 3 to the accompanying consolidated financial statements.


(2)	In December 2017, we divested our former Nutritional Supplements segment, which is reported as discontinued operations. For additional information see Note 4 to the accompanying consolidated financial statements.


(3)	Includes the material impact of new business acquisitions as follows:


•	Fiscal 2017 includes eleven and one-half months of operating results from the acquisition of Hydro Flask, acquired for a net cash purchase price of $209.3 million. Fiscal 2018 and thereafter includes a full year of operating results.


•	Fiscal 2016 includes eleven months of operating results from the Vicks VapoSteam inhalant business acquired for a net cash purchase price of $42.8 million. Fiscal 2017 and thereafter includes a full year of operating results.


(4)	Fiscal 2016 and 2015 include certain reclassifications to conform with fiscal 2017 adopted accounting changes.


(5)	During fiscal 2019, 2018, 2017, 2016 and 2015, we repurchased and retired 1,934,493, 793,085, 929,017, 1,244,090, and 4,174,093 shares of common stock having total cost of $217.5, $73.1, $75.6, $106.4, and $278.4 million, respectively.

Information Regarding Forward-Looking Statements

Certain written and oral statements in this Form 10-K may constitute "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"), in press releases, and in certain other oral and written presentations. Generally, the words "anticipates", "believes", "expects", "plans", "may", "will", "should", "seeks", "estimates", "project", "predict", "potential", "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 ("EPS") results, and statements expressing general expectations about future operating results, are forward-looking statements and are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and assumptions, but there can be no assurance that we will realize our expectations or that our assumptions will prove correct. Forward-looking statements are 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 under Item 1A., “Risk Factors” and that are otherwise described from time to time in our SEC reports as filed. We undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

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Item 7. 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”) should be read in conjunction with the other sections of this report, including Part I, Item 1., “Business”; Part II, Item 6., “Selected Financial Data”; and Part II, Item 8., “Financial Statements and Supplementary Data.” 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 Item 1A.,“Risk Factors,” and in the section entitled “Information Regarding Forward-Looking Statements,” preceding this MD&A, and in Item 7A., “Quantitative and Qualitative Disclosures About Market Risk.” Throughout MD&A, we refer to our Leadership Brands, which are brands that have number-one and number-two positions in their respective categories and include OXO, Honeywell, Braun, PUR, Hydro Flask, Vicks, and Hot Tools.

This MD&A, including the tables under the headings “Operating income, operating margin, adjusted operating income (non-GAAP) and adjusted operating margin (non-GAAP) by segment" and “Income from continuing operations, diluted EPS from continuing operations, adjusted income from continuing operations (non-GAAP), and adjusted diluted EPS from continuing operations (non-GAAP),” respectively, reports operating income, operating margin, income from continuing operations and diluted earnings per share from continuing operations without the impact of non-cash asset impairment charges, restructuring charges, the TRU bankruptcy charge, the patent litigation charge, 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 from continuing operations, and adjusted diluted EPS from continuing operations 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 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 would not accurately reflect the underlying performance of our continuing operations for the period in which the charges are incurred, even though such charges 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 from continuing operations, and adjusted diluted EPS from continuing operations 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 measures are discussed further and reconciled to their applicable GAAP based measures contained in this MD&A beginning on page 35.

Overview

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.

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overall design of our business and organizational plan is intended to create sustainable and profitable growth and improve organizational capability.

Fiscal 2020 begins Phase II of our transformation and 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 continued investment in our Leadership Brands, with a focus on growing them through consumer-centric innovation, expanding them more aggressively outside the United States, and adding new brands through acquisition. We anticipate building further shared service capability and operating efficiency, as well as attracting, retaining, unifying and training the best people.

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 $8.0 million to $10.0 million over the duration of the plan. We estimate the plan to be completed during fiscal 2020 and expect to incur total restructuring charges of approximately $7.0 million. Restructuring provisions are determined based on estimates prepared at the time the restructuring actions are approved by management and are revised periodically. See Note 12 to the accompanying consolidated financial statements for additional information.

Significant Trends Impacting the Business

Potential Impact of Tariffs

During fiscal 2019, the Office of the U.S. Trade Representative (‘‘USTR’’) imposed 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.

The tariff increases that have been implemented by the USTR began to impact our cost of goods sold in the third quarter of fiscal 2019. In total, the net unmitigated tariff impact that unfavorably impacted cost of sales during fiscal 2019 was approximately $4.0 million. Our implemented pricing actions became partially effective during the fourth quarter of fiscal 2019 and will continue into the first quarter of fiscal 2020. This is due to the negotiation and notice periods involved in taking pricing actions with our retail customers. Although our pricing actions are intended to offset the full gross profit impact of tariff increases, there are no assurances that the pricing action will not reduce retail consumption or customer orders in the short-term.

Potential Impact of Brexit

The potential exit of the United Kingdom (the "U.K.") from European Union ("E.U.") membership (commonly referred to as "Brexit") could cause disruptions to and create uncertainty surrounding our business, including affecting our relationships with our existing and future customers, suppliers and employees, which could have an adverse effect on our business, financial results and operations. Negotiations are ongoing to determine the future terms of the U.K.’s relationship with the E.U., including the terms of trade between the U.K. and the E.U. The effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets either during a transitional period or more permanently. These measures could potentially disrupt the markets we serve and the tax jurisdictions in which we

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operate, adversely change tax benefits or liabilities in these or other jurisdictions, and cause us to lose customers, suppliers, and employees. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate.

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 currency (the U.S. Dollar). The most significant currencies affecting our operating results are the British Pound, Euro, Canadian Dollar, and Mexican Peso.

