Helen of Troy Earnings 2020-11-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

hele-20201130

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended November 30, 2020

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

For the transition period from __ to __

Commission File Number: 001-14669

HELEN OF TROY LIMITED

(Exact name of registrant as specified in its charter)

Bermuda 74-2692550

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

Clarendon House, 2 Church Street, Hamilton, Bermuda

(Address of principal executive offices)

1 Helen of Troy Plaza, El Paso, Texas 79912

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

(915) 225-8000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, $0.10 par value per share

HELE

The NASDAQ Stock Market LLC

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

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

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

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

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

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

As of December 29, 2020, there were 24,395,784 common shares, $0.10 par value per share, outstanding.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


		PAGE

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Note 1 - Basis of Presentation and Related Information	7
	Note 2 - New Accounting Pronouncements	8
	Note 3 - Revenue Recognition	9
	Note 4 - Leases	10
	Note 5 - Assets Held for Sale	11
	Note 6 - Supplemental Balance Sheet Information	12
	Note 7 - Acquisitions	12
	Note 8 - Goodwill and Intangible Assets	14
	Note 9 - Share-Based Compensation Plans	15
	Note 10 - Repurchase of Helen of Troy Common Stock	16
	Note 11 - Restructuring Plan	17
	Note 12 - Commitments and Contingencies	17
	Note 13 - Long-Term Debt	17
	Note 14 - Fair Value	19
	Note 15 - Financial Instruments and Risk Management	20
	Note 16 - Accumulated Other Comprehensive Income (Loss)	23
	Note 17 - Segment Information	23
	Note 18 - Income Taxes	24
	Note 19 - Earnings Per Share	25
	Note 20 - Subsequent Events	26

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures A bout Market Risk	53

Item 4.	Controls and Procedures	53

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 6.	Exhibits	55

SIGNATURES		56

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)


(in thousands, except shares and par value)	November 30, 2020		February 29, 2020
Assets
Assets, current:
Cash and cash equivalents	$	156,661	$	24,467
Receivables - principally trade, less allowances of $3,956 and $1,461	500,070		348,023
Inventory	383,440		256,311
Prepaid expenses and other current assets	10,591		9,229

Assets held for sale	39,306		44,806
Total assets, current	1,090,068		682,836

Property and equipment, net of accumulated depreciation of $144,462 and $132,340	135,795		132,107
Goodwill	739,901		739,901
Other intangible assets, net of accumulated amortization of $162,425 and $148,891	288,617		300,952
Operating lease assets	32,277		32,645
Deferred tax assets, net	21,568		14,635
Other assets, net of accumulated amortization of $2,167 and $2,167	3,518		807
Total assets	$	2,311,744	$	1,903,883

Liabilities and Stockholders' Equity
Liabilities, current:
Accounts payable, principally trade	$	301,175	$	152,674
Accrued expenses and other current liabilities	289,568		183,157
Income taxes payable	5,878		1,181
Long-term debt, current maturities	1,884		1,884
Total liabilities, current	598,505		338,896

Long-term debt, excluding current maturities	438,497		337,421
Lease liabilities, non-current	39,279		40,861
Deferred tax liabilities, net	5,636		4,224
Other liabilities, non-current	19,389		20,758
Total liabilities	1,101,306		742,160

Commitments and contingencies

Stockholders' equity:
Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; none issued	—		—
Common stock, $0.10 par. Authorized 50,000,000 shares; 24,394,007 and 25,193,766 shares issued and outstanding	2,439		2,519
Additional paid in capital	277,289		268,043
Accumulated other comprehensive loss	(12,285)		(7,005)
Retained earnings	942,995		898,166
Total stockholders' equity	1,210,438		1,161,723
Total liabilities and stockholders' equity	$	2,311,744	$	1,903,883

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)


	Three Months Ended November 30,				Nine Months Ended November 30,
(in thousands, except per share data)	2020		2019		2020		2019
Sales revenue, net	$	637,737	$	474,737	$	1,589,424	$	1,265,067
Cost of goods sold	350,410		264,764		892,460		723,216
Gross profit	287,327		209,973		696,964		541,851

Selling, general and administrative expense (“SG&A”)	186,630		130,692		439,646		359,794

Restructuring charges	(12)		12		355		1,061
Operating income	100,709		79,269		256,963		180,996

Non-operating income, net	93		92		440		313
Interest expense	(2,926)		(2,767)		(9,568)		(9,291)
Income before income tax	97,876		76,594		247,835		172,018