For fiscal 2019, changes in foreign currency exchange rates had an unfavorable impact on consolidated U.S. Dollar reported net sales revenue of approximately $1.2 million, or 0.1%. For fiscal 2018, changes in foreign currency exchange rates had a favorable impact on consolidated U.S. Dollar reported net sales revenue of approximately $5.2 million, or 0.4%.

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. Approximately 78% of our consolidated net sales in fiscal 2019 were from U.S. shipments compared to 79% in fiscal 2018 and 2017.

Additionally, the shift in consumer shopping preferences to online or multichannel shopping experiences has shifted the concentration of our sales. For fiscal 2019, 2018 and 2017, our net sales to customers fulfilling end-consumer online orders and online sales directly to consumers comprised approximately 19%, 16% and 12%, respectively, of our total consolidated net sales revenue for each fiscal year and grew over 28% in fiscal 2019. 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. For the 2018-2019 season, fall and winter weather was generally milder than historical averages and cough/cold/flu incidence was significantly lower than the 2017-2018 season, which was an above average season.

Potential Sale Process of our Personal Care Business

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Results of Operations

The following table provides selected operating data, in U.S. Dollars, as a percentage of net sales revenue, and as a year-over-year percentage change.



	Fiscal Years Ended February 28,									% of Sales Revenue, net						% Change
(in thousands)	2019 ⁽¹⁾			2018⁽¹⁾⁽³⁾			2017 ⁽¹⁾⁽³⁾			2019		2018		2017		19/18		18/17
Sales revenue by segment, net
Housewares	$	523,807		$	459,004		$	418,558		33.5	%	31.0	%	29.9	%	14.1	%	9.7	%
Health & Home	695,217			674,062			626,982			44.4	%	45.6	%	44.9	%	3.1	%	7.5	%
Beauty	345,127			345,779			351,995			22.1	%	23.4	%	25.2	%	(0.2	)%	(1.8	)%
Total sales revenue, net	1,564,151			1,478,845			1,397,535			100.0	%	100.0	%	100.0	%	5.8	%	5.8	%
Cost of goods sold	923,045			867,646			824,119			59.0	%	58.7	%	59.0	%	6.4	%	5.3	%
Gross profit	641,106			611,199			573,416			41.0	%	41.3	%	41.0	%	4.9	%	6.6	%
Selling, general and administrative expense (SG&A)	438,141			424,833			400,852			28.0	%	28.7	%	28.7	%	3.1	%	6.0	%
Asset impairment charges	—			15,447			2,900			—	%	1.0	%	0.2	%	*		*
Restructuring charges	3,586			1,857			—			0.2	%	0.1	%	—	%	93.1	%	*
Operating income	199,379			169,062			169,664			12.7	%	11.4	%	12.1	%	17.9	%	(0.4	)%
Nonoperating income, net	340			327			414			—	%	—	%	—	%	4.0	%	(21.0	)%
Interest expense	(11,719		)	(13,951		)	(14,361		)	(0.7	)%	(0.9	)%	(1.0	)%	(16.0	)%	(2.9	)%
Income before income tax	188,000			155,438			155,717			12.0	%	10.5	%	11.1	%	20.9	%	(0.2	)%
Income tax expense	13,776			26,556			11,407			0.9	%	1.8	%	0.8	%	(48.1	)%	132.8	%
Income from continuing operations	174,224			128,882			144,310			11.1	%	8.7	%	10.3	%	35.2	%	(10.7	)%
Loss from discontinued operations⁽²⁾	(5,679		)	(84,436		)	(3,621		)	(0.4	)%	(5.7	)%	(0.3	)%	(93.3	)%	*
Net income	$	168,545		$	44,446		$	140,689		10.8	%	3.0	%	10.1	%	279.2	%	(68.4	)%


(1)	We adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) in the first quarter of fiscal 2019 and have reclassified amounts in the prior years' statements of income to conform to the current period’s presentation. For additional information see Note 3 to the accompanying consolidated financial statements.


(2)	During fiscal 2018, we divested our Nutritional Supplements segment, which is reported as discontinued operations for all periods presented. For additional information see Note 4 to the accompanying consolidated financial statements.


(3)	Fiscal 2017 includes eleven and one-half months of operating results for Hydro Flask, acquired on March 18, 2016. Fiscal 2018 includes a full year of operating results for Hydro Flask. For additional information see Note 7 to the accompanying consolidated financial statements.

* Calculation is not meaningful.

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Fiscal 2019 Financial Results


•	Consolidated net sales revenue increased 5.8%, or $85.3 million, to $1,564.2 million in fiscal 2019 compared to $1,478.8 million in fiscal 2018.

•

Consolidated operating income increased 17.9%, or $30.3 million, to $199.4 million in fiscal 2019 compared to $169.1 million in fiscal 2018. Consolidated operating margin increased 1.3 percentage points to 12.7% of consolidated net sales revenue in fiscal 2019 compared to 11.4% in fiscal 2018. Fiscal 2019 includes pre-tax restructuring charges of $3.6 million related to Project Refuel. Consolidated operating income for fiscal 2018 included pre-tax non-cash impairment charges of $15.4 million, a pre-tax charge of $3.6 million related to the bankruptcy of Toys "R" Us ("TRU"), and pre-tax restructuring charges of $1.9 million.


•	Consolidated adjusted operating income increased 6.9%, or $15.3 million, to $239.2 million in fiscal 2019 compared to $223.9 million in fiscal 2018. Consolidated adjusted operating margin increased 0.2 percentage points to 15.3% of consolidated net sales revenue in fiscal 2019 compared to 15.1% in fiscal 2018.


•	Income from continuing operations increased 35.2%, or $45.3 million, to $174.2 million in fiscal 2019 compared to $128.9 million in fiscal 2018. Diluted earnings per share (“EPS”) from continuing operations increased 40.0% to $6.62 in fiscal 2019 compared to $4.73 in fiscal 2018.


•	Adjusted income from continuing operations increased 7.5% to $212.1 million in fiscal 2019, compared to $197.2 million in fiscal 2018. Adjusted diluted EPS from continuing operations increased 11.3% to $8.06 in fiscal 2019 compared to $7.24 in fiscal 2018.

•

On December 20, 2017, we completed the divestiture of the Nutritional Supplements segment through the sale of Healthy Directions LLC and its subsidiaries to Direct Digital, LLC. Following the sale, we no longer consolidate our former Nutritional Supplements segment’s operating results. The Nutritional Supplements segment’s operating results are included in our financial statements and classified within discontinued operations. Loss from discontinued operations, net of tax, decreased to $5.7 million in fiscal 2019, compared to $84.4 million in fiscal 2018. Diluted loss per share from discontinued operations was $0.22 in fiscal 2019 compared to $3.10 in fiscal 2018. Fiscal 2018 included after tax non-cash asset impairment charges of $83.5 million. For additional information, see Note 4 to the accompanying consolidated financial statements.


•	Net income was $168.5 million in fiscal 2019 compared to $44.4 million in fiscal 2018. Diluted EPS was $6.41 in fiscal 2019 compared to $1.63 in fiscal 2018.

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Fiscal 2018 Financial Results


•	Consolidated net sales revenue increased 5.8%, or $81.3 million, to $1,478.8 million in fiscal 2018 compared to $1,397.5 million in fiscal 2017.

•

Consolidated operating income decreased 0.4%, or $0.6 million, to $169.1 million in fiscal 2018 compared to $169.7 million in fiscal 2017. Consolidated operating margin decreased 0.7 percentage points to 11.4% of consolidated net sales revenue in fiscal 2018 compared to 12.1% in fiscal 2017. Fiscal 2018 included pre-tax non-cash impairment charges of $15.4 million, a pre-tax charge of $3.6 million related to the bankruptcy of TRU, and pre-tax restructuring charges of $1.9 million. Fiscal 2017 included a non-cash asset impairment charge of $2.9 million and a patent litigation charge of $1.5 million.


•	Consolidated adjusted operating income increased 6.6%, or $14.0 million, to $223.9 million in fiscal 2018 compared to $209.9 million in fiscal 2017. Consolidated adjusted operating margin increased 0.1 percentage points to 15.1% of consolidated net sales revenue in fiscal 2018 compared to 15.0% in fiscal 2017.


•	Income from continuing operations decreased 10.7%, or $15.4 million, to $128.9 million in fiscal 2018 compared to $144.3 million in fiscal 2017. Diluted EPS from continuing operations decreased 8.5% to $4.73 in fiscal 2018 compared to $5.17 in fiscal 2017.


•	Adjusted income from continuing operations increased 9.0% to $197.2 in fiscal 2018, compared to $180.9 in fiscal 2017. Adjusted diluted EPS from continuing operations increased 11.6% to $7.24 in fiscal 2018 compared to $6.49 in fiscal 2017.

•

Loss from discontinued operations, net of tax, increased to $84.4 million in fiscal 2018, compared to $3.6 million in fiscal 2017. Fiscal 2018 includes after tax non-cash asset impairment charges of $83.5 million. Fiscal 2017 includes after tax non-cash asset impairment charges of $5.9 million. Diluted loss per share from discontinued operations was $3.10 in fiscal 2018 compared to $0.13 in fiscal 2017.


•	Net income was $44.4 million in fiscal 2018 versus $140.7 million in fiscal 2017. Diluted EPS was $1.63 in fiscal 2018 compared to $5.04 in fiscal 2017.

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Consolidated and Segment Net Sales

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



	Fiscal Year Ended February 28,
(in thousands)	Housewares			Health & Home			Beauty			Total
Fiscal 2018 sales revenue, net ⁽¹⁾	$	459,004		$	674,062		$	345,779		$	1,478,845
Core business	64,886			21,061			572			86,519
Impact of foreign currency	(83		)	94			(1,224		)	(1,213		)
Change in sales revenue, net	64,803			21,155			(652		)	85,306
Fiscal 2019 sales revenue, net ⁽¹⁾	$	523,807		$	695,217		$	345,127		$	1,564,151
Total net sales revenue growth	14.1		%	3.1		%	(0.2		)%	5.8		%
Core business	14.1		%	3.1		%	0.2		%	5.9		%
Impact of foreign currency	—		%	—		%	(0.4		)%	(0.1		)%



	Fiscal Year Ended February 28,
(in thousands)	Housewares			Health & Home			Beauty			Total
Fiscal 2017 sales revenue, net ⁽¹⁾	$	418,558		$	626,982		$	351,995		$	1,397,535
Core business	34,222			43,181			(7,421		)	69,982
Impact of foreign currency	76			3,899			1,205			5,180
Acquisitions ⁽²⁾	6,148			—			—			6,148
Change in sales revenue, net	40,446			47,080			(6,216		)	81,310
Fiscal 2018 sales revenue, net ⁽¹⁾	$	459,004		$	674,062		$	345,779		$	1,478,845
Total net sales revenue growth	9.7		%	7.5		%	(1.8		)%	5.8		%
Core business	8.2		%	6.9		%	(2.1		)%	5.0		%
Impact of foreign currency	—		%	0.6		%	0.3		%	0.4		%
Acquisitions	1.5		%	—		%	—		%	0.4		%


(1)	We adopted ASU 2014-09 in the first quarter of fiscal 2019 and have reclassified amounts in the prior years' statements of income to conform to the current period’s presentation. For additional information see Note 3 to the accompanying consolidated financial statements.