Income tax expense	13,721		7,895		16,061		16,530
Net income	$	84,155	$	68,699	$	231,774	$	155,488




Earnings per share (“EPS”):
Basic	$	3.37	$	2.73	$	9.20	$	6.19
Diluted	3.34		2.71		9.14		6.15








Weighted average shares used in computing EPS:
Basic	24,965		25,161		25,182		25,099
Diluted	25,192		25,396		25,350		25,295

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended November 30,				Nine Months Ended November 30,
(in thousands)	2020		2019		2020		2019
Net income	$	84,155	$	68,699	$	231,774	$	155,488
Other comprehensive income (loss), net of tax:
Cash flow hedge activity - interest rate swaps	1,180		1,599		(696)		(5,562)
Cash flow hedge activity - foreign currency contracts	855		(1,729)		(4,584)		(514)
Total other comprehensive income (loss), net of tax	2,035		(130)		(5,280)		(6,076)
Comprehensive income	$	86,190	$	68,569	$	226,494	$	149,412

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity


	Common Stock			Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Shareholders' Equity
(in thousands, including shares)	Shares	Par Value
Balances at August 31, 2020	25,328	$	2,533	$	274,643	$	(14,320)	$	1,045,673	$	1,308,529
Net income	—	—		—		—		84,155		84,155

Other comprehensive income, net of tax	—	—		—		2,035		—		2,035
Exercise of stock options	1	—		70		—		—		70
Net issuance and settlement of restricted stock	20	2		(2)		—		—		—
Issuance of common stock related to stock purchase plan	12	1		1,709		—		—		1,710
Common stock repurchased and retired	(967)	(97)		(5,870)		—		(186,833)		(192,800)
Share-based compensation	—	—		6,739		—		—		6,739

Balances at November 30, 2020	24,394	$	2,439	$	277,289	$	(12,285)	$	942,995	$	1,210,438

Balances at February 29, 2020	25,194	$	2,519	$	268,043	$	(7,005)	$	898,166	$	1,161,723
Net income	—	—		—		—		231,774		231,774

Other comprehensive loss, net of tax	—	—		—		(5,280)		—		(5,280)
Exercise of stock options	13	2		915		—		—		917
Net issuance and settlement of restricted stock	189	19		(19)		—		—		—
Issuance of common stock related to stock purchase plan	27	2		3,609		—		—		3,611
Common stock repurchased and retired	(1,029)	(103)		(15,913)		—		(186,945)		(202,961)
Share-based compensation	—	—		20,654		—		—		20,654

Balances at November 30, 2020	24,394	$	2,439	$	277,289	$	(12,285)	$	942,995	$	1,210,438

Balances at August 31, 2019	25,130	$	2,513	$	256,995	$	(4,755)	$	832,622	$	1,087,375
Net income	—	—		—		—		68,699		68,699

Other comprehensive loss, net of tax	—	—		—		(130)		—		(130)
Exercise of stock options	7	1		556		—		—		557
Net issuance and settlement of restricted stock	21	3		(3)		—		—		—
Issuance of common stock related to stock purchase plan	15	1		1,426		—		—		1,427
Common stock repurchased and retired	(6)	(1)		(1,001)		—		—		(1,002)
Share-based compensation	—	—		4,758		—		—		4,758

Balances at November 30, 2019	25,167	$	2,517	$	262,731	$	(4,885)	$	901,321	$	1,161,684

Balances at February 28, 2019	24,946	$	2,495	$	246,585	$	1,191	$	746,366	$	996,637
Net income	—	—		—		—		155,488		155,488

Other comprehensive loss, net of tax	—	—		—		(6,076)		—		(6,076)
Exercise of stock options	69	7		4,183		—		—		4,190
Net issuance and settlement of restricted stock	199	21		(21)		—		—		—
Issuance of common stock related to stock purchase plan	30	2		2,833		—		—		2,835
Common stock repurchased and retired	(77)	(8)		(9,592)		—		(533)		(10,133)
Share-based compensation	—	—		18,743		—		—		18,743

Balances at November 30, 2019	25,167	$	2,517	$	262,731	$	(4,885)	$	901,321	$	1,161,684

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended November 30,
(in thousands)	2020		2019
Cash provided by operating activities:
Net income	$	231,774	$	155,488


Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27,995		24,876
Amortization of financing costs	772		763
Non-cash operating lease expense	4,910		1,371
Provision for doubtful receivables	3,445		484
Non-cash share-based compensation	20,654		18,743