(2)	Includes approximately one-half month of incremental operating results for Hydro Flask, which was acquired on March 18, 2016. For additional information see Note 7 to the accompanying consolidated financial statements.

In the above tables core 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 is acquired, excluding the impact that foreign currency re-measurement had on reported net sales. Net sales revenue from internally developed brands or product lines is considered core business activity.

Leadership Brand and Other Net Sales

The following tables summarizes our leadership brand and other net sales:




	Fiscal Years Ended February 28,						$ Change						% Change
(in thousands)	2019		2018		2017		19/18			18/17			19/18		18/17
Leadership Brand sales revenue, net	$	1,243,600	$	1,142,183	$	1,044,208	$	101,417		$	97,975		8.9	%	9.4	%
All other sales revenue, net	320,551		336,662		353,327		(16,111		)	(16,665		)	(4.8	)%	(4.7	)%
Total sales revenue, net	$	1,564,151	$	1,478,845	$	1,397,535	$	85,306		$	81,310		5.8	%	5.8	%

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Consolidated Net Sales Revenue

Comparison of Fiscal 2019 to 2018

Consolidated net sales revenue increased $85.3 million, or 5.8%, to $1,564.2 million in fiscal 2019 compared to $1,478.8 million in fiscal 2018. Growth in consolidated net sales was primarily driven by a core business increase of $86.5 million, or 5.9%, primarily due to overall point of sale growth in the brick and mortar channel, incremental distribution, growth in online sales, increased international sales, and new product introductions. This growth was partially offset by a consumption decline in the Personal Care category, the discontinuation of certain brands and products within our Beauty segment and the unfavorable impact from foreign currency fluctuations of approximately $1.2 million, or 0.1%.

Net sales from our Leadership Brands were $1,243.6 million in fiscal 2019, compared to $1,142.2 million in fiscal 2018, representing a growth of 8.9%.

Comparison of Fiscal 2018 to 2017

Consolidated net sales revenue increased $81.3 million, or 5.8%, to $1,478.8 million in fiscal 2018, compared to $1,397.5 million in fiscal 2017. Growth in consolidated net sales was primarily driven by:


•	a core business increase of $70.0 million, or 5.0%, primarily due to new product introductions, online customer growth, incremental distribution and growth in international sales;


•	growth from acquisitions of $6.1 million or 0.4%; and


•	the favorable impact from foreign currency fluctuations of approximately $5.2 million, or 0.4%.

These factors were partially offset by a consumption decline in the Personal Care category and the impact of lower store traffic and soft consumer spending at traditional brick and mortar retail.

Net sales from our Leadership Brands were $1,142.2 million in fiscal 2018, compared to $1,044.2 million in fiscal 2017, representing growth of 9.4%.

Segment Net Sales Revenue

Housewares

Comparison of Fiscal 2019 to 2018

Net sales revenue in the Housewares segment increased $64.8 million, or 14.1%, to $523.8 million in fiscal 2019, compared to $459.0 million in fiscal 2018. Growth was primarily driven by a core business increase of $64.9 million, or 14.1%, due to point of sale growth with existing customers, an increase in online sales, higher sales in the club channel, and new product introductions. These factors were partially offset by lower closeout sales.

Comparison of Fiscal 2018 to 2017

Net sales revenue in the Housewares segment increased $40.4 million, or 9.7%, to $459.0 million in fiscal 2018, compared to $418.6 million in fiscal 2017. Growth was primarily driven by:


•	a core business increase of $34.2 million, or 8.2%, due to an increase in online sales, incremental distribution with existing customers, expanded international and U.S. distribution, new product introductions for both the Hydro Flask and OXO brands, increased marketing investments and promotional activity, and higher sales in the discount channel; and


•	growth from acquisitions of $6.1 million, or 1.5%, representing an incremental one-half month of operating results from Hydro Flask in fiscal 2018, compared to fiscal 2017.

These factors were partially offset by lower store traffic and soft consumer spending at traditional brick and mortar retail and the unfavorable comparative impact of retail pipeline fill and strong sales into the club channel in the prior year period.

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Health & Home

Comparison of Fiscal 2019 to 2018

Net sales revenue in the Health & Home segment increased $21.2 million, or 3.1%, to $695.2 million in fiscal 2019 compared to $674.1 million in fiscal 2018. Growth was driven by a core business increase of 3.1%, primarily due to higher sales of seasonal products and growth in international sales. These factors were partially offset by an unfavorable comparison to fiscal 2018, which benefited from strong cough/cold/flu incidence along with unseasonably cold fall and winter weather. Net foreign currency fluctuations were not meaningful.

Comparison of Fiscal 2018 to 2017

Net sales revenue in the Health & Home segment increased $47.1 million, or 7.5%, to $674.1 million in fiscal 2018 compared to $627.0 million in fiscal 2017. Growth was primarily driven by a core business increase of 6.9%, which benefited from strong cough/cold/flu incidence along with unseasonably cold fall and winter weather, compared to below average cough/cold/flu incidence and milder weather in the same period last year. Growth was also driven by an increase in online sales, incremental distribution and shelf space gains with existing customers, and an increase in international sales. Core business sales increases were partially offset by lower sales into the club channel and lower royalty revenue. Foreign currency fluctuations had a favorable impact on total segment sales of approximately $3.9 million, or 0.6%.