Loss (gain) on the sale or disposal of property and equipment	75		(14)
Deferred income taxes and tax credits	(4,132)		(511)
Changes in operating capital:
Receivables	(155,492)		(85,747)
Inventories	(121,629)		(31,317)
Prepaid expenses and other current assets	(2,915)		(1,269)
Other assets and liabilities, net	(6,617)		21,091
Accounts payable	148,501		(2,037)
Accrued expenses and other current liabilities	95,612		477
Accrued income taxes	6,793		(980)
Net cash provided by operating activities	249,746		101,418



Cash used in investing activities:
Capital and intangible asset expenditures	(19,423)		(13,247)
Proceeds from the sale of property and equipment	—		3
Net cash used in investing activities	(19,423)		(13,244)



Cash used in financing activities:
Proceeds from line of credit	917,400		406,600
Repayment of line of credit	(811,400)		(482,000)
Repayment of long-term debt	(1,900)		(1,900)
Payment of financing costs	(3,796)		—
Proceeds from share issuances under share-based compensation plans	4,528		7,025

Payments for repurchases of common stock	(202,961)		(10,133)
Net cash used in financing activities	(98,129)		(80,408)



Net increase in cash and cash equivalents	132,194		7,766
Cash and cash equivalents, beginning balance	24,467		11,871
Cash and cash equivalents, ending balance	$	156,661	$	19,637



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

See accompanying notes to condensed consolidated financial statements.

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HELEN OF TROY LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

November 30, 2020

Note 1 - Basis of Presentation and Related Information

The accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly our consolidated financial position as of November 30, 2020 and February 29, 2020, and the results of our consolidated operations for the interim periods presented. We follow the same accounting policies when preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the consolidated financial statements and the notes included in our latest annual report on Form 10-K for the fiscal year ended February 29, 2020, and our other reports on file with the Securities and Exchange Commission (“SEC”).

When used in these notes, unless otherwise indicated or the context suggests otherwise, references to “the Company”, “our Company”, “Helen of Troy”, “we”, “us”, or “our” refer to Helen of Troy Limited and its subsidiaries. We refer to our common shares, par value $0.10 per share, as “common stock.” References to the “FASB” refer to the Financial Accounting Standards Board. References to “GAAP” refer to United States (“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.

We incorporated as Helen of Troy Corporation in Texas in 1968 and were reorganized as Helen of Troy Limited in Bermuda in 1994. We are a global designer, developer, importer, marketer, and distributor of an expanding portfolio of brand-name consumer products. We have three segments: Housewares, Health & Home, and Beauty. Our Housewares segment provides a broad range of innovative consumer products for the home and on the go. Product offerings include food preparation tools and storage containers; cleaning, bath and garden tools and accessories; infant and toddler care products; and insulated beverage, food containers and coolers. The Health & Home segment focuses on health care devices such as thermometers, humidifiers, blood pressure monitors, and heating pads; water filtration systems; and small home appliances such as portable heaters, fans, and air purifiers. Our Beauty segment products include electric hair care, beauty care and wellness appliances; grooming tools and accessories; and liquid-, solid- and powder-based personal care and grooming products.

Our business is seasonal due to different calendar events, holidays and seasonal weather patterns. Historically, our highest sales volume and operating income occur in our third fiscal quarter ending November 30th. We purchase our products from unaffiliated manufacturers, most of which are located in China, Mexico and the United States.

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

During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within our mass channel personal care business (“Personal Care”). The assets to be disposed of include intangible assets, inventory and fixed assets relating to our mass channel liquids, powder and aerosol products including brands such as Pert, Brut, Sure and Infusium. We expect the divestiture to occur within fiscal

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2021. Accordingly, we have classified the identified assets of the disposal group as held for sale. For additional information, see Note 5.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) to be a pandemic. COVID-19 continues to spread throughout the United States and the world, with the continued potential for catastrophic impact. The effects of the COVID-19 pandemic have had an unfavorable impact on certain parts of our business. The impact includes the effect of temporary closures of certain customer stores, or limited hours of operation, which has resulted in materially lower store traffic at some of our brick and mortar retailers. The economic impact of historic unemployment and consumer uncertainty has also resulted in reduced demand for some of our more discretionary product lines. COVID-19 has also disrupted certain parts of our supply chain, which in certain cases has limited our ability to fulfill demand. COVID-19 has favorably impacted the demand for our product lines that are more defensive, meet certain healthcare or healthy living needs, or meet the needs of consumers that are spending more time at home as a result of the pandemic. COVID-19 has also favorably impacted our online channel in a meaningful way, as brick and mortar shopping options have been limited or considered unsafe. Although the favorable impacts of COVID-19 outweighed the unfavorable impacts during the nine month period ended November 30, 2020, this situation continues to change rapidly, and additional impacts or more pronounced adverse impacts may arise that we are not currently aware of today. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.