Beauty

Comparison of Fiscal 2019 to 2018

Net sales revenue in the Beauty segment decreased $0.7 million, or 0.2%, to $345.1 million in fiscal 2019 compared to $345.8 million in fiscal 2018. Segment net sales were unfavorably impacted by net foreign currency fluctuations of approximately $1.2 million, or 0.4%. Core business revenue increased by 0.2%, reflecting growth in the online channel, new product introductions in the retail appliance category, and an increase in international sales, which was partially offset by a decline in brick and mortar sales, the discontinuation of certain brands and products and a decrease in the Personal Care category.

Comparison of Fiscal 2018 to 2017

Net sales revenue in the Beauty segment decreased $6.2 million, or 1.8%, to $345.8 million in fiscal 2018 compared to $352.0 million in fiscal 2017. The decrease was primarily driven by a decline in the Personal Care category, which was partially offset by solid growth in both retail and professional appliance sales, particularly to online retail customers. Segment net sales were favorably impacted by foreign currency fluctuations of approximately $1.2 million, or 0.3%.

Gross Profit Margin

Comparison of Fiscal 2019 to 2018

Consolidated gross profit margin decreased 0.3 percentage points to 41.0% in fiscal 2019, compared to 41.3% in fiscal 2018. The decrease in consolidated gross profit margin is primarily due to less favorable channel and product mix, a higher mix of shipments made on a direct import basis, and the impact of tariff increases, partially offset by the favorable margin impact from growth in our Leadership Brands.

Comparison of Fiscal 2018 to 2017

Consolidated gross profit margin increased 0.3 percentage points to 41.3% in fiscal 2018, compared to 41.0% in fiscal 2017. The increase in consolidated gross profit margin is primarily due to the favorable impact from growth in our Leadership Brands, a higher margin product mix and the favorable impact from foreign currency fluctuations. These factors were partially offset by a less favorable channel mix and higher promotional spending.

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Selling General and Administrative Expense

Comparison of Fiscal 2019 to 2018

Consolidated SG&A ratio decreased 0.7 percentage points to 28.0% in fiscal 2019, compared to 28.7% in fiscal 2018. The decrease in the consolidated SG&A ratio was primarily due to:


•	lower amortization expense;


•	the favorable impact from foreign currency exchange and forward contract settlements


•	the favorable comparative impact of a $3.6 million charge related to the bankruptcy of TRU in the same period last year;


•	the favorable impact of a higher mix of shipments made on a direct import basis; and


•	the impact that higher overall net sales had on operating leverage.

These factors were partially offset by:


•	higher advertising expense;


•	higher share-based compensation expense; and


•	higher freight expense.

Comparison of Fiscal 2018 to 2017

Consolidated SG&A ratio remained flat at 28.7% in fiscal 2018 and 2017. Fiscal 2018 included a $3.6 million charge related to the bankruptcy of TRU, higher overall marketing, advertising and new product development expense in support of our Leadership Brands and an unfavorable impact from foreign currency exchange and forward contract settlements. These factors were offset by the favorable comparison from a $1.5 million patent litigation charge in fiscal 2017, improved distribution and logistics efficiency and lower outbound freight expense, and the favorable impact that higher overall sales had on operating leverage.

Asset Impairment Charges

Fiscal 2019

We did not record any asset impairment charges in fiscal 2019.

Fiscal 2018

As a result of our interim and annual testing of indefinite-lived trademarks, we recorded non-cash asset impairment charges of $15.4 million ($13.8 million after tax) in continuing operations. The charges were related to certain trademarks in our Beauty segment.

Fiscal 2017

As a result of our testing of indefinite-lived trademarks, we recorded non-cash asset impairment charges of $2.9 million ($2.5 million after tax) in continuing operations. These charges were related to certain trademarks in our Beauty segment.

Restructuring Charges

Fiscal 2019

We incurred $3.6 million of pre-tax restructuring costs related to employee severance and termination benefits under Project Refuel. During fiscal 2019, we made total cash restructuring payments of $3.1 million and had a remaining liability of $1.2 million as of February 28, 2019.

Fiscal 2018

We incurred $1.9 million of pre-tax restructuring costs related to employee severance and termination benefits and contract termination costs under Project Refuel. During fiscal 2018, we made cash restructuring payments of $1.3 million and had a remaining liability of $0.5 million as of February 28, 2018.

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Fiscal 2017

We did not record any restructuring charges in fiscal 2017.

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Operating income, operating margin, adjusted operating income (non-GAAP), and adjusted operating margin (non-GAAP) by segment

In order to provide a better understanding of the impact of certain items on our operating income, the below tables report the comparative after tax impact of non‐cash asset impairment charges, restructuring charges, patent litigation charges, the TRU bankruptcy charge, 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 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 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”



	Fiscal Year Ended February 28, 2019
(In thousands)	Housewares				Health & Home				Beauty				Total
Operating income, as reported (GAAP)	$	100,743	19.2	%	$	68,448	9.8	%	$	30,188	8.7	%	$	199,379	12.7	%
Asset impairment charges	—		—	%	—		—	%	—		—	%	—		—	%
Restructuring charges	926		0.2	%	686		0.1	%	1,974		0.6	%	3,586		0.2	%
TRU bankruptcy charge	—		—	%	—		—	%	—		—	%	—		—	%
Subtotal	101,669		19.4	%	69,134		9.9	%	32,162		9.3	%	202,965		13.0	%
Amortization of intangible assets	1,980		0.4	%	10,925		1.6	%	1,299		0.4	%	14,204		0.9	%
Non-cash share-based compensation	7,974		1.5	%	9,204		1.3	%	4,875		1.4	%	22,053		1.4	%
Adjusted operating income (non-GAAP)	$	111,623	21.3	%	$	89,263	12.8	%	$	38,336	11.1	%	$	239,222	15.3	%



	Fiscal Year Ended February 28, 2018
(In thousands)	Housewares ⁽¹⁾				Health & Home				Beauty				Total
Operating income, as reported (GAAP)	$	89,319	19.5	%	$	62,099	9.2	%	$	17,644	5.1	%	$	169,062	11.4	%
Asset impairment charges	—		—	%	—		—	%	15,447		4.5	%	15,447		1.0	%
Restructuring charges	220		—	%	—		—	%	1,637		0.5	%	1,857		0.1	%
TRU bankruptcy charge	956		0.2	%	2,640		0.4	%	—		—	%	3,596		0.2	%
Subtotal	90,495		19.7	%	64,739		9.6	%	34,728		10.0	%	189,962		12.8	%
Amortization of intangible assets	2,226		0.5	%	11,101		1.6	%	5,527		1.6	%	18,854		1.3	%
Non-cash share-based compensation	4,701		1.0	%	5,721		0.8	%	4,632		1.3	%	15,054		1.0	%
Adjusted operating income (non-GAAP)	$	97,422	21.2	%	$	81,561	12.1	%	$	44,887	13.0	%	$	223,870	15.1	%



	Fiscal Year Ended February 28, 2017
(In thousands)	Housewares ⁽¹⁾				Health & Home				Beauty				Total
Operating income, as reported (GAAP)	$	89,020	21.3	%	$	51,072	8.1	%	$	29,572	8.4	%	$	169,664	12.1	%
Asset impairment charges	—		—	%	—		—	%	2,900		0.8	%	2,900		0.2	%
Patent litigation charge	—		—	%	1,468		0.2	%	—		—		1,468		0.1	%
Subtotal	89,020		21.3	%	52,540		8.3	%	32,472		9.2	%	174,032		12.4	%
Amortization of intangible assets	2,643		0.6	%	13,663		2.2	%	5,718		1.6	%	22,024		1.6	%
Non-cash share-based compensation	3,409		0.8	%	5,449		0.9	%	5,003		1.4	%	13,861		1.0	%
Adjusted operating income (non-GAAP)	$	95,072	22.7	%	$	71,652	11.4	%	$	43,193	12.3	%	$	209,917	15.0	%


(1)	Fiscal 2017 includes eleven and one-half months of incremental operating results for Hydro Flask, acquired on March 18, 2016. Fiscal 2018 includes a full year of operating results for Hydro Flask.

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Consolidated Operating Income

Comparison of Fiscal 2019 to 2018

Consolidated operating income was $199.4 million, or 12.7% of net sales, in fiscal 2019, compared to consolidated operating income of $169.1 million, or 11.4% of net sales, in fiscal 2018. Fiscal 2019 includes pre-tax restructuring charges of $3.6 million associated with Project Refuel. Fiscal 2018 included pre-tax non-cash asset impairment charges of $15.4 million, a $3.6 million charge related to the TRU bankruptcy and pre-tax restructuring charges of $1.9 million. The effect of these items in both years favorably impacted the year-over-year comparison of operating margin by a combined 1.1 percentage points. The remaining improvement in fiscal 2019 consolidated operating margin was driven by:


•	a higher mix of Leadership Brand sales at a higher operating margin;


•	lower amortization expense; and


•	the favorable impact of increased operating leverage from net sales growth.

These factors were partially offset by:


•	a less favorable channel and product mix;


•	higher advertising expense;


•	the impact of tariff increases; and


•	higher share-based compensation expense.

Consolidated adjusted operating income increased 6.9%, or $15.4 million, to $239.2 million in fiscal 2019 compared to $223.9 million in fiscal 2018. Consolidated adjusted operating margin increased 0.2 percentage points to 15.3% of consolidated net sales revenue in fiscal 2019, compared to 15.1% in fiscal 2018.

Comparison of Fiscal 2018 to 2017

Consolidated operating income was $169.1 million in fiscal 2018 compared to $169.7 million in fiscal 2017. Consolidated operating margin was 11.4% in fiscal 2018 compared to 12.1% in fiscal 2017. Fiscal 2018 included pre-tax non-cash asset impairment charges totaling $15.4 million, a $3.6 million charge related to the TRU bankruptcy and pre-tax restructuring charges of $1.9 million associated with Project Refuel. Fiscal 2017 included pre-tax non-cash asset impairment charges of $2.9 million and a patent litigation charge of $1.5 million. The effect of these items in both years unfavorably impacted the year-over-year comparison of operating margin by a combined 1.0 percentage point. The remaining improvement in fiscal 2018 consolidated operating margin primarily reflects:


•	a higher mix of Leadership Brand sales at a higher operating margin;


•	improved distribution and logistics efficiency and lower outbound freight costs; and


•	the favorable impact that higher overall net sales had on operating leverage.

These factors were partially offset by higher marketing, advertising and new product development expense in support of our Leadership Brands and the unfavorable impact from foreign currency exchange and forward contract settlements.

Consolidated adjusted operating income increased 6.6% to $223.9 million in fiscal 2018 compared to $209.9 million in fiscal 2017. Consolidated adjusted operating margin increased 0.1 percentage point to 15.1% in fiscal 2018 compared to 15.0% in fiscal 2017.

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Housewares

Comparison of Fiscal 2019 to 2018

Housewares fiscal 2019 operating income was $100.7 million, or 19.2% of segment net sales, compared to $89.3 million, or 19.5% of segment net sales, in fiscal 2018. The 0.3 percentage point decrease in segment operating margin is primarily due to:


•	higher advertising expense;


•	higher share-based compensation expense;


•	higher annual incentive compensation expense related to current year performance;


•	higher freight expense; and


•	higher rent expense related to new office space.