Our condensed consolidated financial statements are prepared in U.S. Dollars. All intercompany accounts and transactions are eliminated in consolidation.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. The severity, duration and the economic consequences of COVID-19 are uncertain, evolving and difficult to predict. Therefore, our estimates and assumptions may change materially in future periods in response to COVID-19. Actual results may differ materially from those estimates.

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

Note 2 - New Accounting Pronouncements

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

Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which provides for certain updates to reduce complexity in accounting for income taxes, including the utilization of the incremental approach for intra-period tax allocation, among others. The amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and will be effective for us in the first quarter of fiscal 2022. We are currently evaluating the impact this guidance may have on our consolidated financial statements.

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Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting and other transactions affected by reference rate reform to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU was effective upon issuance, on March 12, 2020, and may be applied through December 31, 2022. The adoption of this ASU did not have a material impact on our consolidated financial statements.

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

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

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

Note 3 - Revenue Recognition

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

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

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with the guidance, we reclassified an immaterial amount of estimated sales returns from a reduction of receivables to accrued expenses and other current liabilities for all periods presented. We elected to adopt the guidance using the full retrospective method.

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

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

Note 4 - Leases

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

We primarily have leases for office space, which are classified as operating leases. Operating leases are included in operating lease assets, accrued expenses and other current liabilities, and lease liabilities, non-current in our consolidated balance sheets. Operating lease assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of our lease contracts do not provide an explicit interest rate, we use an estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We include options to extend or terminate the lease in the lease term for accounting considerations, when it is reasonably certain that we will exercise that option. Our leases have remaining lease terms of less than 1 to 12 years. Lease expense for lease payments is recognized on a straight-line basis over the lease term in a manner similar to previous accounting guidance. We do not recognize leases with an initial term of twelve months or less on the balance sheet and instead recognize the related lease payments as expense in the condensed consolidated statements of income on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease component for all asset classes. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease expense recognized in the condensed consolidated statements of income during the three and nine month periods ended November 30, 2020, was $1.8 million and $5.0 million, respectively, compared to $1.5 million and $4.8 million, respectively, for the same periods last year. Short-term lease expense is excluded from this amount and is not material. For the three and nine month periods ended November 30, 2020, rent expense related to all our operating leases was $2.4 million and $6.6 million, respectively, compared to $2.1 million and $5.8 million for the same periods last year. The non-cash component of lease expense is included as an adjustment to reconcile net income to net cash provided by operating activities in the condensed consolidated statements of cash flows.

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A summary of supplemental lease information is as follows:


	November 30, 2020
Weighted average remaining lease term (years)	10.0
Weighted average discount rate	6.10%
Year-to-date cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (in thousands)	$	4,998

A summary of our estimated lease payments, imputed interest and liabilities as of November 30, 2020 are as follows:


(in thousands)
Fiscal 2021 (balance for remainder of fiscal year)	$	1,826
Fiscal 2022	7,128
Fiscal 2023	6,123
Fiscal 2024	5,332
Fiscal 2025	5,762
Thereafter	34,370
Total future lease payments	60,541
Less: imputed interest	(16,492)
Present value of lease liability	$	44,049


	November 30, 2020
Lease liabilities, current (1)	$	4,770
Lease liabilities, non-current	39,279
Total lease liability	$	44,049

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

Note 5 - Assets Held for Sale

During the fourth quarter of fiscal 2020, we committed to a plan to divest certain assets within Personal Care. The assets to be disposed of include intangible assets, inventory and fixed assets relating to our mass channel liquids, powder and aerosol products under brands such as Pert, Brut, Sure and Infusium. We expect the divestiture to occur within fiscal 2021 and have classified the identified assets of the disposal group as held for sale. The business is currently being marketed and the process is ongoing.