These factors were partially offset by:


•	the favorable margin impact from growth in the Hydro Flask business;


•	the favorable impact of increased operating leverage from net sales growth; and


•	the favorable comparative impact of a $1.0 million charge related to the bankruptcy of TRU in the same period last year.

Segment adjusted operating income increased 14.6% to $111.6 million, or 21.3% of segment net sales, in fiscal 2019, compared to $97.4 million, or 21.2% of segment net sales, in fiscal 2018.

Comparison of Fiscal 2018 to 2017

Housewares fiscal 2018 operating income was $89.3 million, or 19.5% of segment net sales, compared to $89.0 million, or 21.3% of segment net sales, in fiscal 2017. The 1.8 percentage point decrease in segment operating margin was primarily due to:


•	higher marketing, advertising and new product development expense;


•	higher promotional spending;


•	higher sales in the discount channel;


•	a $1.0 million charge related to the bankruptcy of TRU; and


•	a $0.2 million pre-tax restructuring charge.

These factors were partially offset by the favorable margin impact from growth in the Hydro Flask business, improved distribution and logistics efficiency coupled with lower outbound freight costs and the impact of increased operating leverage from overall sales growth.

Segment adjusted operating income increased $2.3 million to $97.4 million, or 21.2% of segment net sales, in fiscal 2018 compared to $95.1 million, or 22.7% of segment net sales, in fiscal 2017.

Health & Home

Comparison of Fiscal 2019 to 2018

Health & Home fiscal 2019 operating income was $68.4 million, or 9.8% of segment net sales, compared to $62.1 million, or 9.2% of segment net sales, in fiscal 2018. The 0.6 percentage point increase in segment operating margin is primarily due to:


•	the favorable comparative impact of a $2.6 million charge related to the bankruptcy of TRU in the same period last year;


•	strong sales growth in the Asia Pacific region at a higher operating margin;


•	the favorable impact that higher overall net sales had on operating leverage; and


•	the favorable impact of foreign currency exchange and forward contract settlements.

These factors were partially offset by:


•	the margin impact of a less favorable product mix;


•	the impact of tariff increases;


•	higher share-based compensation expense; and

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•	higher advertising expense.

Segment adjusted operating income increased 9.4% to $89.3 million, or 12.8% of segment net sales, in fiscal 2019 compared to $81.6 million, or 12.1% of segment net sales, in fiscal 2018.

Comparison of Fiscal 2018 to 2017

Health & Home fiscal 2018 operating income was $62.1 million, 9.2% of segment net sales, compared to $51.1 million, or 8.1% of segment net sales, in fiscal 2017. The 1.1 percentage point increase in segment operating margin was primarily due to:


•	lower legal fee expense and the favorable comparative impact of a $1.5 million patent litigation charge in the same period last year;


•	improved distribution and logistics efficiency and lower outbound freight costs;


•	lower royalty expense; and


•	the favorable impact that higher overall net sales had on operating leverage.

These factors were partially offset by:


•	an increase in new product development expense;


•	higher personnel and incentive compensation costs;


•	a $2.6 million charge related to the bankruptcy of TRU; and


•	an increase in product liability expense.

Segment adjusted operating income increased 13.8% to $81.6 million, or 12.1% of segment net sales, in fiscal 2018 compared to $71.7 million, or 11.4% of segment net sales, in fiscal 2017.

Beauty

Comparison of Fiscal 2019 to 2018

Beauty fiscal 2019 operating income was $30.2 million, or 8.7% of segment net sales, compared to $17.6 million, or 5.1% of segment net sales, in fiscal 2018. Fiscal 2019 includes pre-tax restructuring charges of $2.0 million, compared to $1.6 million in fiscal 2018. Fiscal 2018 also included a $15.4 million pre-tax non-cash asset impairment charge that did not reoccur in fiscal 2019. The effect of these items favorably impacted the year-over-year comparison of operating margin by 4.4 percentage points. The remaining decrease in segment operating margin is primarily due to:


•	the net sales decline in the Personal Care category and its unfavorable impact on operating margin;


•	higher freight expense; and


•	higher share-based compensation expense.

These factors were partially offset by:


•	cost savings from Project Refuel; and


•	lower amortization expense.

Segment adjusted operating income decreased 14.6% to $38.3 million, or 11.1% of segment net sales, in fiscal 2019 compared to $44.9 million, or 13.0% of segment net sales, in fiscal 2018.

Comparison of Fiscal 2018 to 2017

Beauty fiscal 2018 operating income decreased $11.9 million, or 40.3%, to $17.6 million compared to $29.6 million in fiscal 2017. The decrease in segment operating margin was primarily due to:


•	pre-tax non-cash asset impairment charges of $15.4 million, compared to $2.9 million recorded in the same period last year;


•	pre-tax restructuring charges of $1.6 million related to Project Refuel; and


•	the net sales decline in the Personal Care category and its unfavorable impact on operating margin.

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These factors were partially offset by the favorable impact of new product introductions in the appliance category, lower media advertising expense and improved distribution and logistics efficiency coupled with lower outbound freight costs.

Segment adjusted operating income increased 3.9% to $44.9 million, or 13.0% of segment net sales, in fiscal 2018 compared to $43.2 million, or 12.3% of segment net sales, in fiscal 2017.

Interest Expense

Interest expense was $11.7 million in fiscal 2019, compared to $14.0 million in fiscal 2018. The decrease in interest expense is due to lower average levels of debt held during fiscal 2019, partially offset by higher average interest rates.

Interest expense was $14.0 million in fiscal 2018, compared to $14.4 million in fiscal 2017. The decrease in interest expense was due to lower average levels of debt held during fiscal 2018, partially offset by higher average interest rates.

Income Tax Expense

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. Among other changes, the Tax Act lowered the U.S. corporate statutory income tax rate from 35% to 21% and established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries.

The year-over-year comparison of our effective tax rates is impacted by the mix of taxable income in our various tax jurisdictions, among other factors. 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.

Fiscal 2019 income tax expense as a percentage of income before tax was 7.3% compared to 17.1% in the same period last year. The decrease in our effective tax rate was primarily due to the provisional charge of $17.9 million recorded in fiscal 2018 related to the Tax Act.

Fiscal 2018 income tax expense as a percentage of income before tax was 17.1% compared to 7.3% in fiscal 2017. The increase in the effective tax rate was primarily due to the provisional charge of $17.9 million related to the Tax Act, which increased our effective tax rate by 11.5 percentage points. This impact was partially offset by:


•	$2.1 million in benefits resulting from the recognition of excess tax benefits from share-based compensation in income tax expense rather than paid in capital due to our adoption of ASU 2016-09; and


•	$2.4 million in tax benefits related to the resolution of uncertain tax positions.

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Income from continuing operations, diluted EPS from continuing operations, adjusted Income from continuing operations (non-GAAP), and adjusted diluted EPS from continuing operations (non-GAAP)

In order to provide a better understanding of the impact of certain items on our income and EPS from continuing operations, the below tables report the comparative after tax impact of non‐cash asset impairment charges, restructuring charges, tax reform, patent litigation charges, the TRU bankruptcy charge, amortization of intangible assets, and non‐cash share‐based compensation, as applicable, on income from continuing operations, and basic and diluted EPS from continuing operations for the periods covered below. For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”



	Fiscal Year Ended February 28, 2019
	Income From Continuing Operations						Diluted Earnings Per Share
(in thousands, except per share data)	Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax
As reported (GAAP)	$	188,000	$	13,776	$	174,224	$	7.15	$	0.52	$	6.62
Restructuring charges	3,586		215		3,371		0.14		0.01		0.13
Subtotal	191,586		13,991		177,595		7.28		0.53		6.75
Amortization of intangible assets	14,204		372		13,832		0.54		0.01		0.53
Non-cash share-based compensation	22,053		1,395		20,658		0.84		0.05		0.79
Adjusted (non-GAAP)	$	227,843	$	15,758	$	212,085	$	8.66	$	0.60	$	8.06

Weighted average shares of common stock used in computing diluted earnings per share											26,303



	Fiscal Year Ended February 28, 2018
	Income From Continuing Operations							Diluted Earnings Per Share
(in thousands, except per share data)	Before Tax		Tax			Net of Tax		Before Tax		Tax			Net of Tax
As reported (GAAP)	$	155,438	$	26,556		$	128,882	$	5.70	$	0.97		$	4.73
Tax reform	—		(17,939		)	17,939		—		(0.66		)	0.66
Asset impairment charges	15,447		1,613			13,834		0.57		0.06			0.51
Restructuring charges	1,857		69			1,788		0.07		—			0.07
TRU bankruptcy charge	3,596		204			3,392		0.13		0.01			0.12
Subtotal	176,338		10,503			165,835		6.47		0.39			6.08
Amortization of intangible assets	18,854		850			18,004		0.69		0.03			0.66
Non-cash share-based compensation	15,054		1,669			13,385		0.55		0.06			0.49
Adjusted (non-GAAP)	$	210,246	$	13,022		$	197,224	$	7.71	$	0.48		$	7.24

Weighted average shares of common stock used in computing diluted earnings per share													27,254



	Fiscal Year Ended February 28, 2017
	Income From Continuing Operations						Diluted Earnings Per Share
(in thousands, except per share data)	Before Tax		Tax		Net of Tax		Before Tax		Tax		Net of Tax
As reported (GAAP)	$	155,717	$	11,407	$	144,310	$	5.58	$	0.41	$	5.17
Asset impairment charges	2,900		354		2,546		0.10		0.01		0.09
Patent litigation charge	1,468		4		1,464		0.05		—		0.05
Subtotal	160,085		11,765		148,320		5.74		0.42		5.32
Amortization of intangible assets	22,024		1,538		20,486		0.79		0.06		0.73
Non-cash share-based compensation	13,861		1,762		12,099		0.50		0.06		0.44
Adjusted (non-GAAP)	$	195,970	$	15,065	$	180,905	$	7.03	$	0.54	$	6.49

Weighted average shares of common stock used in computing diluted earnings per share											27,891

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Comparison of Fiscal 2019 to 2018

Our income from continuing operations was $174.2 million in fiscal 2019 compared to $128.9 million in fiscal 2018, an increase of 35.2%. Our diluted EPS from continuing operations increased $1.89, or 40.0%, to $6.62 in fiscal 2019 compared to $4.73 in fiscal 2018.

Adjusted income from continuing operations increased $14.9 million, or 7.5%, to $212.1 million in fiscal 2019 compared to $197.2 million in fiscal 2018. Adjusted diluted EPS from continuing operations increased 11.3% to $8.06 in fiscal 2019 compared to $7.24 in fiscal 2018. The increase in adjusted income from continuing operations was primarily due to an increase in adjusted operating income and lower interest expense. The increase in adjusted diluted EPS from continuing operations was due to increased adjusted income and lower diluted shares outstanding during fiscal 2019.

Comparison of Fiscal 2018 to 2017

Our income from continuing operations was $128.9 million in fiscal 2018 compared to $144.3 million in fiscal 2017, a decrease of 10.7%. Our diluted EPS from continuing operations decreased $0.44, or 8.5%, to $4.73 in fiscal 2018 compared to $5.17 in fiscal 2017.

Adjusted income from continuing operations