The carrying amounts of the major classes of assets for Personal Care that were classified as held for sale are as follows:


(in thousands)	November 30, 2020		February 29, 2020
Assets:
Inventory	$	11,650	$	17,150
Property and equipment, net of accumulated depreciation of $403	83		83
Goodwill, net of cumulative impairments of $71,993	9,849		9,849
Other intangible assets, net of accumulated amortization of $4,474	17,724		17,724
Total assets held for sale	$	39,306	$	44,806

Table of Contents

Note 6 - Supplemental Balance Sheet Information

PROPERTY AND EQUIPMENT


(in thousands)	Estimated Useful Lives (Years)			November 30, 2020		February 29, 2020
Land		-		$	12,644	$	12,644
Building and improvements	3	-	40	117,061		115,592
Computer, software, furniture and other equipment	3	-	15	98,382		89,257
Tools, molds and other production equipment	3	-	7	43,001

Price	138.29	EPS	5
Shares	25	P/E	29
MCap	3,491	P/FCF	30
Net Debt	303	EBIT	149
TEV	3,794	TEV/EBIT	25
TTM 2019-05-31, in MM, except price, ratios

10-Q	2020-11-30	Filed 2021-01-08
10-Q	2020-08-31	Filed 2020-10-09
10-Q	2020-05-31	Filed 2020-07-10
10-K	2020-02-29	Filed 2020-04-29
10-Q	2019-11-30	Filed 2020-01-09
10-Q	2019-08-31	Filed 2019-10-10
10-Q	2019-05-31	Filed 2019-07-10
10-K	2019-02-28	Filed 2019-04-29
10-Q	2018-11-30	Filed 2019-01-09
10-Q	2018-08-31	Filed 2018-10-10
10-Q	2018-05-31	Filed 2018-07-10
10-K	2018-02-28	Filed 2018-04-30
10-Q	2017-11-30	Filed 2018-01-09
10-Q	2017-08-31	Filed 2017-10-10
10-Q	2017-05-31	Filed 2017-07-10
10-K	2017-02-28	Filed 2017-05-01
10-Q	2016-11-30	Filed 2017-01-09
10-Q	2016-08-31	Filed 2016-10-11
10-Q	2016-05-31	Filed 2016-07-11
10-K	2016-02-29	Filed 2016-04-29
10-Q	2015-11-30	Filed 2016-01-11
10-Q	2015-08-31	Filed 2015-10-13
10-Q	2015-05-31	Filed 2015-07-10
10-K	2015-02-28	Filed 2015-04-29
10-Q	2014-11-30	Filed 2015-01-09
10-Q	2014-08-31	Filed 2014-10-10
10-Q	2014-05-31	Filed 2014-07-10
10-K	2014-02-28	Filed 2014-04-29
10-Q	2013-11-30	Filed 2014-01-09
10-Q	2013-08-31	Filed 2013-10-10
10-K	2013-02-28	Filed 2013-04-29
10-Q	2012-11-30	Filed 2013-01-09
10-Q	2012-08-31	Filed 2012-10-10
10-Q	2012-05-31	Filed 2012-07-10
10-K	2012-02-29	Filed 2012-04-30
10-Q	2011-11-30	Filed 2012-01-06
10-Q	2011-08-31	Filed 2011-10-07
10-Q	2011-05-31	Filed 2011-07-11
10-K	2011-02-28	Filed 2011-05-16
10-Q	2010-11-30	Filed 2011-01-10
10-Q	2010-08-31	Filed 2010-10-06
10-Q	2010-05-31	Filed 2010-07-09
10-K	2010-02-28	Filed 2010-05-13
10-Q	2009-11-30	Filed 2010-01-11

8-K	2020-10-08
8-K	2020-10-06
8-K	2020-08-26
8-K	2020-07-09
8-K	2020-05-14
8-K	2020-05-04
8-K	2020-04-28
8-K	2020-03-30
8-K	2020-03-17
8-K	2020-01-28
8-K	2020-01-23
8-K	2020-01-08
8-K	2019-12-19
8-K	2019-10-08
8-K	2019-08-23
8-K	2019-07-09
8-K	2019-06-21
8-K	2019-05-21
8-K	2019-04-26
8-K	2019-01-08
8-K	2018-11-07
8-K	2018-10-09
8-K	2018-08-22
8-K	2018-07-09
8-K	2018-04-26
8-K	2018-03-01
8-K	2018-01-24
8-K	2018-01-08

EX-31.1	fy21_q3xexhibit311.htm
EX-31.2	fy21_q3xexhibit312.htm
EX-32	fy21_q3xexhibit32.htm

HELE 10Q Quarterly Report

Helen of Troy Earnings 2020-11-30